US: Private college students loaded with debt
The University of Phoenix's parent company recently paid close to US$80 million to settle with the US Department of Education against charges that it violated a federal ban to reimburse recruiters based on the number of students they recruited.
Last week, the US Department of Education issued new 'programme integrity' rules to maintain the quality of the federal financial aid programme while protecting students enrolled in vocational courses.
The US Public Interest Research Group and the US Student Association have been calling for strong rules to shield students from deceptive recruitment tactics and unscrupulous lending. The two groups say nearly half the student loan borrowers who entered repayment in 2007 and defaulted on their loan by 2009 attended a for-profit college.
"Evidence has mounted that the career education sector relies on high-pressure sales tactics to recruit students and loads them up with debt to pay for programmes that provide them little benefit," said Christine Lindstrom, Director of the public interest group's higher education programme.
Corinthian Schools in 2007 settled for $6.5 million with the California Attorney General's office for using false salary and job placement information to persuade students to enrol.
"Students of colour, low-income and first-generation students deserve education programmes that require low-to-no debt and result in jobs with salaries high enough to move forward in their lives," said student association President Gregory Cendana.
The US Department of Education sought to curb consumer abuse by closing loopholes within regulations that allowed schools to pay recruiters based on the number of students enrolled and the amount they borrowed.
The two groups say the loopholes have created an environment of high-pressure sales tactics and even cases of deceit, causing students to assume debt levels for their education they will not be able to repay.
Federal law prohibits schools from offering any financial incentives or commission to recruiters. The department plans to issue another rule this month around the 'gainful employment' provision.
To receive federal aid, career certificate programmes must prepare their students for gainful employment. But the groups say this is a term that has no definition and schools looking to gain access to federal aid have been able to abuse this requirement.
As a result, schools receive federal aid for enrolling students in programmes that plunge them into debt for an education that doesn't improve their livelihood.
* The United States Student Association