For years, predatory for-profit schools have plagued the American higher education system, aggressively recruiting students into high-cost, low-quality education and training programs with false promises. As the abuses of this industry continue to come to light, the SBPC has launched investigations into the companies and practices that allow these schools to operate with impunity, raking in billions of dollars in federal student aid while student loan borrowers are driven deeper into debt.
Student financing companies that partner with for-profit schools to drive students to take on risky, high-cost student debt.
This report examines the web of predatory schools and financial services firms that drive students to take on risky, high-cost shadow student debt.
The SBPC, Allied Progress, Americans for Financial Reform, and Student Debt Crisis sent letters to the CEO of PayPal, Inc. and its regulators warning that the tech firm may be driving significant harm to borrowers attending for-profit schools.
The SBPC sent a letter to the CFPB warning of troubling business practices and possible borrower harm by Climb Credit, a specialty lender that provides financing for education and vocational training courses.
Unscrupulous Debt Collection Practices
Abusive strategies deployed by debt collectors and schools, including transcript and credential withholding, excessive robocalling, and even termination of enrollment for unpaid debts.
Recent court settlements at for-profit colleges have shed light on a less traditional type of student debt: past-due financial accounts, otherwise known as accounts receivable. While defaulted student loans can lead to long-term problems like bad credit and wage garnishment, accounts receivable have a much more immediate effect.
In an issue brief, the SBPC shows how private student loan collection practices are harming borrowers across the country — with a spotlight on Maryland borrowers.
Forced Arbitration Clauses
Predatory contract terms buried in agreements that for-profit schools require students to sign upon enrollment. These terms are used to deny students their right to sue when schools the law and cheat students.
Testimony in favor of legislation to prevent state resources from flowing to schools and training programs that require students to consent to arbitration and waive other rights prior to a dispute arising.
These forced arbitration clauses are arguably some of the most damaging tools used by companies across the student loan market to shield themselves from accountability.
Deceptive Marketers and Lead Generators
Firms hired by schools to boost enrollment, often by making false claims and utilizing aggressive sales tactics to recruit low-income students, students of color, and military-connected students.
In recent years, federal and state law enforcement officials have cracked down on lead generation firms that drive servicemembers, veterans, and their families into the open arms of the worst actors in American higher education. These firms are often the first interaction prospective students have with the for-profit college industry—the first step on a path that has left millions drowning in debt.
CDR Manipulation Consultants
Firms paid to manipulate federal accountability metrics, such as cohort default rates, that are designed to hold schools accountable.
The SBPC released a new issue brief detailing how predatory for-profit schools team up with cohort default rate (CDR) manipulation companies to evade critical rules designed to protect borrowers who attended schools with high default rates.
Industry lobbyists have tried to convince lawmakers that private sector student loan companies known as “Guaranty Agencies” are not performing student loan servicing under the definition commonly included in state legislative proposals—a definition modeled on federal regulations. The truth is these are student loan servicers.
In the News
Students at some for-profit career schools could find themselves paying hefty interest charges when using a credit line offered by PayPal, a group of consumer watchdog groups warned this week.
Thirty-eight percent of students borrow additional money for college via credit cards, home equity loans and other non-student loans, according to a May 2020 report from the Federal Reserve. The SBPC has dubbed this the “shadow education finance market” because these options can lack transparency.