The Consumer Financial Protection Bureau (CFPB) is suing one of the biggest for-profit collegecompanies in the industry, ITT Educational Services, Inc. You’ve probably seen their TV commercials that air during shows like Law & Order-SVU, promising a rewarding career to reel students in. Like many for-profit colleges (though not all are bad), ITT has been exploiting students and pushing them into taking out huge loans, knowing they would probably end up in default. At a time when 48 percent of all student loan defaults can be attributed to for-profit colleges, the CFPB’s lawsuit is a big deal.
Any day now, the U.S. Department of Education is expected to release its proposed gainful employment regulation that aims to help protect students from risky programs where students are often set up to fail. We’ve explained before that a strong gainful employment regulation would make it harder for institutions to take advantage of students to receive federal funding. Many, but not all, of these predatory institutions are for-profit colleges that make money by tricking students to take on large amounts of debt and a meaningless degree — costing taxpayers millions of dollars in the process.
It’s a huge problem. Which is why a strong rule from the department would be a very welcome piece of the solution. However, it is still not enough to stop the dangerous practices that harm students in the first place. And the regulation doesn’t really help increase the visibility of this issue by using obscure terms like “gainful employment.”
More than two-thirds of students attending for-profit colleges have never even heard the term “for-profit college,” let alone aware of their reputations for deceptive marketing tactics, high cost of attendance relative to job placement, or predatory lending practices. ITT, for example, charges some of the highest tuition in the for-profit industry ($44,000 for an associate’s degree, really?). Then they pressure students into high-cost loans to pay for it. According to the CFPB, “for borrowers with credit scores under 600, for example, the costs of the private student loans included 10 percent origination fees and interest rates as high as 16.25 percent.”
And Corinthian Colleges Inc. (Everest College), which isbeing suedby the California attorney general, has some of the most egregious false advertising. The company allegedly advertised job placement rates as high as 100 percent for some programs when not even a single student obtained a job. Moreover, their marketers describe their target audience as “‘isolated,’ ‘impatient’ individuals with ‘low self-esteem’ who have ‘few people in their lives who care about them.’” Without this kind of explicit exposure from these lawsuits, even fewer students would be aware of what these colleges are really about.
Getting students to understand the dangers of some of these schools is one reason lawsuits like these are important. And getting lawmakers to see where they fit in is another. This week, powerful lobbyists are storming Capitol Hill to talk Congress out of protecting students from dangerous programs. Write your members of Congress, and let them know why we NEED a strong gainful employment regulation.