For-profit college cancels $500M in student debt after fraud allegations

https://www.nbcnews.com/news/us-news/profit-college-cancels-500m-student-debt-after-fraud-allegations-n954486

by daegloe • 8 years ago

139 45 8 years ago

I'm guessing the kids who actually paid their student loan debts didn't get any of their money back.

elliekelly• 8 years ago

And this settlement only covers loans that students took out with the school directly. Any students with federal loans are still on the hook for every penny.

Edit: Source for anyone interested[1]. Federal law provides individuals with federal student loans to discharge their loans under the "borrower defense" if the students were defrauded into taking out those loans. The intent was to allow debt relief for students of for-profit institutions who are saddled with with enormous loans when the education has little or no economic benefit. On paper, the CEC students are eligible for this program but DeVos has been reluctant to allow any borrowers to take advantage of the program. It's been an ongoing legal matter.[2]

[1]https://www.capemaycountyherald.com/news/government/article_...

[2]https://www.forbes.com/sites/zackfriedman/2018/10/17/student...

mirimir• 8 years ago

If it's been established that there was fraud, I'd think that they would have claims. If Career Education has any capital left, there's potential for a class action. And if I remember correctly, plaintiffs can demand treble damages.

vinceguidry3• 8 years ago

If Career Education has any capital left, there's potential for a class action.

I'm guessing there isn't any capital left.

olefoo• 8 years ago

Clearly since a few people were able to succeed in engaging with a thouroughly corrupt system; everything is fine and there is NO NEED TO FIX ANYTHING.

Thank you for clearing that up for us.

zamadatix• 8 years ago

I read their comment the exact opposite way you did - that the corrupt system would get by without paying these people back.

stolson• 8 years ago

More than 90 percent of its students are enrolled through online courses, according to the company.

That's a huge number. I believe online education is going to be an important part of college education, but that's almost the entire student body. Good to see this debt being cancelled.

bko• 8 years ago

The debt stems from institutional loans the company issued to students

The article makes it sound as though these weren't government loans. Are students of that institution able to tap government loans?

Bootcamps often post misleading statistics about placement numbers [0]. Will they be subject to the same fraud allegations? I would think misleading statistics are pretty much par for the course for nearly all form of sales. I generally apply by the principal of "never ask your barber if you need a haircut". These seem kind of fraud allegations seem to be arbitrarily enforced and politically motivated.

[0] https://medium.com/@abinoda/coding-bootcamp-placement-rates-...

rcarrigan873• 8 years ago

The value of a college degree has changed whether you get the degree from an Ivy League School or a diploma mill. All colleges are basically false advertising at this point. The settlement will make some politicians feel good, but the reality is the entire system needs to be overhauled.

exogeny2• 8 years ago

I would dispute this, if only using personal experience. The value of my degree from CMU has paid itself back multiple times over in terms of doors opened.

Your statement feels like too broad of a brush. In my view, there’s a huge fat tail of non-value add schools that are only surviving because of this perception, but the narrow bulb of the elite schools maintains that value if only due to networking and social proof.

_jal2• 8 years ago

Unless you can point to a rather significant shift in the last three years, that is utter nonsense.

Ref: https://www.washingtonpost.com/news/wonk/wp/2015/09/14/this-...

Also, whatever the feelings of politicians, I'm pretty sure _the people whose debt was canceled_ have a feeling or two on the matter, too.

mikeash• 8 years ago

There’s a big difference between misleading statistics and lies. If you boast a high placement rate because your program is sort of mediocre but you’re extremely selective in who you accept, well, caveat emptor. If you boast a high placement rate because you just made up nice-looking numbers, that’s fraud, and it should be.

jbreiding• 8 years ago

Or don't forget about the boot camps which boast high placement rates because they hire the students that don't find outside roles to continue teaching until they find a better outside role. I find that practice deceptive especially because they are paying well under the rate they are advertising the student should earn upon graduation.

exogeny2• 8 years ago

For-profit college? Fraud?

Surely you jest.

ada19812• 8 years ago

This would be a good requirement for any educational institution:

“give all prospective students a single-page disclosure with information including job placement rates, anticipated costs and the average earnings of graduates.”

protonfish• 8 years ago

This seems like a terrible idea. Colleges should be about learning. I can understand guaranteeing what skills at what proficiency should be attained, but job placement and career advancement are the result of a different process. If you want a business that studies the needs of employers, gives crash courses in those skills to build what is determined to be a desired resume, and then aggressively markets you to prospective job opportunities, that sounds valuable, but it most definitely not an educational institution.

debacle• 8 years ago

Colleges are only about learning for the upper quintiles. For the lower quintiles, they are and have always been about jobs.

_jal2• 8 years ago

Like it or not, the primary reason a lot of people go to school is related to desires about their future earning potential. I don't see how intentionally refusing to provide information on outcomes experienced by past students is going to benefit those people.

Not everyone goes off to an expensive school at 18. Rest assured, those institutions are going to stay available. This is about for-profits, and calling those "educational institutions" is already an arguable proposition.

tareqak• 8 years ago

There is probably room for both. Some people are in it for the end result while others want to develop thenselves further. I’ve had this conversation with others before about the expectations people have of universities and universities of themselves.

A few possible purposes come to mind.

1) To train students in skills that are immediately relevant for one or more careers.

2) To train the next generation of researchers and expand the body of known knowledge through research and discovery.

3) To give students a quick but lasting foothold into the professional networks of their future peers.

There might have been a few more that I fail to recall now.

swsieber• 8 years ago

It seems like a great idea to me (not terrible).

People pay a lot for college, in large part, because they expect they can pay it back with their increased earning potential afterwards. And many are wrong.

Withholding knowledge (how ironic) is not the way to correct the education system.

qudat• 8 years ago

Colleges should be about learning.

While I agree in spirit, I disagree in reality. The fact of the matter is, "higher level education" has been co-opted by industry to train employees. I think overall it's a round-about way to train employees and we should break apart the concept of higher education/training into discrete parts: apprenticeships and academics. The problem for me is that college is a one-size-fits-all solution for the US and I think we are starting to see it burst at the seams.

I mean we can't even agree on the purpose of college, how can we possibly optimize the institution if we cannot answer that question?

drcross• 8 years ago

What you're saying is fine, if the cost of the course doesn't financially cripple the student for 25 years, which is what is mostly happening.

bradleyjg• 8 years ago

Colleges should be about learning.

I’m inclined to agree. The way to make that happen is to figure out some superior proxy for the characteristics employers are looking for (intelligence, diligence, willingness to conform, etc.) than university degrees. When the signaling value of a degree is no longer necessary, colleges will be truly optional and so for and about learning.

However, it should be noted the implications are fairly radical. A college system for and about learning about is going to be much much smaller than the status quo. Which in turn means either much less research output or some other method of funding research has to be found.

dsajames• 8 years ago

Some people treat it like a university, others like a vocational school. Have stats for both.

Just be careful with stats. They are easily gamed.

sailfast• 8 years ago

I agree that it’s weird for an educational institution to have to do this but it seems logical for a for-profit that is actively marketing with basically made-up numbers about costs, placement rates, etc to be held accountable for this.

If your students expect they will get a job because you said so, and expect it to cost 30K, there should be some truth to those claims. They shouldn’t end up unplaced and 100K in debt if you effectively made guarantees in your marketing / sales materials. The same is true for investment firms. You can’t promise 50% returns.

michaelt• 8 years ago

At least in my country, there are two main camps on college funding.

The first camp believes education shouldn't focus on graduate earnings, and shouldn't cost anything.

The second camp believes student fees are unfortunate-but-currently-unavoidable, and so long as they're in place we should ensure students make informed, rational decisions before taking on a lifetime of debt.

sigstoat• 8 years ago

“give all prospective students a single-page disclosure with information including job placement rates, anticipated costs and the average earnings of graduates.”

do that every semester when they return to the financial aid trough, include the estimated amount they'll need to borrow after this, do all the interest calculations, show them how much they'll have left to spend after their loan payments, and include a map of the parts of the country where monthly rent is <1/2 of that amount, and make the students sign that they read it.

anyone with unlimited funds who cares about nothing but learning will gleefully take their piece of paper and sign that they got it.

everyone else can have a little momento mori moment as regards their future financial situation.

tricking those without the funds (present or future) into thinking they should ignore these issues because "omg learning" is profoundly immoral.

benj111• 8 years ago

To be fair, I think high schools should be educating their students on this. I don't think any other options were really presented for me (except apprenticeships).

Unfortunately it isn't really measurable except as a tick box. So all you end up getting is an appointment with the careers 'advisor', which as I recall took all of 2 minutes. /rant

AJ007• 8 years ago

Give them a list of all equivalent courses which are available for free online with URL.

Allow students to test out of any required course. Require classes to be priced and offered individually.

hammock• 8 years ago

Non profit colleges do that (or rather, they report them to US news and world report etc). They still game them though.

bdcravens• 8 years ago

Job placement rates should always exclude graduates hired by the school. (too easy to game otherwise)

madengr• 8 years ago

/rant

The entire premise of these (snobbish) comments seems be: if you majored in anything that is employable, then it’s “vocational”, and you really didn’t learn anything.

That’s insulting and a load of bullshit. I can only speak for EE, but it’s all theory and loaded with difficult math, physics, etc. So an English major is “educated”, but an EE education is trade school? I think the “educated” majors ought to take graduate level electromagnetics. They’d be raked over the coals.

/rant

Vaslo• 8 years ago

Sometimes these issues occur in public Universities. A friend of mine took a Masters in Occupational Therapy, and their school continually advertised very high averages for OTs. The vast majority of the program staying the East Ohio/West PA area looking for jobs. The schools average was US and included much higher Cost of Living cities where salaries would be higher. When asked for local data, they had none available and claimed the data was local. Literally nobody got anywhere near that salary who stayed in the area, and none of the interviewing companies ever even offer something near that. An honest disclosure on how many people get jobs and how much they earn regionally should be required for any school, profit or non-profit.

esotericn• 8 years ago

Why regionally?

In the UK, most move away from home to study, and then move away from their University to work.

Anecdotally I don't know a single person who studied at University and works near their hometown.

For many it's the main reason they study. To get out.

8bitsrule• 8 years ago

It should be mentioned that both of the schools owned by Career Education Corporation receive over 90% of their funding from the US Govt.

https://en.wikipedia.org/wiki/Colorado_Technical_University

http://en.wikipedia.org/wiki/American%20InterContinental%20U...

AIU was founded in 1970 'as the American Fashion College of Switzerland'. CEC has been under investigation since the mid-2000s, and decided to close most of its schools in 2015.

Not that for-profit vocational-training schools with credibility problems are a new thing. They are 'accredited' by ten nationally recognized accrediting agencies overseen by the Dept. of Ed. It should be dismaying that schools which primarily 'serve' federally-funded DoD and GI Bill students are not held to objective claims about their efficacy.

For-profit college cancels $500M in student debt after fraud allegations

Related Stories