A push is on among consumer groups to have the U.S. Department of Education cancel the federal student debt incurred by students at Corinthian Colleges, a for-profit chain that just went belly up.
These students are finding out that the credits for which they borrowed thousands of dollars have no value. Other colleges and universities won’t accept them and employers don’t respect them.
I support the Corinthian students in their quest for relief. But what about the others? What happens to the millions of people all over the nation who were lured into debt traps by expensive schools that never delivered on their promises of quality educations and careers?
The implications of the Corinthian case are enormous. The department of education says canceling the debt of the 16,000 students directly affected by the company’s bankruptcy would cost the federal government around $214 million. Add the debt load of former students who were cheated by Corinthian, and you’re talking about more than $1 billion.
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And that’s just one company. We could be witnessing the start of colossal consequences for the failure of Congress and federal and state administrations to properly crack down on the predatory for-profit college industry.
Enforcement action by the U.S. Department of Education accelerated the demise of Corinthian. Along with reducing its access to federal loans, the department fined the company $30 million over findings that it paid employment agencies to hire graduates for limited periods of time in order to boost its job placement rates. Corinthian, which operated schools under several names, was also accused of falsifying attendance rates and grades.
But critics say that kind of aggressive oversight came much too late.
“The Department of Education’s inaction, despite years of evidence of problems at Corinthian, had a devastating effect on tens of thousands of students who got little from the company beyond a mountain of debt,” consumer advocates wrote in a letter to Education Secretary Arne Duncan.
Gene Graham, a Kansas City-area lawyer who has represented students in actions against for-profit colleges, said he has been stonewalled by education department staffers.
“I went and met with them in a particularly egregious case against a local proprietary school,” he said. “Not only did they not want to help us, they were short, sarcastic, critical.”
Graham has heard from hundreds of students harmed by for-profit colleges — more than he could possibly represent. The common theme is a hard sell and an expensive, inadequate education for which schools collect federal loan and grant money and students rack up debt.
“When these students are defrauded by these predatory schools, which they are, by the thousands, they have to pay me to help them,” Graham said. “They’re coming to me because the U.S. Department of Education refuses to do its job.”
Graham has won cases in court with allegations that he contends should be grounds for closing down a school or entire company, but regulators have taken no action.
There is plenty of blame to go around. Congress bows to the industry’s lobbying firepower and refuses to demand outcomes. State regulators tend not to focus on the for-profit sector. Accrediting agencies are funded through fees from the schools they are supposed to monitor.
Fortunately, enrollment at for-profit colleges is dropping as the job market improves and word is getting around that many of the schools are scams. But college debt in the United States stands at $1.2 trillion and a disproportionate share of that is held by students unfortunate enough to have found their way to the for-profit sector.
These unscrupulous operators prospered during hard times by preying upon people with limited options, and Congress and the administration let it happen. Now the bill appears to be coming due. But it’s U.S. taxpayers who will be stuck with it.