For years, the Trump Administration has sought to undermine higher education by coddling the very same predatory for-profit schools that spent the last decade ripping of students at every turn. After stacking her senior staff with for-profit industry executives, Betsy DeVos rolled back a series of federal protections designed to help defrauded student loan borrowers. Now, millions of borrowers have been left with nowhere to turn.
States have the power to fight back against the abuses perpetrated by for-profit colleges. States can use their long-standing authorities to protect their residents from being swindled by this multi-billion dollar industry. Read below to see all of the ways states are holding the for-profit school industry accountable.
Banning mandatory arbitration when students are defrauded
For-profit schools are notorious for engaging in fraudulent and deceptive tactics to entice students to enroll—often targeting vulnerable populations and charging more than double the cost of these schools’ nonprofit counterparts. To add insult to injury, for-profit schools use intimidation and scare tactics to pressure students into taking out high cost loans for poorly designed programs that too often fail to pay off for students.
After being saddled with worthless degrees and tens of thousands of dollars in debt, students often seek justice and accountability for these predatory schools, only to find that the courthouse doors are slammed shut. Why? Because buried deep within the fine print of the contracts are mandatory arbitration clauses that force students to sign away their legal rights.
This needs to end.
Prohibiting transcript withholding
One of the most harmful debt collection tactics is “transcript withholding,” where a school refuses to allow a student access to their transcript or diploma because of an outstanding debt to the school, often called an “account receivable.” Withholding a student’s transcript creates a dangerous Catch-22 for millions of borrowers—because the borrower lacks the cash needed to pay their debt, the school renders the student unable to reenroll, transfer schools, or otherwise obtain a higher paying job. And while millions of borrowers are caught in the trap of transcript withholding, this collection tactic is disproportionately favored by for-profit schools.
Transcript withholding hinders individual access to higher education and gives schools an unusual and unnecessary debt collection tool. It also hinders economic growth by holding ransom the educational achievements of these Americans.
This needs to end.
Protecting borrowers when predatory schools abruptly slam the doors shut
The for-profit college business model is built on a simple concept—drive profits to executives and shareholders while driving the student and school into the ground. When a college or university unexpectedly shuts down, students are often left on the hook with no recourse. These school closures often leave students with mountains of debt and no degree. Schools like Corinthian Colleges, Argosy University, ITT Technical Institute, and The Art Institute all closed down without warning, leaving hundreds of thousands of students saddled with billions of dollars in debt with no clear path forward.
While some borrowers with federal student loans may receive a discharge of their debt if their school closes, many borrowers are still left owing on private student debt. In fact, predatory for-profit schools are notorious for creating institutionally held debt and then partnering with financial companies that continue collecting money long after these schools shut their doors.
This needs to end.