Student Loans and For-Profit College Issues

In a follow-up to the Biden administration’s announcement that it will give full debt relief to students defrauded by private, for-profit colleges, the U.S. Department of Education (DOE) has released the specifics of how the program will work.

First off, the program will replace the student loan relief program established during the Trump administration under former DOE Secretary Betsy DeVos. After completing a comprehensive review of that methodology, the Biden-era DOE concluded that DeVos’ version did not result in an appropriate relief determination.

Officials say this is just a beginning -- a first step in addressing borrower defense claims as well as the underlying regulations. They say they will be pursuing additional actions, including re-regulation of student loans, in the future.

In its place, the “new” DOE under Secretary Dr. Miguel Cardona will be employing what it calls a “streamlined approach for granting full relief under the regulations to borrower defense claims approved to date.” The agency believes this change will help approximately 72,000 borrowers who will receive $1 billion in loan cancellation.

Who this applies to

The forgiveness program employs the “borrower defense to repayment" and is for borrowers who a) seek cancellation of their William D. Ford Direct Loan; and, b) have “claims approved to date that their institution engaged in certain misconduct.” 

Among the 72,000 eligible claims, a DOE spokesperson told ConsumerAffairs that the vast majority of these borrowers attended Corinthian Colleges. A smaller subset attended ITT Technical Institute.

The new loan forgiveness program also includes borrowers with previously approved claims that received less than a full loan dismissal. Full relief under the regulations of the new program will include:

• 100 percent discharge of borrowers’ related federal student loans;

• Reimbursement of any amounts paid on the loans, where appropriate under the regulations;

• Requests to credit bureaus to remove any related negative credit reporting; and 

• Reinstatement of federal student aid eligibility, if applicable.

Changes to the claims process

The DOE will begin applying this new approach effective immediately. Affected borrowers should receive notices over the next several weeks with loan dismissals following after that. 

An agency spokesperson told ConsumerAffairs that it is not changing the process of adjudicating claims. A thorough review will still be conducted to determine whether there is sufficient evidence of misconduct to merit a valid claim. 

What is changing, however, is what happens once a claim is recommended for approval.  Previously, the DOE would calculate the share of a borrower’s loan balance that would be cancelled under the partial relief methodology. That will not happen under the new process. As things stand now, claims that were approved for partial relief will now be granted full relief.

Updated information for borrowers, applications for Borrower Defense, and application management is all available at StudentAid.gov/borrower-defense.

Student debt in the U.S. ballooned to over $1.7 trillion in the third quarter of 2020, according to Federal Reserve estimates. 

That figure represents an increase of almost 4 percent year-over-year and a staggering 102 percent increase from ten years ago, CNBC reported. Towards the end of 2010, Americans owed around $845 billion in student loans. 

As student debt totals have snowballed, lawmakers have proposed a number of different policies. The CARES Act passed by Congress in March halted federal student loan payments. That provision has been extended through January 2021. 

President-Elect Joe Biden has been urged by House and Senate Democrats to take executive actions when he takes office to implement resolutions that would forgive up to $50,000 of federal student debt for borrowers. 

Tackling the crisis 

Student debt reform was a key part of Biden’s presidential campaign. Though he hasn’t said specifically what he plans to do once inaugurated, he proposed creating a program that offers $10,000 of undergraduate or graduate student debt relief for every year of national or community service.

“Individuals working in schools, government and other non-profit settings will be automatically enrolled in this forgiveness program; up to five years of prior national or community service will also qualify,” according to the proposal. 

In the longer-term, Biden has proposed eliminating undergraduate tuition-related federal student debt from public colleges for people who make less than $125,000 per year.

Proponents of such resolutions argue that wiping out student debt would help the struggling economy, since money that doesn’t get thrown at student loans would be spent in the retail industry or put toward big purchases like buying a house. 

With all the might it can muster, Google is coming to the rescue of student loan holders by introducing a student loan repayment program for all Google employees in the U.S. Starting in 2021, Google says it will match up to $2,500 in student loan payments per Googler per year. 

The company’s white hat approach is certainly a welcome refrain. Americans face an enormous student loan deficit of $1.5 trillion dollars -- twice what it was 10 years ago. 

Both the White House and Education Secretary Betsy DeVos have stonewalled virtually all attempts to create some relief, not only during the pandemic but for students who were defrauded by for-profit institutions and are still accountable for repaying their loans. DeVos’ department even gets a paltry 1-star rating from ConsumerAffairs reviewers -- one going so far as to call them “legalized loan sharks.”

Helping save money for life essentials

While Google can’t erase a student loan completely, it feels that $2,500 a year can help people pay their loans off quicker. That might give consumers a better opportunity to purchase a home, start a family, or invest in a 401(k). 

“Lack of financial resources should not prevent someone from accessing the opportunities that come with education,” John Casey, the Director of Global Benefit at Global wrote in the company’s announcement.

“Change starts at home. We’re hoping this student loan repayment program gives our workforce some relief from student loans and helps them build more financial stability over the long term. And we’ll keep looking for more ways to increase access to education and opportunity for everyone.”

The new loan repayment program is one more component in the attention Google has recently started offering students. In July, it rolled out Google Career Certificates, a way for Americans to qualify for high-paying, high-growth jobs with no college degree required. 

Students who attended the college chain ITT Tech, which went bankrupt in 2016, will have their student debt forgiven under a nationwide settlement. 

This week, the attorneys general of almost all 50 states and the federal Consumer Financial Protection Bureau announced a settlement that will wipe out a collective $330 million in debt for the 35,000 students who attended the school and still have outstanding balances. 

The now-defunct school imposed high-interest loan payments through private lender PEAKS Trust, and these debts have continued to affect the credit scores of former students. 

"The default rate on the PEAKS loans is projected to exceed 80%, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible," the Ohio Attorney General's office said in a statement. "The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.” 

Deceptive practices

In a complaint filed by the CFPB, government prosecutors said ITT knew borrowers would be unable to repay the high-interest loans. In some cases, the loans were signed by ITT employees without the borrower’s knowledge or permission. 

“Their tactics were wild,” Massachusetts Attorney General Maura Healey wrote on Twitter. “ITT offered students temporary credit upon enrollment to be repaid the next year. When some students couldn't pay, ITT allegedly pulled them out of class and threatened to expel them if they did not refinance their debt with a high-interest PEAKS loan."

Former students don't need to take any action to have their ITT debt erased; PEAKS will send students a notice. Students with questions for PEAKS can email the company at customerservice@peaksloans.com or call 866-747-0273.

We’re closing in on year three since the U.S. Department of Education (DOE) was tasked with canceling federal student loans for thousands of consumers. These students were victimized by predatory for-profit colleges like Corinthian Colleges, which, at its peak, operated more than 100 campuses in the U.S. and Canada. 

When someone asks why the debt cancellation is getting nowhere, the answer usually includes a mention of Education Secretary Betsy DeVos.

Whether DeVos doesn’t like taking orders from Congress or is made of Teflon, no one knows. But what we do know is nothing seems to stick when she’s asked to make something happen for the benefit of those exploited students.

You want me to do what?

A coalition of states tried to get DeVos to take action on 27,000 applications for loan forgiveness filed by students whose for-profit schools collapsed and left them stranded without a degree or guaranteed admission to another school. That went nowhere, and neither did another alliance of 18 states. Then, 23 senators asked the Consumer Financial Protection Bureau (CFPB) to look into the mismanagement of the forgiveness program because they also couldn’t get DeVos to move forward.

Fast forward to Thursday, when the House Education and Labor Committee called DeVos on the carpet to try to find out two things: 

1. Why her department has been dragging its feet on bringing some resolution to the affected students.

2. What the logic was behind the math in her loan relief plan -- specifically how it deals with debt relief claims made under the “borrower defense to repayment” statute, a law which gives students a defense against loan repayment if they were subject to adversarial debt collection. The Washington Post’s education economics writer Danielle Douglas-Gabriel reported that higher education experts went as far as saying DeVos’s new sliding scale will result in substantially less loan cancellation than before.

Why the stonewalling?

Committee Chairperson Bobby Scott (D-VA) didn’t waste any time in laying out his case in Thursday’s hearing. 

“The department's initial partial relief formula would have provided about 93 percent of defrauded students full relief,” Scott said. “In 2018 the federal court blocked the initial partial relief formula because it misused students personal data. But even after the court's ruling which specifically asserted the department could provide timely and full relief to eligible borrowers under the Obama era framework, the department refused to do so.”

Scott then moved to some facts which showed how defrauded students were completely left out in the cold:

• In the 18 months between the court's 2018 ruling and the department’s announcement of a new revised formula, the department failed to process a single borrower defense claim. 

• In that same timeframe, the number of borrowers awaiting relief soared from 54,000 to approximately 240,000.

• The department illegally collected on 45,000 borrowers during that period of inaction, putting some borrowers in a situation where wages and tax returns were garnished by the government when those borrowers should have been receiving some type of monetary relief.

The gloves came off as Scott made it clear that the department has done nothing on behalf of the students who were hoodwinked. 

“So, Madame Secretary, your refusal to process those claims is inflicting serious harm on students that you have the duty to serve while the department has been searching for a legal method to shortchange these defrauded borrowers,” he argued. 

“These defrauded borrowers have been left with mountains of debt, worthless degrees and none of the job opportunities they were promised. In many cases, they were unable to go back to school, start a family, or move on with their lives.”

DeVos defends herself

To her credit, DeVos appeared prepared for Scott’s barrage and defended both her department and the administration vigorously. She put some of the blame back on the Obama administration, saying it not only left behind 64,000 borrower defense claims to be processed, but it also “weaponized the regulation against schools it simply didn't like.” 

“They applied the law in a discriminatory fashion...since 2015, there has been a 5,000 percent increase in borrower defense claims. This administration is committed to pulling back the previous administration's overreach and will enforce a borrower defense rule that is consistent with Congress' intent, that protects all borrowers and that treats taxpayers and schools fairly.” 

In defense of the DOE’s new formula, DeVos wanted it known that the DOE’s rule first and foremost “puts into place a process that is clear, understandable and easily accessible for borrowers. It also ensures that claims are processed efficiently, carefully, transparently and fairly.”

However, DeVos’ definition of “clear, understandable, and easily accessible” might be interpreted as an exhausting number of hoops a student would have to jump through to get a loan absolved. Students have to file claims “which will be judged using a preponderance of the evidence standard”; the new process allows for “both borrowers and institutions to present evidence, obtain relevant evidence we are considering in the case and respond to any evidence in the record.” 

One caveat that might make matters worse for students using the borrower defense rule is that DeVos’ version does not apply retroactively. When it goes into effect on July 1, 2020, it will apply to loans only dispersed after that date. 

“This means that the Department will continue to enforce, in good faith, the previous administration's 2016 rule for all loans dispersed between July 1st, 2017 and July 1, 2020,” DeVos said, leaving her interpretation of “in good faith” up for conjecture.

“Frankly, it’s criminal”

When Rep. Lori Trahan (MA-03) had her turn at the grill, she went straight at Secretary DeVos’ revised formula, which, in Trahan’s estimation, provided only partial loan relief to the defrauded students. 

Rep. Trahan demonstrated why DeVos’ plan won’t work by weaving a tale about an imaginary student (named “Betsy,” interestingly enough) who was defrauded by their school. Because “Betsy” makes less than the federal minimum wage, she would not receive full debt relief, Trahan argued.

As the video shows, Trahan took no prisoners, playing pin-the-tale-on-DeVos with the Education Secretary and her new formula.

“Look, the new partial relief formula that you came out with two days ago, it doesn't benefit students who have been fleeced,” argued Trahan. “It doesn't take into account individualized earnings, debt load, whether Betsy is back in a full-time or part-time accredited college program, which is why my friend from Pennsylvania, Representative Wild, and economists alike call it nonsensical.”

“These are students who wanted nothing more than to get ahead, who took out loans in good faith, and they were taken advantage of instead. And your response to them is to cheat them again.” 

Speaking to Scott’s tirade about the DOE’s snail’s pace, Trahan pointed out to DeVos that she has the ability to make things better, but she said the Education Secretary simply isn’t doing enough.

“So, I know right now, you have the authority to provide full, fair, and immediate debt relief to student borrowers who were defrauded by these predatory colleges. And every day that goes by is a violation of students' rights. And frankly, it's criminal,” Trahan said. 

“I know fraud when I see it”

When Suzanne Bonamici (D-OR) had her turn at DeVos, she didn’t spare her concerns either. 

In lawmaker’s scrutiny of the Education Department’s revised formula for processing Borrower Defense claims, she argued that only a fraction of borrowers will get that relief and that DeVos’ continuing efforts to demand loan repayment from defrauded students was an insult. 

“I’m a former consumer protection lawyer for the Federal Trade Commission, and I know fraud when I see it,” Bonamici said during the hearing. “These students were misled and cheated. And the fact that some of them may be making money doesn’t mean they weren’t defrauded. If someone went into one of these programs hoping to become a nurse, for example, and now they’re selling clothes at a department store, it doesn’t mean that they weren’t defrauded.”

“That’s not the way it works”

Not unlike anything else we’ve seen from congressional hearings lately, the Republicans on the committee went to bat for DeVos. Rep. Virginia Foxx (R-NC), the ranking member on the committee, offered this analogy in defense of DeVos’ right to provide partial relief for successful borrower defense claims: 

“I bet you there is not a member of this committee who has not had a car accident or a problem in homeowner's insurance, and I'll guarantee you that the insurance companies don't write you a check for what you think is your damage. They assess that damage. They look at your car. They come to your home. What these members are saying is, you just write a check from the taxpayers and say, ‘It's okay if you tell us you've been defrauded or you've been damaged.’ That's not the way it works.”

Dealing with the DOE?

The Department of Education barely gets one star from ConsumerAffairs reviewers, and now you may be able to understand why.

But one thing that raises an eyebrow is something that Trisha of Thousand Oaks CA brought up in her review of the DOE. She says that when someone calls the DOE, they’re actually getting a call center run by Maximus Federal Services Inc. which, Trisha claims, “runs every aspect of FSA (Federal Student Aid).” 

“They can't answer questions. Being on the outside, we can't possibly know this...They work off of a script. If you ask a question not on the script, they will dance around an answer and actually make something up. They don't offer anything because they don't know how.”

Working your way through college was once a time-honored tradition, but with today’s sky-high tuition, who can do that?

The concept may be making a comeback as more companies begin offering college tuition benefits for their employees. Chipotle Mexican Grill is the latest company to introduce what it calls “debt-free degrees” for eligible employees.

Chipotle says it is expanding its current Chipotle Cultivate Education benefits program that has provided company employees with more than $20 million in tuition assistance over the last two years.

Under the expansion, Chipotle says it will cover 100 percent of tuition costs for 75 different business and technology degrees and provide the assistance upfront, not through reimbursement.

Four months on the job

To qualify, an employee must have been on the job for at least 120 days. After that, they are eligible to seek degrees from non-profit and accredited universities such as the University of Arizona, Bellevue University, Brandman University, Southern New Hampshire University, and Wilmington University.

The program is being administered through Guild Education, an education benefits company.

"This expansion of Chipotle's Cultivate Education benefits program to cover 100 percent tuition costs upfront for degrees in business and technology represents the company's commitment to upskilling its workforce and helping employees achieve their professional goals," said Rachel Carlson, Guild Education CEO & co-founder. 

"We are thrilled to partner with Chipotle as they continue to lead the way in the fast-casual industry for enhancing the employee experience with best-in-class benefits."

Starbucks’ tuition reimbursement

A growing number of companies whose workforces include a  large number of young, entry-level, and often minimum wage workers have taken the step of providing financial assistance for education.

In 2015, Starbucks introduced a tuition reimbursement program for its employees who wanted to complete their college education. The program provides 100 percent tuition coverage for the last two years of school in Arizona State University’s online curriculum. The program is open to full-time and part-time employees who work at least 20 hours a week.

For students who have already run up some student loan debt, there is also a growing number of employers willing to help. As we reported previously, more corporations are making student loan repayment an optional employee benefit.

At the time, 73 percent of major corporations surveyed by Challenger, Gray, & Christmas either offered or planned to offer a student loan repayment package.

The rate at which students are able to pay off their student loans could be altered under the Trump administration’s 2020 budget plan, which includes a proposal to eliminate the Public Service Loan Forgiveness (PSLF) program.

The proposal, titled “A Budget for a Better America: Promises Kept. Taxpayers First,” includes $64 billion in funding for the U.S. Department of Education, which represents a $7.1 billion decrease compared to the 2019 funding.

Under the plan, the PSLF program -- which forgives student loans for borrowers who are employed full-time in government and some nonprofit positions who make 120 eligible on-time payments over ten years -- would be cut.

The elimination of the program would affect borrowers who take out a new student loan starting July 1, 2020. It would exclude borrowers who are currently completing their education.

‘Draconian cuts’

The proposed plan aims to balance taxpayer interests with students’ needs. The White House said it would save an estimated $53 billion over nine years by cutting the PSLF program.

The budget plan might also make colleges share some of the responsibility for student loans. It  includes a “request to create an educational finance system that requires postsecondary institutions that accept taxpayer funds to have skin in the game through a student loan risk-sharing program.”

American Council on Education President Ted Mitchell called the cuts "draconian.”

​“This is the third year in a row that the Trump administration has proposed to walk away from adequately investing in student financial aid and incredibly important, life-saving biomedical research,” Mitchell said in a statement.

“If enacted, the president’s proposal would cut over $200 billion in federal student aid and also cut billions more in funding for the National Institutes of Health and the National Science Foundation, threatening the well-being of our nation’s students and citizenry.”

James Kvaal, president of The Institute for College Access and Success (TICAS), also criticized the proposed budget cuts.

"These deep cuts overshadow otherwise worthwhile changes, such as automatically enrolling distressed borrowers in income-driven repayment, automating the annual income recertification process, and modernizing student loan servicing," Kvall said in a statement.

The proposal hasn’t been finalized yet, and it will likely be altered before taking effect. On Monday, Presidential adviser Ivanka Trump is expected to appear at an event that will discuss college affordability and reauthorization of the Higher Education Act.

Across the nation, senior citizens are collectively carrying $86 billion in student loan debt -- a figure that rose 161 percent between 2010 and 2017, the Wall Street Journal reported.

The sharp increase in student loan debt among consumers older than 60 was the largest out of any age group during that time frame.

A primary cause of the burden of student loan debt falling increasingly on older Americans is the rising cost of college. In some cases, seniors co-signed loans to pay for their children or grandchildren’s college education. In other cases, seniors went back to school after the 2008 financial crisis caused them to lose their job and had to borrow to finance their education.

In 2015, the government seized social security benefits, tax refunds, or other federal payments from 40,000 U.S. consumers aged 65 or older who had defaulted on their student or parent loan debt, up 362 percent from the previous decade, according to the Journal.

“The borrowing buildup has upended the traditional arc of adult life for many Americans. Average debt levels traditionally peak for families headed by people aged 45 to 54 years old,” the Journal noted.

Seniors hobbled by student loan debt

A study conducted in 2018 by the Association of Young Americans (AYA) and AARP found that 32 percent of seniors with student debt had to use their retirement savings to help pay off the loans. About a third of seniors (31 percent) couldn’t buy a new home because of student loan debt, and nine percent couldn’t afford health care because of student debt.

“The trillion-dollar student loan crisis is clearly having a tangible impact on all Americans across all generations,” said AYA Founder Ben Brown. “The impacts of this crisis have deep consequences on our economy as a whole, with the majority of Americans noting that student loan debt has been a barrier in making key life decisions and planning for the future.”

Student loans are the second largest credit debt for Americans, coming in behind mortgage loans.

Economic policymakers, including Federal Reserve Chairman Jerome Powell, have expressed concerns over the possible toll of student loan debt on the economy as a whole. In the years since the financial crisis, student loan debt has been linked to a slowdown in home ownership, marriage and starting families.

In a new marketing effort, some colleges will begin price-matching tuition in the hopes of bringing in more students.

While a number a private universities will be offering students public school tuition, a number of public institutions will be offering out-of-state students the opportunity to pay like the locals.

Using billboards and social media campaigns, colleges and universities across the country are hoping to draw in more students from their local areas. Additionally, many schools are hoping they’ll attract higher-performing students, thus boosting their academic profiles, while others are hoping to change the public perception that college is unaffordable.

Nathan Mueller, a principal at EAB -- a consulting firm that helps schools with enrollment strategies -- said that any increases in enrollment universities see after announcements like these will most likely not last long-term. He says that “the interest seems to cool” once schools have the time to evaluate the success of the initiative.

Specific offers

At Oglethorpe University near Atlanta, students with a GPA of 3.5 or higher and a 1250 SAT or 26 ACT score will be eligible to pay the tuition rate of any in-state university. This year, Oglethorpe’s tuition and fees is posted as $39,830. However, with scholarships, students would pay much less, and the average Oglethorpe student ends up paying $13,700 per year.

President Lawrence Schall is hoping to attract higher-performing students, as well as prove that a private education can be affordable and attainable.

“It is about growing the top of the class,” Dr. Schall said.

Currently, Oglethorpe admits roughly 25 percent of the students it accepts, though 10 to 15 percent of those students are high-ranking.

Recently, Oglethorpe has seen an increase in tuition revenue, and in an effort to continue the upwards trend, the school is hoping to admit and enroll even more students -- and from different locations. While the majority of the students are from Florida, Tennessee, and Georgia, Oglethorpe’s newest freshman class comes from 17 different states.

Similarly, since 2012, the University of Nebraska at Kearney has experienced a one to two percent enrollment decline. Now, the school will be offering students from Colorado and Kansas in-state tuition.

Sarah Dieffenbacher borrowed $50,000 in federal student loans so she could study to become a paralegal in a program at Everest College in Ontario, California, but she never found work in her field.

The college shut down eight years later, after the Department of Education determined that Corinthian Colleges, the for-profit chain that operated the campus, had defrauded the government and consumers by providing inadequate career training and falsifying job placement data.

Federal student loans are supposed to be forgiven if the feds determine a school defrauded its students, consumer attorneys say, but that still hasn’t happened, according to the Project on Predatory Student Lending, a legal clinic at Harvard University that is suing the federal government on behalf of Dieffenbacher and thousands of other former Corinthian College students.

The Harvard legal clinic was formed in 2012 by attorneys who describe for-profit colleges as a predatory industry and the federal government as the industry’s longtime enablers.

Denying debt relief efforts

This weekend, the clinic filed a motion alleging that the Department of Education illegally obtained earnings data from the Social Security Administration to continue denying former Corinthian students debt relief.

“The Department of Education had already unfairly and unlawfully refused to cancel these bogus loans for so long,” Josh Rovenger, one of the attorneys representing the students, told the Washington Post. “Now, it has secretly and illegally co-opted Social Security data to try to argue for something less than the complete cancellation and refund that these borrowers are due.”

Some former Corinthian students have even had their tax refunds seized by the federal government to pay off  their loans, the attorneys say, or worse.

In Dieffenbacher’s case, the Department of Education attempted to garnish her wages until the legal clinic filed an emergency order on her behalf.

Slow relief under two administrations

If former Corinthian students made little progress in loan forgiveness under Obama, they are faring worse under the Trump administration.

In December, the Department of Education announced that it would only be forgiving loans of Corinthian students if their salary did not match earnings made by people who completed other vocational programs. Many students shortly after received letters stating that they would only get partial loan relief.

Department of Education Secretary Betsy Devos framed the decision as one that was necessary to save taxpayers money, but students say in the recent legal filing that using their social security data to prevent loan forgiveness violates several laws and their constitutional rights.

Warren investigation

The Obama administration cut off federal funds to the Corinthian College chain in 2014 and encouraged defrauded students to apply for loan forgiveness when the company went bankrupt in 2015. But over a year later, an investigation conducted by Sen. Elizabeth Warren found that most students who attended the schools did not see any loan relief.  

Even after the Department of Education encouraged students to apply for a debt discharge, only a fraction actually received one, Warren wrote in a letter to former Education Secretary John B. King. A staggering 80,000 other former Corinthian students continued to face some fort of debt collection for not repaying their loans, the senator said.  

“It is unconscionable that instead of helping these borrowers, vast numbers of Corinthian victims are currently being hounded by the Department’s debt collectors...all to pay fraudulent debts that, under federal law and the Department’s own policies, are likely eligible for discharge and thus, invalid,” she wrote.

Over a year and a half later, the students now face a presidential administration that is even friendlier to for-profit schools.

Devos friendlier to for-profit schools

As DeVos began turning back or freezing Obama-era regulations on for-profit colleges, some states took matters into their own hands. Massachusetts Attorney General Maura Healey, for instance, filed a similar lawsuit demanding debt relief for former Corinthian students in December.  

Healey is among numerous state attorneys general who have launched their own lawsuits and investigations into for-profit colleges and the student loan industry in an attempt to block either from collecting payments. But last week, the Department of Education published a notice claiming that states do not have the authority to impose regulations on student loan services.

"Massachusetts is improperly seeking to impose requirements on the department’s servicers that conflict with the Higher Education Act, federal regulations, and federal contracts that govern the federal loan programs," DeVos wrote in a recent memo. "We believe that attempts by other states to impose similar requirements will create additional conflicts with federal law.”

U.S. college students have run up $1.4 trillion in student loan debt, but some college majors have apparently prepared borrowers to pay down that debt at a faster rate.

CometFi, a resource site for college grads with student loan debt, has drilled down into the student debt numbers over the past decade and unearthed some surprising facts.

When it measured student loan debt against fields of study and subsequent careers, the study determined that graduates in journalism and broadcasting have done the best job of paying off their student loans.

This group graduated with an average of $27,000 in loans but now owes an average of $12,000, reducing balances by 55 percent. Graduates in publishing, construction, and real estate have all paid off at least 47 percent of their loans.

Graduates working in telecommunications have paid only 16 percent, while those in scientific jobs have reduced their debt by only 19 percent. Those in medical and health care have paid back just 20 percent.These results are particularly surprising because graduates in the so-called science, technology, engineering and mathematics (STEM) fields, including healthcare, have made the slowest progress paying off their student loans.STEM grads have made less progress

"So why is it that journalists have paid off almost twice as much debt?" the authors ask. "Perhaps it’s because medical professionals were more likely to have other types of debt – business loans to buy into a practice or personal debt incurred during residencies they were simultaneously paying off. Perhaps it’s because people who choose these professions value lifestyles that require more spending, or it may be that medical degrees aren’t quite the financial windfall we think they are."

The survey also analyzed students’ financial reliance on parents or family, finding that 51 percent of students paid for their education themselves while 24 percent relied on their parents.

It also looked at where students attended school, finding that a large majority -- 57 percent -- attended public, in-state institutions where tuition is typically lowest. Twenty-four percent attended more expensive private schools.

However, those attending private colleges graduated with the most debt but have simultaneously done the best job of paying it back, reducing their loan balances by an average 32 percent. Technical and trade school graduates have paid off 30 percent of their loans, barely outstripping 29 percent paid off for public, in-state graduates.

Giving advice to their younger selves

Perhaps the most intriguing aspect of the survey involves looking back. Knowing what they now know, graduates were asked to give advice to their younger selves.

If they had it to do over, 49 percent of graduates said they would spend the first two years of school at a community college and live at home. Eighteen percent said they actually did that.

Fifty percent of graduates said they would choose to attend a less expensive college and only 54 percent agreed that the cost of attending college was worth it.

Student debt has had significant economic impact on the generation that has graduated in the last decade, making many major purchases (in particular buying a home) more difficult. Moreover, the weight of student loans has left this group cash-strapped even on a small scale; forty-six percent of respondents said they did not have the cash on hand for a $400 emergency.

The survey found a direct correlation between student loan debt and the ability to meet that unexpected expense, with those with the least amount of debt most able to handle it.

A report by the Consumer Financial Protection Bureau (CFPB) shows student loans -- and especially those backed by the government -- remain a major source of consumer complaints to the agency.

The report documents a surprising increase in complaints about federal student loans, generally regarded as more consumer-friendly than those from banks and other private lenders.

Federal loan complaints rising

According to the Department of Education, federal student loans include many benefits not typically offered with private loans, such as fixed interest rates and income-driven repayment plans. In contrast, private loans are generally more expensive than federal student loans.

The annual Student Loan Ombudsman Report found that over the last year, the CFPB received nearly 23,000 complaints involving all types of student loans. More than half were complaints about federal loans.

Whitney Barkley-Denney, a policy counsel and student loan specialist with the Center for Responsible Lending, says the increase in federal student loan complaints is disturbing.

"When 56 percent of consumers filing complaints are frustrated by an inability to access options such as income-driven repayment (IDR), these new findings help to explain why so many borrowers are in default," she said.

Many of the complaints focused on loan servicing and debt collection policies. Barkley-Denney draws a comparison to the foreclosure crisis, when she says many homeowners unnecessarily found themselves in foreclosure.

"There are now borrowers who are unnecessarily defaulting on student loans when alternatives exist to protect their payment affordability and their credit ratings," she said. "These unnecessary defaults, in many cases, contribute to the debt collection complaints involving student loans.

Optimistic results

Despite the increase in federal student loan complaints, the CFPB report strikes a more optimistic tone when it discusses results. The agency said it was able to produce more than $750 million in relief for borrowers and improved loan servicing for millions more.

The CFPB says it was able to provide automatic interest rate reductions for eligible military personnel and eliminate "surprise defaults" from the majority of new private student loans. But the agency said the large number of complaints from student loan borrowers shows widespread student loan servicing problems persist.

“As borrowers continue to fall through the cracks of our broken student loan system, the Bureau’s work to date offers a roadmap for consumer-driven reforms,” said CFPB Student Loan Ombudsman Seth Frotman.

More work needed for a better market

Frotman says giving borrowers the power to bring these problems to the attention of government regulators is a positive, but says regulators have a lot more work to do to produce a student loan market that works better for consumers.

The CFPB keeps track of how much money has been loaned to students to attend college and puts the current balance at more than $1.4 trillion. It says about 44 million consumers now owe money on their student loans, in some cases reducing their spending power.

The CFPB report shows more than eight million student loan borrowers are currently in default and more than 1.2 million borrowers defaulted on their student loans last year.

The Federal Trade Commission and eleven state attorneys general are launching a coordinated attack on student loan debt relief services, alleging they have fraudulently collected roughly $95 million in fees.

“Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans,” said Maureen K. Ohlhausen, FTC Acting Chairman. “The FTC is proud to work with state partners to protect consumers from these scams, help them learn how to spot a scam, and let them know where to go for legitimate help.”

Florida Attorney General Pam Bondi has filed two of 36 total lawsuits, charging two Florida-based companies misled student loan borrowers into believing they would be enrolled in a loan forgiveness program, making unkept promises.

She says the students would have been much better off using the money they paid in upfront fees to make payments on their loan balances. Illinois Attorney General Lisa Madigan also filed two separate actions against firms in her state.

Borrowers not getting the right information

“Student loan debt relief scams are successful because borrowers are not receiving the information they need to repay their loans,” Madigan said. “They rob borrowers of the money they could be using to pay down their student loan debt.”

With approximately 42 million borrowers owing more than $1.4 trillion in student loans, some firms have targeted this debt-burdened group with promises of relief. Similar scams targeted homeowners facing foreclosure following the 2008 housing market crash

Consumers were charged upfront fees and, in many cases, ended up in worse shape than before.

While the government has established some ways for student loan debt to be forgiven, borrowers should understand that it is very difficult to walk away from a student loan. This debt is so iron-clad it cannot even be discharged in bankruptcy.

Don't fall for big promises

Madigan says student loan borrowers should not believe sales pitches that claim to have expertise in navigating the debt relief process. Some of these firms have names that make them sound like a government agency when they clearly are not.

These companies often employ high-pressure sales tactics, providing erroneous information in order to scare borrowers into signing up. People who do sign up are often charged upfront fees as much as $700.

The service they provide is available to any consumer at no charge if they contact government agencies like the Department of Education and the Consumer Financial Protection Bureau (CFPB).

Under federal law, there are a few cases in which a student loan may be forgiven, such as when a for-profit school goes out of business or the borrower takes certain public service jobs. The Department of Education lists them here.

A growing number of employers now offer some help in repaying student loan debt as an employee benefit. Earlier this year, outplacement firm Challenger, Gray & Christmas reported nearly 73 percent of the firms it surveyed either currently offer or plan to offer a student loan assistance package.

Students eligible for federal college grants left $2.3 billion on the table this year, according to an analysis by personal finance site NerdWallet.

The analysis reveals that the money was available through Pell Grants, federal aid that is distributed based on financial need and does not have to be repaid. These were left unclaimed because students didn't fill out the reuqired Federal Application for Financial Student Aid (FAFSA) form.

In fact, NerdWallet found a staggering 1,234,249 high school graduates didn’t fill out their FAFSA for the 2017-2018 academic year, and an estimated 648,191 of them would have qualified for Pell Grants.

Qualifying students could have received an average of $3,583 to help pay tuition and fees, reducing the need for student loans.

Grant money might have made the difference

As we reported last week, a new survey by COUNTRY Financial asked recent high school graduates who had never attended college why they weren't applying. Nearly half -- 48 percent -- said the high cost of college was a factor in their decision. Nearly as many -- 47 percent -- said they were unwilling to go into student loan debt to pursue a college degree.

"Student loans have had an impact on the ability of Americans to complete their education," the authors wrote. "Of those who started but did not complete a post-secondary program, 59 percent said the cost of education factored into their inability to finish their education, and 53 percent said that taking on student debt was also a factor in their incomplete education."

The Nerdwallet researchers say this underscores the need for all college students to fill out the FAFSA, the key to unlocking federal and state aid dollars. You can get started on the process here.

Pell Grants

While there are different grant programs available, the Pell Grant is among the most widely used by those who are eligible. The amount of money applicants can receive changes on a yearly basis. Currently, the amount is capped at $5,920.

The amount applicants can qualify for will depend on financial need and the cost of attending a particular school. Recipients can receive Pell Grants for up to 12 semesters, meaning the money could be available throughout the process of receiving a bachelor's degree.

Nearly half of all 2017 high school graduates were eligible to receive a Pell Grant for college this fall. However, the Nerdwallet analysis shows 36 percent of last spring's high school graduates failed to submit the FAFSA.

The lesson for current high school seniors and their family is to file the FAFSA by the deadline, which is midnight Central Time, June 30, 2018. However, since aid is awarded on a first-come, first-served basis, it is best to file as early as possible.

College enrollment appears to be inching down, according to a recent report by the National Student Clearinghouse Research Center.

The Center found that Spring 2017 enrollment fell 1.5 percent from Spring 2016. The greatest declines were at for-profit institutions, which have faced increasing regulatory scrutiny. But enrollment also dropped sharply at public community colleges.

There could be a number of reasons for this. In its coverage of the issue, higher education website The Hechinger Report noted a decline in the population of students leaving high school, as well as an increase in the number of would-be graduate students who are opting to join the workforce as the economy slowly recovers.

However, a new survey by COUNTRY Financial suggests another reason: cost.

The survey of college-age consumers asked those who had never attended college their reasons for not attending. Nearly half -- 48 percent -- said the high cost of college was a factor in their decision.

Unwilling to go into debt

Nearly as many -- 47 percent -- said they were unwilling to go into student loan debt to pursue a college degree.

"Student loans have had an impact on the ability of Americans to complete their education," the authors write. "Of those who started but did not complete a post-secondary program, 59 percent said the cost of education factored into their inability to finish their education, and 53 percent said that taking on student debt was also a factor in their incomplete education."

At the same time, the survey suggests there is still a strong respect among young people for the value of a college degree. A large majority agree that "post-secondary education is critical to success."

Some who borrowed money to attend college now appear to have a case of buyer's remorse. Thirty-six percent of those who have taken on student debt to get through school reported they are not confident they'll repay the loans entirely. Among those still working to pay back their student loans, 48 percent said they have missed at least one payment.

“Our survey found the majority of Americans who have missed a student loan payment have not done so because of error or because they forgot. It’s been a lack of money, not a lapse in memory," said Doyle Williams, an executive vice president at COUNTRY Financial.

Alternatives to debt

There are alternatives to piling on debt to attend college. Students who qualify for scholarships and aid can greatly reduce the out-of-pocket expense associated with a college degree.

In addition to federal aid packages, most colleges and universities offer their own aid to students who qualify. Completing the Federal Application for Financial Student Aid (FAFSA) is a key step in taking advantage of both, as many schools use information from a student's FAFSA to allocate their scholarships.

A free app called College Abacus can help students determine their out-of-pocket costs for each college they might be considering.

“Every school uses its own formula to allocate financial aid,” Abigail Seldin, VP of Innovation for ECMC and founder of College Abacus, told ConsumerAffairs in a 2014 interview. “Those individualized net prices are often lower – much lower – than a family's government-calculated estimated family contribution.”

The app can provide a more exact number because it takes into account each college's typical aid packages. Using the tool, Seldin said prospective students sometimes find the school of their choice is less expensive than the alternatives they were considering.

The U.S. Department of Education (ED) reports that the default rate on new federal student loans has risen for the first time in four years.

Efforts to help borrowers achieve more manageable payments appeared to be working, as the loan default rate leveled off after 2013. But as of June 30 this year, a record 8.5 million federal student loan borrowers were in default.

More than 500,000 of them defaulted in the first half of this year.

The Institute for College Access and Success (TICAS) is calling for further improvements in student loan policies and increased oversight of loan programs, but worries the ED is moving in the opposite direction.

"The Department's rollback of critical protections and enforcement will only lead to more student loan defaults, higher debt burdens, and wasted taxpayer dollars," said Pauline Abernathy, TICAS' executive vice president.

State attorneys general weigh in

Pennsylvania Attorney General Josh Shapiro and 18 other attorneys general fired off a letter to Education Secretary Betsy DeVos this week, asking her to stop the department's "systematic rolling back of critical protections for student loan borrowers."

The letter asserts that the ED does not have exclusive jurisdiction over federal student loans, but shares that responsibility with state attorneys general, the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and other federal agencies.

In June, DeVos ordered what she called a "reset" of regulations implemented by the Obama Administration to protect students from predatory loans. She said it was intended to allow time for the department "to develop fair, effective and improved regulations to protect individual borrowers from fraud, ensure accountability across institutions of higher education and protect taxpayers."

More flexible repayment plans

In late 2013, the government began implementing new rules with more repayment options. Borrowers on the standard 10-year repayment plan, for example, could switch to a plan based on income, helping them maintain a positive monthly cash-flow.

LearnVest offers this helpful guide to the various payment options that are available under current rules. However, supporters of these repayment rules worry they will be watered down or eliminated altogether.

TICAS claims for-profit schools continue to be a big reason for rising student defaults. It points to statistics that show only nine percent of all college students enrolled in for-profit schools, but those for-profit students accounted for a third of student loan defaults among borrowers who entered repayment in 2014 and defaulted by 2016.

Shapiro says student loan borrowers will lose out if the repayment regulations are rolled back. The only entities that will profit, he says, are loan servicers and for-profit colleges.

Student loan debt is still a heavy burden for millions, but there are now around 41,000 former students whose debt has disappeared.

In a settlement with federal and state agencies, Aequitas Capital Management, Inc., a financial services firm in receivership, will make refunds to the 41,000 students who borrowed money to attend the for-profit, and now defunct, Corinthian Colleges.

The settlement is in the final stages and must win approval from the court in Oregon that is handing the Aequitas bankruptcy.

“Thousands of New Yorkers signed up at Corinthian College to build the skills they need to compete in today’s economy,” said New York Attorney General Eric Schneiderman. “But Aequitas Capital Management took advantage of their ambition and schemed with Corinthian to saddle these students with high-default loans at the now-bankrupt college. This was nothing more than a sham that victimized unwitting students and deceived the government and taxpayers.”

Who gets a refund

Under the terms of the settlement, students who borrowed money from Aequitas Capital to attend a Corinthian school, and were attending when it closed in 2014 -- or who defaulted on their loans -- will receive a full discharge of their student loans. That includes any accrued interest.

A small number of borrowers won't receive a full discharge of their loans, but will have around 55% of the amount forgiven. Schneiderman says the average student loan borrower will get $6,000 and $7,000 in loan relief.

Schneiderman says Aequitas Capital was brought into the picture when Corinthian was in danger of having too many of its students reliant on federal aid under Title IV. Students then got private student loans through Aequitas, which allegedly had a deal with Corinthian to buy back loans in default. Schneiderman says the purpose was to make it appear Corinthian was in Title IV compliance.

'Sham loans'

“These were sham loans used by for-profit schools and lenders to access federal taxpayer dollars to fund programs that did nothing to help students get ahead,” said Illinois Attorney General Lisa Madigan.

Madigan says that after Corinthian could no longer make payments to Aequitas as agreed, the hedge fund was left holding a large inventory of loans that students could not repay. At that point, the Securities and Exchange Commission (SEC) took notice and declared the arrangement a Ponzi scheme. Aequitas failed in 2016 and was taken into SEC receivership.

If you are a former Corinthian student with student loan debt and believe you might be eligible for loan forgiveness under the terms of the settlement, contact your state attorney general to learn more. You can find your attorney general's contact information here.

Eighteen states and the District of Columbia have filed suit against Education Secretary Betsy DeVos over her delay of regulations meant to provide new protections for federal student loan borrowers, particularly those at for-profit colleges.

“The Trump Administration should do everything in its power to protect our students,”said California Attorney General Xavier Becerra, one of those joining the action. “At the California Department of Justice, we will continue working to ensure that all who seek higher education can do so without worrying that their American Dream will be stolen by unscrupulous purveyors of a sham college education. These regulations should be implemented because they’re good for students and because that’s what the law requires.”

The lawsuit accuses DeVos of illegally delaying the regulations, known as the “Borrower Defense Regulations.” They were set to take effect on July 1, but DeVos announced last month that the Department of Education would refuse to implement them as part of a “regulatory reset” while looking to develop alternative regulations that would likely leave victimized borrowers with far less protection.

Becerra said the refusal is a violation of the Administrative Procedure Act because the Department improperly relied upon a legal challenge to the regulations as a basis for delay and also failed to provide the public with the required notice and opportunity to comment on the delay.

Echoes of Corinthian

Becerra noted the case of California-based Corinthian Colleges, accused of targeting low-income, vulnerable individuals through false advertisements that misrepresented job placement rates and the value of school programs.

The Attorney General's Office obtained a $1.1 billion judgement against Corinthian on March 26, 2016, and worked with the Obama Administration to ensure that tens of thousands of former Corinthian students were entitled to federal student loan relief. The process led to the creation of the Borrower Defense Regulations, which provide for:

• Automatically canceling eligible loans for students who were defrauded;
• Taking greater steps to ensure a school’s financial viability; and
• Banning schools from including or enforcing certain arbitration provisions or class-action waivers in their enrollment agreements. 

There's not a lot Republicans and Democrats agree on, but during last year's presidential campaign, then-candidate Donald Trump promised to work for a solution to the student debt crisis that he said was a crushing burden on families.

According to government data, the student loan debt is now more than $1.3 trillion, much of it owed by young families. Bearing the weight of student loan debt can put a halt on a young person’s aspirations to purchase a home or raise a family.

Now, Sen. Bill Nelson (D-Fla.) has proposed legislation to try to ease the burden. Nelson's bill seeks to cut student loan interest rates and allow borrowers to refinance their existing federal student loans.

Would counteract recent rate hike

The federal government recently increased rates for new loans from 3.76 percent to 4.45 percent. However, the bill would permanently cap interest rates for undergraduate students at 4 percent.

The proposal spells good news to students like Michael Silurso, a student at the University of Central Florida, who acknowledges that it must be difficult for kids who are graduating -- “They are trying to find a job, and they already have debt that they have to pay off," he told WFTV News, Orlando.

Sen. Nelson's bill would also eliminate the "loan origination fees" charged to students to process their loans. This fee is taken out of a student's loan before they receive it, but they are still responsible for paying back the full amount.

The Florida Democrat says capping interest rates, ending loan origination fees, and allowing borrowers to refinance existing loans would help to make education more affordable. 

“If we really want to make higher education more accessible in this country, we have to make it more affordable,” Nelson said in a news release. “If you can get a home loan at 4 percent, why can’t students get an education for the same rate?” 

Tool for paying down debt

While the legislation may or may not have a chance at passage, families still must find ways to pay down student loan debt. The Consumer Financial Protection Bureau (CFPB) offers a tool for getting started.

While everyone's situation is different, the tool will try to point you in the right direction. To get started, have a list of your monthly loans and required monthly payment amounts at the ready. Then, simply choose "your situation" and answer a series of 'yes' or 'no' questions to figure out your best course of action. 

More state universities are beginning to respond to rising tuition burdens on families by offering more financial aid -- and in some cases, free -- tuition.

The University of Michigan (U-M) is the latest state university to roll out a free tuition plan, called the "Go Blue Guarantee." Launching next January, it will guarantee students from a family with income below $65,000 a year free tuition for up to four years.

"Today, our long-standing commitment to ensuring that qualified students from Michigan can afford a U-M education becomes a guarantee," said U-M President Mark Schlissel.

Eliminates some of the complexities

Schlissel says the guarantee eliminates a lot of the complexities found in financial aid. If a family of an accepted student qualifies, the student pays no tuition

"I have always believed that talent is ubiquitous in our society, but opportunity most certainly is not," Schlissel said. "The 'Go Blue Guarantee' helps us ensure wider opportunity."

U-M says the new aid package is a way it can help meet the financial needs of in-state students who have the grades to attend the university but not the money. The school says the program is not taking any money away from existing financial aid packages.

The "Go Blue Guarantee" will be available to students whose families fall within the income limits, and also are below a certain net worth threshold. Qualifying students also may be eligible for additional aid to cover non-tuition costs.

New York's free tuition program

In April, New York announced its own free tuition plan. The state legislature approved funding to provide free tuition to students attending CUNY and SUNY, as long as their families earn less than $100,000 a year.

Qualifying students must attend school full-time and average 30 credits each year, including summer and winter classes. They will also be required to maintain a passing grade point average to be eligible for free tuition.

There is an additional condition as well. Upon ending their education, they will be required to live and work in the state for the same number of years they received the financial aid.

The financial aid program called the “Excelsior Scholarship” will be available to students starting school this fall, as long as their families make under $100,000 per year. The income threshold will increase to $110,000 in 2018 and $125,000 in 2019.

According to the College Board, the average cost of tuition and fees for the 2016–2017 school year was $9,650 for in-state students across the U.S.

It doesn't seem to matter which party is in power, the U.S. Department of Education is slow to correct errors, no matter how grevious. In the most recent example, the department has failed to cancel federal student loans for thousands of students victimized by predatory for-profit colleges.

A coalition of states is pressing Education Secretary Betsy DeVos to take action on the 27,000 applications for loan forgiveness filed by students whose for-profit schools collapsed and left them stranded without a degree or guaranteed admission to another school.

Some students are nearing the end of 12-month forbearances on their loans, and face restarting monthly payments on debts that should be canceled.

“There is simply no reason for Secretary DeVos to delay student loan forgiveness for the thousands who were victimized by Corinthian Colleges," said New York Attorney General Attorney General Eric T. Schneiderman. "We should be doing all we can to allow students to pursue their educations without the burden of crushing student loan debt. I call on Secretary DeVos to stop delaying this common-sense solution for those who were duped and ripped off by Corinthian."

Schneiderman and 18 other attorneys general wrote to DeVos today, pressing her to provide information on what the department is doing to reduce the growing backlog of applications and to provide a timeframe for the discharge of student debts.

The department has similarly ignored thousands of teachers whose TEACH grants were unjustifiably converted to delinquent loans because of minor clerical errors on the teachers' annual applications. 

Discharge should be automatic

Going a bit further, the AGs note that since the Department of Education has already determined that these students are eligible for loan forgiveness, DeVos should abandon the application process and automatically discharge all eligible loans.

Students eligible for loan discharges attended Corinthian Colleges, which the Education Department has said made false claims about post-graduation employment rates for many of its programs.

More than 100,000 students who attended programs at Corinthian schools received a letter in April explaining that they are eligible for streamlined federal student loan cancellation based on the Department of Education’s findings. The students were directed to fill out a short application for the Department of Education. Students who did so are still waiting for action on their request.

“Relieving these hard-working Americans of their fraud-induced student debt will free them to participate more fully in their local economies, or even continue their educations with reputable schools,” the letter explains.

The list of states signing the letter includes Illinois, Washington, Massachusetts, California, Connecticut, Delaware, Hawaii, Iowa, Kentucky, Maryland, Maine, Minnesota, Mississippi, New Mexico, New York, Oregon, Pennsylvania, Virginia, the Hawaii Department of Commerce and Consumer Affairs, and the District of Columbia.

Back in October, the Education Department finalized rules that were intended to help students discharge their student loan debt if their school was found to be fraudulent or misrepresentative in its claims. Critics have argued that the process was rushed because regulators wanted the rules pushed through before President Trump took office.

Now, only a few weeks before the rules are set to roll out, a school trade group has filed a federal complaint saying that the regulations threaten their financial existence, according to Courthouse News.

“The final rule is a sprawling mass of thinly studied new requirements that, by the [Education] Department’s own estimates, will cost schools almost $1 billion dollars per year,” the complaint reads. “The ten-year impact on the public is estimated at $14.9 billion. It is necessary and important that regulations with such a profound fiscal impact be justified and supported by reasoned decision-making. This rule was not.”

"Crippling" regulations

The group heading the complaint – the California Association of Private PostSecondary Schools (CAPPS) – says that the new rules make it too easy for students to charge a school with fraud or misrepresentation in order to have their loans discharged.

The complaint argues that it was already possible under the previous system for students to claim borrower defense against loan repayment if they were subject to adversarial debt collection. But under the new rules, it says that the increased financial burden may very well put many schools out of business.

"The department has transformed the borrower ‘defense’ into a wide-ranging affirmative cause of action that a student can use to have all of his or her Title IV debts cancelled, or even recover loan amounts previously paid, with the student’s financial liability transferred to either the student’s school or federal taxpayers,” CAPPS said.

“The increased costs and the dramatically escalated threat of meritless claims and litigation, both before the Department and in court, will be crippling for many schools. The lack of procedural safeguards and clear standards throughout the final rule severely exacerbates these problems.”

No reasonable justification

In addition to the increased cost and liability, the complaint says that the new regulations allow schools to be labeled as “financially unsound” if they face litigation from a public entity, regardless of whether the case has any actual merit.

Under this provision, the group says that schools would be forced to negatively report their financial standing to current and prospective students and notify them if alumni have not paid their loans back quickly enough, a stipulation that the complaint says unfairly targets institutions whose students rely on income-based repayment plans or financial aid.

“The final rule creates a seismic shift in multiple areas of higher education regulation without legal basis or reasonable justification,” CAPPS said.

The complaint alleges that the rules violate First and Fifth Amendment rights and the Administrative Procedures Act and is seeking for the final regulations to be vacated by the Department of Education.

Student loan debt has risen dramatically in recent years, with reports indicating that it has climbed to 10.6% of all U.S. household debt. To help ease the burden on consumers, the federal government has paid debt collectors up to $1 billion annually to help defaulted borrowers climb out of debt and begin making monthly payments, a process referred to as rehabilitation.

However, a recent report by the Consumer Financial Protection Bureau (CFPB) shows that these federal incentives may be doing little more than costing American taxpayers. A Bloomberg report details how debt collectors often rake in money for helping consumers who quickly fall back into default on their debts.

“Collectors earn this compensation irrespective of borrower performance over the months or years following a completed rehabilitation, ensuring that collectors have no ‘skin in the game’ when a borrower defaults again. Policymakers may wish to reevaluate the economic inventive in place for debt collectors and student loan servicers to encourage long-term borrower success,” an October, 2016 report states.

Abysmal return on investment

Since the start of the 2013 fiscal year, CFPB says that the federal government has paid $4.2 billion to debt collectors for rehabilitation services, with a maximum amount of $1,710 being paid for each “successful” rehabilitation.

But when the agency tracked how much consumers paid back after these efforts, they found that the numbers were abysmally low. Statistics show that for each federal payment made to debt collectors, the amount collected afterward from the borrower was as little as $45 in 80% of cases.

Part of the problem, experts say, is that the contracts offered to debt collectors are simply too lucrative for the amount of return that the federal government gets back. CFPB points out that government’s rehabilitation program, which targets people who have defaulted on their debt, allows borrowers to pay back as little as $5 per month during a nine-month period in order to be considered in “good standing” on their debt. However, the agency found that 40% of these borrowers went into default again within three years.

“When student loan companies know that nearly half of their highest-risk customers will quickly fail, it's time to fix the broken system that makes this possible,” said Seth Frotman, a top CFPB student loan official.

"Do a better job"

To further exacerbate the problem, experts say that borrowers often don’t receive good counsel when it comes to exercising their options after coming out of default. CFPB points out that the majority of borrowers who make $5 monthly payments are eligible for $0 payments after exiting default, but around 90% of them don’t take advantage of the program and remain within the purview of debt collectors.

Education Secretary Betsy DeVos said earlier this year that it was up to the Education Department to “do a better job” than the previous administration when it came to reining in debt collectors. But thus far, student loan borrowers have only seen reductions in protections and are facing the loss of certain forgiveness programs that they were relying on. CFPB is urging the government to reconsider its loan program and debt collector contracts to ensure that they are working for the benefit of Americans.

“I don’t see how anyone wins from this system other than the collection industry,” commented Adam S. Minsky, a student debtor representative based in Boston.

The full report update from the CFPB can be viewed here.

Consumers struggling to pay back student loans have been left in the lurch lately, as the U.S. Education Department and Fannie Mae, among others, roll back protection measures from the Obama Era.

Illinois Attorney General Lisa Madigan and lawmakers in the state are trying to compensate by passing legislation at the state level. The Illinois Senate this week passed Senate Bill 1351, which would create a Student Loan Bill of Rights to protect borrowers from abuse.

The bill addresses widespread abuses and failures in the student loan industry that were revealed by Madigan’s investigation and lawsuit against one of the country’s largest student loan servicing companies, Navient.

The measure, drafted by Madigan’s office and Sen. Daniel Biss, passed the Senate by a vote of 34 to 15 with one member voting present, and will now be considered in the House, where it will be sponsored by Rep. Will Guzzardi.

“This bill is critically important now that the U.S. Department of Education has abandoned student loan borrowers by revoking reforms to prevent the abuses uncovered in my investigation,” Madigan said. “These commonsense measures will improve the financial futures of student loan borrowers, their families and our economy.”

"Misleading and self-serving practices"

“The U.S. Department of Education’s decision to roll back protections for student loan borrowers is extremely disappointing, particularly when investigations into the industry – such as those conducted by Attorney General Madigan – have revealed misleading and self-serving practices,” Sen. Biss said. “I encourage my colleagues in the House to support these commonsense reforms.”

Over the past decade, student loan debt has doubled to become the largest form of unsecured consumer debt in the country, with more than 40 million borrowers owing over $1.4 trillion. Nearly 70 percent of graduates leave college with an average debt burden of $30,000, and one-in-four borrowers are behind on their payments or in default.

Students who attended for-profit colleges are particularly hard hit, making up the vast majority of borrowers in default. While federal income-based repayment options are available, the U.S. Treasury has reported that only 20 percent of eligible borrowers are enrolled in these options, which can lower payments based on income to as low as $0 a month.

Madigan said Illinois borrowers frequently experience problems with their student loan servicers. Specifically, borrowers in Illinois have complained to her office that their loan servicers failed to inform them of affordable repayment options, follow borrower payment instructions and answer questions consistently.

Senate Bill 1351 would create a Student Loan Bill of Rights to protect student loan borrowers by prohibiting student loan servicers from misleading borrowers and requiring that they:

• Properly process payments;
• Require specialists to provide and explain to struggling borrowers all of their repayment options, starting with income-driven plans; and
• Inform borrowers who may be eligible to have their loans forgiven due to a disability or a problem with the school they attended.

The bill would also create a Student Loan Ombudsman in the Attorney General’s office and require student loan servicers to obtain a license to operate in Illinois.

Learn more in the ConsumerAffairs Student Loan Buyers Guide.

Former students at schools once operated by Corinthian Colleges may be getting some relief from student loans left over from their days at the failed schools.

Letters are going out to thousands of students around the country, explaining their potential eligibility to cancel federal student loans used to attend schools operated by Corinthian Colleges, including Everest Institute, Everest College, Everest University, Heald College, and WyoTech. Lists of the affected campuses, programs, and dates of enrollment are available here and here.

For-profit Corinthian Colleges abruptly ceased operations in 2015, transferring some of its campuses to a nonprofit called Zenith Education Group. The U.S. Department of Education then found that while it was operating, Corinthian Colleges made widespread misrepresentations between 2010 and 2014 about post-graduation employment rates. 

“We want people to know about this opportunity,” Ohio Attorney General Mike DeWine said. “If you qualify for this program, apply through the U.S. Department of Education, and get your federal student loan canceled, you won’t have to make additional payments on the loan, and you’ll be refunded for payments you already made.”

Ohio is one of 44 states and the District of Columbia that have arranged for a special “streamlined” process to discharge federal student loans.

However, any student who attended Corinthian Colleges and believes that the school lied about job prospects, the transferability of credits, or other issues may also apply to have their federal student loans canceled using the U.S. Department of Education’s universal discharge application at borrowerdischarge.ed.gov.  More information is available at studentaid.ed.gov/borrower-defense.

Continue making payments

It may take time for the U.S. Department of Education to process applications, so any borrowers who apply for loan discharge should continue making payments on the affected loans until they are informed by the U.S. Department of Education or by their loan servicer that their federal loans have been canceled or that the loans are in forbearance while their application is pending.

DeWine also reminded borrowers to beware of student loan scams. Borrowers can apply for loan forgiveness or find related information for free through the U.S. Department of Education. Requests for application fees or offers to cancel student loans in exchange for advance payments may be scams.

Not too long ago, the Washington Post Company owned a very profitable newspaper and an even more profitable for-profit college. The newspaper, of course, was The Washington Post and the college was Kaplan University.

We all know what happened to the Post. The Graham family sold it to Amazon impresario Jeff Bezos. Now the Grahams are selling Kaplan to Purdue University, an unusual and somewhat controversial transaction in a world where for-profit schools are still regarded as inferior to "real" universities (like Purdue, Indiana's land-grant college).

But Purdue says it needs the expertise that Kaplan has developed.

“None of us knows how fast or in what direction online higher education will evolve, but we know its role will grow, and we intend that Purdue be positioned to be a leader as that happens,” Purdue President Mitch Daniels said in a statement. “A careful analysis made it clear that we are very ill-equipped to build the necessary capabilities ourselves, and that the smart course would be to acquire them if we could.”

Sold for $1

Businesses do this all the time -- buy a company that has the technical or marketing skills they need to enter new markets or protect existing ones. But it's a little unusual for a public university to buy a private, for-profit school.

What's perhaps even more unusual is that Purdue won't be folding Kaplan into its existing academic operations. It plans to continue to operate all 15 Kaplan campuses and "learning centers," currently with about 32,000 students and 3,000 employees.

The price, by the way, is a whopping $1. Graham Holdings Company, as the former Washington Post Company is now known, will get 12.5 percent of Kapaln revenues going forward.

All of this, of course, still depends on approval by various boards and regulators. During the Obama Administration, for-profit schools were held in low regard and attempts to merge for-profit schools into nonprofit institutions didn't get very far.

That may change now that the president is himself the ex-CEO of a for-profit school that enjoyed more than its share of controversy.

The Purdue trustees have already given their blessing to the deal. The U.S. Education Department and the Higher Learning Commission has yet to weigh in.

Earlier this month, the Department of Education took a big step towards deregulating the student loan repayment process. Under new Secretary Betsy DeVos, the agency rolled back guidelines designed to protect student loan borrowers by directing federal agencies to judge student loan servicers based on their past records when issuing new contracts.

DeVos said that the decision was meant to shore up “shortcomings” that put an undue burden on student loan servicers and led to “deficiencies in service,” but critics immediately called the notion preposterous and said that the rollback rescinded commonsense consumer protections that had led to a higher level of service for borrowers.

It seems that many attorneys general agree with that assessment. In a letter delivered yesterday, attorney generals from 21 states sent a letter to DeVos expressing their concern and discontent with the Department’s decision.

“We, the undersigned Attorneys General . . . write to express our profound concern regarding the Department of Education’s revocation of critical student loan servicing reforms. The memoranda withdrawn by the Department on April 11, 2017 provided guidance designed to reform the student loan servicing industry in order to protect student loan borrowers and help these borrowers find affordable ways to repay their debts and avoid default,” the letter reads.

“At a time when the need for common-sense federal student loan servicing reforms is undeniable, the Department’s decision to roll back essential protections imperils millions of student loan borrowers and families.”

“Abdicating its responsibility”

The AG’s point out that the guidelines allowed student loan borrowers to manage their loans, save money, and make informed decisions about their repayment options. However, with their repeal, the AG’s say that consumers have become “mired in ambiguity and inconsistency that the servicing reforms were intended to prevent.”

The letter points to several cases where consumers were misled or misguided by servicers, including recent cases brought against ACS Education Services in Massachusetts and Navient in Washington and Illinois. “Investigations and enforcement actions undertaken by the state attorneys general have repeatedly revealed the havoc that student loan servicers’ poor practices and servicing failures wreak on the lives of borrowers,” the AG’s said.

In summation, the AG’s say that one of the primary roles of the Department of Education is to create and enforce standards that protect student loan borrowers, but they believe that the recent actions go in the opposite direction and ultimately fail consumers.

“The Department’s stated rationale does not justify summarily denying student borrowers basic protections. . . The guidance revoked by the Department was expressly designed to protect borrowers and correct pervasive student loan servicing failures that harm student loan borrowers and their families. By revoking these critical protections, the Department has abdicated its responsibility to student loan borrowers.”

“We urge you to reconsider immediately,” the letter concludes.

The letter was signed by the attorneys general of Massachusetts, Illinois, California, Connecticut, Hawaii, Iowa, Kentucky, Maine, Maryland, Minnesota, Mississippi, New Mexico, new York, North Carolina, Oregon Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia, as well as by the executive director of the Office of Consumer Protection of Hawaii.

A full transcript of the letter can be found here.

The Trump administration is rolling back more new regulations put in place by its predecessor. The Department of Education has withdrawn guidelines designed to inject more transparency into the student loan repayment process.

Specifically, Education Secretary Betsy Devos withdrew two sections of guidance that had been put in place last summer. The guidance directed federal agencies to judge student loan servicers based on their past record when considering them for new contracts. For example, if there were a lot of unresolved grievances, the servicers would get less consideration for new work.

The Consumer Financial Protection Bureau (CFPB) enacted the rule last year to protect borrowers in their dealings with loan servicers who were working under U.S. government contracts.

New rules were 'shortcomings'

In a brief memo to the head of Federal Student Aid (FSA), Devos said she was taking the action because the new rules had shortcomings that could impede the department's efforts to make sure borrowers "do not experience deficiencies in service."

"We have a duty to do right by both borrowers and taxpayers, and I look forward to working with your team at FSA, as well as others, in order to acquire new federal student loan capabilities that will provide borrowers with the tools necessary to efficiently repay their debt," Devos wrote.

Critics respond

Critics immediately pounced on the news, disputing the idea that the guidance places any undue burden on loan servicers. Americans for Financial Reform said Devos' action will result in the opposite of her stated goals.

"The decision to rescind the July 20, 2016 memo rolls back commonsense consumer protections, such as requirements that servicers provide a higher level of service to the borrowers most at risk of default," the group said in a statement.

It's the second reversal for student loan borrowers in recent weeks. In late March, The New York Times reported thousands of borrowers who took advantage of a program, where they traded years of work in the public sector for some student loan forgiveness, were now in limbo.

The Times reported a legal filing by the Department of Education cast doubt on whether some of the agreements with people enrolled in the program were actually binding.

One of the most complained about subjects on consumers’ minds lately has been student loans. Reports show that complaints made to the Consumer Financial Protection Bureau (CFPB) increased by 429% year-over-year from December 2016 to February 2017, the most of any product or service.

However, prospective students in New York may have less to complain about in the future. With the passing of its 2018 State Budget by the Senate, the state will soon become the first to offer free tuition at both two- and four-year public colleges and universities to lower and middle income families.

The program, which was proposed by Governor Andrew Cuomo earlier this year, will affect approximately 940,000 middle-class families and individuals, who will have the option of attending any of the 64 CUNY or SUNY colleges free of charge.

“With this Budget, New York is once again leading the nation and showing what responsible government can achieve. The result is a Budget that advances the core progressive principles that built New York: investing in the middle class, strengthening the economy and creating opportunity for all,” Cuomo said in a statement.

Who can apply?

The free tuition program, called the “Excelsior Scholarship” program, will initially cover students starting school this fall whose families make under $100,000 per year. However, that threshold will increase in subsequent years to $110,000 in 2018 and $125,000 in 2019.

Applicable students must also be enrolled full-time at their public college or university of choice and average 30 credits each year, including summer and winter classes. An impetus has also been put on grades under the program, as students must maintain a passing grade point average to be eligible for free tuition.

Additionally, students are required to live and work in New York for the same number of years after graduating school that they received the scholarship. So, those who attend a four-year college will have to live and work in the state for four years after they’ve received their diploma.

Covering costs

So, how exactly will the plan work? Basically, the state has calculated that tuition at CUNY and SUNY schools comes out to approximately $6,470 per year. When combined with room and board and other associated fees, that number comes out to just under $25,000 annually.

The budget language indicates that around $5,500 of this total cost will be covered by current tuition assistance programs, and that the remaining amount will be covered by the state and reimbursed to the public colleges and universities. Officials peg the cost of the program at $163 million per year once it is fully implemented.

Facing opposition

However, opponents of the plan have stated that the real cost will be much more than Cuomo and his supporters predict, especially for students who don’t meet the program requirements. Assemblyman James Skoufis points to parameters within the state budget that allow SUNY Board of Trustees the option of increasing tuition by $200 per year over the next three years for some students.

“It’s shocking to me how the governor can, out of one side of his mouth, propose free tuition for a small group of select students while out of the other side of his mouth, advocate for tuition hikes on a dramatically larger set of students,” he said.

However, Cuomo spokesman Rich Azzopardi fired back at Skoufis over the comments. “If Skoufis thinks 80% of all New York families is too few students, he should go back to school himself and take a remedial math course,” he said.

More information on the Excelsior Scholarship and the state’s budget can be found here.

The Trump Administration is rolling back an Obama initiative that gave some breathing room to consumers who fall behind on student loan repayments. 

In its first major policy decision on student loan issues, the U.S. Department of Education is giving lenders the right to charge a 16% fee to borrowers who enter a loan rehabilitation program within 60 days after defaulting on their debt.

Consumer advocates say the move will do nothing to address a wave of defaults.

“The Administration’s first move on the student loan default crisis will do nothing to stop the tidal wave of defaults that is sweeping across the nation,” said Rohit Chopra, Senior Fellow at the Consumer Federation of America and the former Student Loan Ombudsman at the Consumer Financial Protection Bureau. “With more than 3,000 Americans defaulting on a student loan every day, this just adds insult to injury.”

The action applies only to borrowers who took out loans from banks and other institutions, not Federal Direct Loans. It potentially affects about 7 million people who owe approximately $162 billion. 

Advocates object

Sen. Elizabeth Warren (D-Mass.) and Rep. Suzanne Bonamici (D-Ore.) protested the action, saying the 16% fee "is enormous and results in an unnecessary financial burden on vulnerable borrowers."

"Congress gave borrowers who default on their federal student loans the one-time opportunity to rehabilitate their loans out of default and re-enter repayment. It is inconsistent with the goal of rehabilitation to return borrowers to repayment with such large fees added," they said in a letter to Education Secretary Betsy DeVos.

The case grows out of a lawsuit against United Student Aid Funds (USA Funds) that challenged the collection costs. In that case, borrower Bryana Bible was charged $4,547 in collection costs after defaulting on a student loan in 2012. The company assessed the fees even though she had signed a rehabilitation agreement that set a reduced payment schedule. 

Education Department officials sided with Bible and USA Funds sued the department in 2015. USA Funds later agreed to pay $23 million to settle a class-action lawsuit that grew out of the Bible case, although it did not admit any wrongdoing. 

Last week, the Consumer Federation of America released an analysis that showed that 1.1 million Americans defaulted on a federal student loan in 2016. Americans are now in default on $137 billion in federal student loans.

With the founder of Trump University in the White House, for-profit education is riding high once again. After years of increasing federal oversight, the for-profit college industry sees President Trump's regulation rollback as its ticket to renewed growth.

The Education Department last week announced it would delay enforcing the "gainful employment" rules drafted by the Obama Administration to crack down on schools that leave their students with huge debts and scant job opportunities.

“This action is taken to allow the Department to further review the GE regulations and their implementation,” the agency said.

The rules cut off access to taxpayer funds for colleges and vocational training institutions if their graduates spend at least 20% of their discretionary income, or 8% of their total earnings each year, paying off student debt.

Regulations challenged

Schools have challenged the data used to make the determinations. 

The industry's lobbying group, Career Education Colleges and Universities, has taken the position that all schools -- public, private, and for-profit -- should be treated equally.

Education Secretary Betsy DeVos is an advocate of private education and said during her confirmation hearings that she would work to promote trade schools as an alternative to four-year colleges. 

President Trump's now-defunct Trump University claimed to offer training in real estate and finance but closed after a series of lawsuits and challenges from regulators and former students who said they got little for their money but sales pitches.

In November 2016, Trump agreed to pay $25 million to settle a class action lawsuit filed on behalf of about 7,000 former students. 

One of the named plaintiffs in the case, Sonny Low, said he still had $9,000 in credit card debt and had to take a job at Home Depot to try to finally pay off the remainder, attorney Rachel Jensen said.

A group of state attorneys general are asking Education Secretary Betsy DeVos and Congressional leaders not to declare "open season" on students by rolling back regulations governing for-profit colleges.

"Over the past fifteen years, millions of students have been defrauded by unscrupulous for-profit post-secondary schools," said the nine-page letter signed by 18 attorneys general, who said they had been forced to step in to stop some of the worst abuses because accreditors had been "asleep at the wheel."

Regulations governing for-profit schools and their accrediting agencies were tightened over the past several years after a series of abuses, but the new chair of the House Education Committee -- Rep. Virginia Foxx (R-N.C.) -- has vowed to "do everything we can" to roll back the regulations.

"Now that Mr. Trump is the president-elect, I think [we’ll approach things] quite differently than the way we might have if it had been Mrs. Clinton," Foxx said in a November 2016 interview with Inside Higher Education.

Asked if she sees the federal government taking action to lower the cost of education, Foxx said she did not.

"No. Why should we? We have a $20 trillion debt," she said. "Why should we go into debt to pay for what the states should be doing? Have you read the Constitution lately? If you find the word "education" in there as a responsibility of the federal government, then I might change my mind."

Serious cases

The AGs listed some of the most serious cases, including American Career Institute; Ashford University/Bridgepoint Education, Inc.; Corinthian Colleges, Inc.; Career Education Corporation; Education Management Corporation; Daymar College; DeVry University; ITT Tech; National College of Kentucky; and Westwood Colleges, noting that students and taxpayers have lost millions of dollars paying for substandard programs, certificates, and degrees.

Illinois Attorney General Lisa Madigan and the other AGs pointed to a number of protections they believe should remain intact, including the Gainful Employment Rule, which ensures students who attend career training programs will qualify for employment and be able to repay their federal student loans once they graduate.

The AGs are also pushing to keep vigorous federal oversight of accreditors that are tasked with providing prospective students with quality assurance.

Loan forgiveness

In addition to today’s letter, Madigan has repeatedly called on the U.S. Department of Education to immediately forgive federal loans of students who attended fraudulent for-profit schools. Madigan reached a $15 million settlement with Westwood College in 2015 that forgave private debt owed by students of Westwood’s criminal justice program. 

Madigan’s investigation into Everest College, which was operated by Corinthian Colleges Inc., revealed widespread misrepresentations made to prospective students, supporting the Department of Education’s own findings of fraud.

Madigan was also the first attorney general in the country to take action against a new industry of student loan debt relief scams. These scams target student loan borrowers who are desperate for help to avoid defaulting on their loans and end up getting scammed into paying money that does not help with their debt. Once these scammers illegally take upfront fees from borrowers, they do little to help them with their payments.

"Deceptive and abusive"

"These schools, and others like them, engaged in a variety of deceptive and abusive practices," the letter said. "Some promised prospective students jobs, careers, and further opportunities in education that the schools could not provide. Many schools inflated job placement numbers and/or promised career services resources that did not exist. Many nationally accredited schools promised that their credits would transfer, even though credits from nationally accredited schools often do not transfer to more rigorous regionally accredited schools."

"Many students were placed in loans that the schools knew from experience their graduates could not pay back. The schools were overseen by accreditors who failed to take action to protect students or the taxpayers who funded their federal student loans, despite ample evidence of these and other problems. In short, the entire for-profit education system was failing students and taxpayers," the letter continues.

Joining Madigan in sending the letter were attorneys general from Connecticut, Delaware, Hawaii, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and the District of Columbia, as well as the Executive Director of the Office of Consumer Protection of Hawaii.

DeVry University has agreed to pay $2.25 million in restitution to New York graduates, wrapping up charges that the for-profit school lured students with ads that exaggerated both graduates’ success in finding jobs and potential salary figures. DeVry will also pay $500,000 in penalties, fees, and costs.

“DeVry used misleading claims to lure in students who were simply seeking a college degree, greatly exaggerating job and salary prospects for graduates” said Attorney General Eric Schneiderman. “I’m pleased that this settlement provides much-deserved restitution to students who were misled, and requires DeVry to stop its false advertising.” 

DeVry graduates eligible to participate in the claims process include: 

(1) graduates of associates and bachelor’s degree programs at DeVry campuses in New York who began their program between July 2008 and September 2015; and

(2) New York residents that graduated from DeVry online associates or bachelor’s programs and who began their program between July 2008 and September 2015. 

Those graduates will be eligible to receive restitution if they submit a claim form that indicates that the graduate was not employed in her field of study within six months of graduation, despite seeking in-field employment.  

Graduates eligible to participate in the claims process will receive a claim form by mail.   

DeVry recently reached a separate settlement with the Federal Trade Commission (“FTC”) concerning its advertising practices. New York DeVry graduates may be eligible to receive restitution under both settlements.

DeVry is headquartered in Illinois and operates fifty-five campuses throughout the country, including three in New York City.  DeVry also offers online college programs.

"90% success"

Many of DeVry’s advertisements centered on a claim that 90% of DeVry graduates who are actively seeking employment obtain employment in their field of study within six months of graduation. The investigation revealed that the 90% claim was misleading because a substantial number of the graduates included in the 90% figure were graduates who were already employed prior to graduating from DeVry, Schneiderman's office said.  In fact, many of the graduates included in the 90% were employed before they even enrolled at DeVry. 

In addition, DeVry’s employment outcome statistics inaccurately classified a significant number of graduates as employed in their field of study, when in reality the graduates were not working in their field. 

For example, DeVry counted graduates of DeVry’s Technical Management program as “employed in field” where the graduates were employed as retail salespersons, receptionists, bank tellers, and data entry workers. In some cases, graduates were counted as employed in their field of study despite holding positions that did not require a college degree.

Teachers who say they are victims of "legalized theft" are getting a little help in the form of a lawsuit that challenges the wrongful conversion of federal grants into delinquent loans.

The U.S. Education Department, which sponsors the TEACH Grant program, has ignored the problem, as has the Pennsylvania state agency that services the grants and the Congressional representatives who might have been expected to come to their constituents' aid.

The case involves David West, a teacher in Lexington, S.C., and Ashley Ford, a special-ed teacher in Kent, Ohio. Both volunteered to teach in high-needs schools for four years in exchange for grants of a few thousand dollars during their college years.

But because of minor errors on their annual renewal forms, their grants were converted to delinquent loans complete with past-due interest and penalty payments.

"This is an advertised federal program to help people become teachers. In reality, it's a for-profit scam," said West.

"For-profit scam"

The issue first came to light in October 2015 when ConsumerAffairs wrote about West's case. West, who applied for a TEACH grant while he was a student at the University of South Carolina, got a $4,000 grant and took a job teaching visual arts at White Knoll High School in Lexington, S.C., a subject and school that met the TEACH criteria. 

Things were fine the first two years, but at the beginning of his third year, West was tripped up by paperwork.

"I had the form filled out completely with all relevant information, also signed by my school's principal certifying everything. I submitted the form on time to them, but I overlooked a spot on the back of their dense form that required my signature," West told ConsumerAffairs in 2015.

"They sent me a letter saying I had 30 days to complete and resubmit the form, but I didn't receive this letter until about two weeks into that 30-day period.  I sent the form to my principal's secretary," he said. "When I resubmitted the form via fax, it was at most two days past their deadline. I never imagined that such a seemingly innocuous administrative oversight would end up costing me $4,000 plus interest."

West was quickly informed that his grant had been converted to a loan -- a delinquent loan at that -- and he began receiving demands for payment from FedLoan Servicing, a contractor to the Education Department. 

West was infuriated and has since stopped making payments and is now being threatened with garnishment of his wages. 

Ashley Ford's problems began when she was on maternity leave. She fell behind in her paperwork and her $7,000 grant was converted to a delinquent loan with nearly $2,000 of accrued interest.

Doing the job

Both West and Ford note that they are doing what they agreed to do -- teaching in "high-need" schools -- generally schools that are in low-income areas and have trouble attracting top teaching talent. Their only error was in being late with routine paperwork.

An investigation by the Government Accountability Office later found that 2,252 recipients had their grants mistakenly converted to loans from August 2013 through September 2014, the Washington Post reported. 

The case illustrates what critics say is the sloppy, even negligent, way in which the government handles programs that affect individual citizens. It also illustrates the complete indifference with which government agencies and elected officials respond when informed of such problems.

The Education Department, for example, has never responded to any of the inquiries made by ConsumerAffairs since October 2015. Sen. Lindsay Graham (R-S.C.) -- a constant and voluble commenter on all matters political -- was no help. "The response I received basically parroted the rationale FedLoan Servicing is providing for converting this grant into a loan. It seems they called on my behalf and just relayed to me what FedLoan Servicing told them," West said.

Rep. Joe Wilson refused to help because, although White Knoll High is in his district, West lives in Rep. Jim Clyburn's district. Clyburn's office didn't respond to a request for comment.

Can't sue City Hall

As West and others quickly learn, government agencies not only are aloof and often completely unresponsive, they also enjoy a certain immunity from lawsuits. 

The agencies that administer and service the TEACH grants are the usual alphabet soup. Most directly responsible is something called PHEAA -- the Pennsylvania Higher Education Assistance Agency and its subsidiary, FedLoan A quasi-public agency, PHEAA says its "earnings are used to support its public service mission and to pay its operating costs, including administration of the Pennsylvania State Grant and other state-funded student aid programs." 

A PHEAA spokesman, Keith New, said back in 2015 that he could not comment on the teachers' complaints. "We are just a contractor to the Department of Education. We have been instructed that all media inquiries must go to them," he said. Inquiries to the Education Department, in turn, went unanswered.

Just a contractor it may be, but PHEAA is very much a creature of Pennsylvania state government. Most of its 20 board seats are held by sitting members of the state legislature, who have remained blithely above the fray.

Columbus, Ohio, attorney Troy Doucet is representing West and Ford and is seeking class action status to include others who have been victimized by what West has called "legalized theft." Doucet says PHEAA makes more money servicing loans than servicing grants.

"Fedloan’s actions of converting grants into interest-bearing loans is unacceptable," said Doucet in a blog posting. He was not immediately available for further comment.

Many students heading for college will be rushing to get their applications in next month ahead of deadlines, but they should also be thinking about financial aid at the same time.

This is the first year that aid requests are being considered three months earlier than in the past, and since aid is dispensed on a first-come, first-served basis, if you wait too long you could get left out.

To avoid missing out, Paula Craw—director of outreach and financial literacy for ECMC—is advising families to take advantage of the holiday lull to file their aid forms – known in education jargon as the FAFSA Form – without delay.

Craw says there are five things families should know to improve their chances of getting financial aid.

Procrastination is costly

Colleges and universities tend to hand out aid to the first students who apply for it. They don't hold it back since they don't know how many applications they will receive. With the earlier start to the application season, the funds will likely go sooner than in years past.

Craw cites one survey of colleges showing they've already received 32% of the FAFSA forms filed during all of last year.

Don't make assumptions

Families often make a big mistake by assuming they are too well off to qualify for financial aid. That's not always how it works, and many middle and even upper-middle income families get college aid each year.

There are a number of different factors that determine eligibility, including assets and number of household members currently attending college. You might not qualify for federal aid, but a lot of colleges rely on the FAFSA Form when they hand out their own scholarships.

You don't have to be class valedictorian

If you're applying to college you should have good grades, but they don't have to be outstanding. Most of the federal and state college aid packages focus more on need than merit.

Merit is certainly a powerful factor when it's on your side, but remember that in most cases you only need to maintain a “satisfactory” GPA to continue receiving aid dollars.

Don't be scared by the sticker price

Make no mistake, college is expensive, but don't let a college's posted tuition rate scare you off. Just like a car dealer, colleges will make a deal, putting together financial aid packages that can, in some cases, drastically lower the actual tuition cost.

Don't pass up the college of your choice until you can figure out what it will really cost.

It's an annual process

If you're a returning college student, don't assume last year's FAFSA Form will cover you this year. It doesn't automatically renew – you have to fill it out each year.

But to simplify the process, if you submitted the form last year you have the option of filling out a Renewal FAFSA, in which most of the questions are answered with last year's information.

The University of Phoenix is one step closer to being sold and going private. The U.S. Education Department approved the $1.14 billion sale of parent company Apollo Education Group to three private equity firms on Wednesday.

But before that happens, the new owners, including two executives with close ties to the Obama Administration, must agree to the conditions set forth by the department.

The conditions require the company to submit a letter of credit totaling about $386 million to be used as collateral if the company can't pay back funds advanced to it by the federal government. Apollo would also agree not to change or add any new programs until June 30, 2018 and to maintain enrollment levels at or below current levels.

The agreement would apply to both the University of Phoenix and Western International University, both owned by Apollo.

Republicans have been questioning the deal because of the involvement of Marty Nesbitt, a close friend of President Obama who runs the Vistria Group, one of the equity firms. Also, Vistria's co-founder is Tony Miller, who was deputy secretary of education from 2009 to 2013.

The Trump Effect

The apparent close ties to the Obama White House have brought calls for tighter scrutiny of the arrangement from educators as well as political interests.

“It’s entirely reasonable to ensure that an ownership group with no prior experience running a college of any sort should abide by certain restrictions,” said Ben Miller, senior director for postsecondary education at the Center for American Progress, according to Inside Higher Education. “It’s very clear the department is taking a real risk that Tony Miller and others who have no experience in running a college will be able to do so successfully.”

Some analysts suggested the requirement for the letter of credit was "onerous" and would push an already troubled institution further into the red. But some also suggested the buyers might go ahead with the deal in hopes that the incoming administration of President-elect Trump -- no stranger to the for-profit education business -- might take a kinder view and loosen the restrictions. 

The University of Phoenix has for years been the largest and best-known for-profit college, with an enrollment nearing 500,000 in 2010. But after a series of lawsuits, scandals, and governmental pressure, enrollment is now down to about 175,000 and the company's future prospects are unclear.

The Obama Administration has cracked the whip on for-profit schools, which critics say charge high tuition, make unrealistic promises of future employment, and deliver degrees and certificates that are often viewed as worthless by prospective employers.

Consumer advocates have for years encouraged students to look to community colleges, which tend to be much less expensive and deliver training that is more widely accepted in the marketplace. 

The Consumer Financial Protection Bureau (CFPB) has some dire warnings for consumers trying to clean up their student loans. It says one in three borrowers who have rehabilitated their status could be driven back into default because of gaps between student loan programs.

“The consumer protections promised under federal law should make it nearly impossible for the most vulnerable consumers to be trapped in default,” said CFPB Director Richard Cordray. “Today’s report shows that far too many of these borrowers continue to fall through the cracks of a flawed student loan system."

The report, prepared by the CFPB's student loan ombudsman, examines debt collection and servicing problems plaguing the federal programs designed to help millions of defaulted student loan borrowers get on track and into affordable repayment plans.

The Bureau estimates that the breakdowns along the path out of default will cost borrowers hundreds of millions of dollars, including over $125 million in unnecessary interest charges over the next two years. The bureau is calling for an overhaul of these programs in order to help improve the recovery process for distressed consumers.

“Too many student loan borrowers are being left behind due to breakdowns in the federal programs designed to provide them a fresh start, including an affordable monthly payment and a path to long-term success,” said CFPB Student Loan Ombudsman Seth Frotman. “This report offers further evidence that industry practices and needless red tape can turn a student loan into an unbearable burden. Policymakers should work to reform the programs that are failing those borrowers that need help most.”

Student debt has grown markedly over the last decade, with about 44 million Americans now owing roughly $1.4 trillion, most of it from federal loans. It's estimated that more than 8 million borrowers haven't made a payment in at least 12 months and have fallen into default.

Besides costing taxpayers money, defaulting causes problems for the borrower, including wage garnishment, loss of federal benefits, and negative credit history.

"Rehabilitation" process

Federal law gives most borrowers in default the right to “rehabilitate” their loan – a process for borrowers to get out of default and get back on track by making a series of payments, which can be set based on income, to a debt collector. 

But consumers have complained to the CFPB about every step of the process for getting out of default and into an affordable repayment plan. They borrowers report a range of debt collection and servicing breakdowns across these programs.

What to do

While the CFPB is pressing for improvements to the rehabilitation program, it offers advice that can be used now by borrowers trying to retire their loans. The Repay Student Debt tool helps borrowers get unbiased tips on how to navigate student loan repayment, along with other sample letters they can send to their student loan servicers.

More information can be found at: consumerfinance.gov/students. 

Once you take out a student loan, you have to pay it back. It can't be discharged in bankruptcy, for example.

But there is one scenario where you might be able to walk away. The law allows consumers to discharge some student loans if the school they were attending closed its doors.

It happened last year when Corinthian Colleges shut down, and more recently when ITT went under. As we reported just a few weeks ago, students who were attending ITT when it closed and had not completed a degree program may be able to cancel their student loans by applying for a student loan discharge.

So Sen. Elizabeth Warren (D-MA) was not pleased when she learned that the U.S. Department of Education was working to collect loans from former Corinthian students who might have otherwise been eligible to cancel their debts.

Troubling new data

"These troubling new data suggest that instead of focusing on getting these students the relief they are entitled to under federal law, the Department's student loan bank - working with its loan servicers and debt collectors - is instead intentionally collecting on debt that it knows may be eligible for discharge," Warren wrote in a letter to Secretary of Education John King.

Warren says the evidence suggests that, instead of helping borrowers who might be eligible to discharge their debt, the government is assisting debt collectors who she said are hounding former students for money they might not owe.

The lawmaker said she received information provided by the Department of Education that showed only a small number of former Corinthian students have been able to discharge their student loan debt. But she says it appears as though some 80,000 former students might be eligible for the relief.

Instead, she says most of these students have had tax refunds and other government benefits seized. She suspects many of these former students are unaware of their rights.

Adding insult to injury

"Instead of adding insult to injury for tens of thousands of Corinthian victims by pushing scores of them into debt collection, the Department of Education should stand up for these students as it has promised to do for more than a year and immediately halt all collections on this debt," Warren wrote.

Warren says the government agency should use its existing authority to discharge Corinthian borrowers' debts and make sure that no other students are being hounded for debts they don't owe.

Who's eligible

If you attended Corinthian or ITT using Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans and were enrolled when the school closed, you may be eligible for relief.

First, contact your loan servicer about the application process to discharge a loan. The Consumer Financial Protection Bureau (CFPB) says you may also need to contact your school to obtain your academic and financial records.

You may also need to contact the licensing agency in the state where you attended school to get help in acquiring those records. The documents may help support your discharge claim.

You can get more information about that here.

In another blow for the for-profit college industry, the U.S. Department of Education is withdrawing its recognition of the independent agency that accredits many for-profit schools.

The Accrediting Council for Independent Colleges and Schools (ACICS) is appealing the decision and will continue to operate while the appeal is processed. It accredits about 245 colleges that enroll 600,000 students. Many of its colleges are for-profit schools.

“While we are disappointed in this decision, ACICS plans to continue diligent efforts to renew and strengthen its policies and practices necessary to demonstrate this agency’s determination to come into full compliance with the Department of Education’s recognition criteria and, most importantly, to improve outcomes for the estimated 600,000 students currently attending ACICS-accredited institutions," the agency's interim president, Roger Williams, said in a prepared statement. 

ACICS was the accrediting agency for ITT Tech and Corinthian, both of which collapsed under the pressure of multiple investigations by federal and state agencies. 

Is your school affected?

If the appeal is not successful, schools accredited by ACICS will have 18 months to find a new accrediting agency. Is your school accredited by ACICS? Find out here.

In September 2015, a report by the Center for American Progress faulted ACICS for not taking action sooner against Corinthian Colleges.

“In April 2014—while the Department of Education was actively investigating the company for its questionable job placement rates and just a few months before the department acted to start Corinthian’s closure—ACICS renewed the accreditation of two Corinthian campuses and authorized a new branch campus,” the report noted.

The report also found that one out of every five borrowers at an ACICS-accredited college defaults on his or her loans within three years of entering repayment, 50% higher than the national average. Many of those loans are backed by federal agencies, meaning that the defaults wind up costing taxpayers.

For-profit colleges are barred from receiving more than 90% of their revenue from federal financial aid, but following the collapse of ITT, Corinthian, and other for-profit chains, DeVry says it will accept no more than 85% of its revenue from the feds.

“This is a significant pledge that DeVry Group is voluntarily making for the long term and it underscores our commitment to finding solutions to the issues facing higher education today,” said Lisa Wardell, president and CEO of DeVry Education Group. “This is part of a broader effort to improve our policies and demonstrate the quality and value of our programs.”

DeVry is working with "a variety of stakeholders on those commitments," which will be announced later this year, Wardell said, adding: “As we continue to engage with key stakeholders, we look forward to sharing details of the other commitments when they are finalized.” 

Cracking down

Federal and state agencies have been cracking down on for-profit schools, which tend to enroll large numbers of military veterans and students seeking vocational training. Many such students qualify for federal financial aid, meaning that taxpayers wind up paying for programs that critics say do little to prepare the students for careers.

ITT Institute shut down earlier this month after the Education Department cut off its flow of federal funds. Corinthian College closed down in 2015, leaving many students adrift. It was hit with a $1.1 billion judgment in March, some of which may be available to help students retire outstanding loans.

DeVry has had problems of its own. In January, the Federal Trade Commission sued DeVry, charging it used deceptive advertising to lure students. Last year, the school closed 14 campuses, moving students to its online program.

DeVry Education Group operates schools under several names, including  American University of the Caribbean School of Medicine, Becker Professional Education, Carrington College, Chamberlain College of Nursing, DeVry Brasil, DeVry University and its Keller Graduate School of Management, Ross University School of Medicine, and Ross University School of Veterinary Medicine.

It's been a rough week for students at ITT. On Tuesday they learned their school was closing its doors after the U.S. government cut off the flow of federal funds.

Students who just started a new term suddenly had to find an education alternative. Worse still, many were stuck with student loans.

Fortunately, there may be some options. The Consumer Financial Protection Bureau (CFPB) reports ITT students who were attending ITT when it closed and had not completed a degree program may be able to cancel their student loans by applying for a student loan discharge.

Who's eligible?

Students may be eligible for a complete discharge of Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans if they were enrolled when the school closed, or the school closed within 120 days after they withdrew.

The first step is to contact your loan servicer about the application process to discharge a loan. CFPB says you may also need to contact your school to obtain your academic and financial records. CFPB suggests contacting the licensing agency in the state where you attended school to get help in acquiring those records. The documents may help support your discharge claim.

You can get more information about that here.

You can't transfer the credits

There's another thing to consider. If you are successful in discharging your student loans, you won't owe the money you borrowed to pay ITT, but you won't be able to transfer any credits you earned there either. Essentially, you'll be starting over.

However, that might prove to be a good option since it is highly likely you'll be able to pursue the same course of study at a community college, or online public school at much less cost. In July, we reported on a new program allowing employees of National Federation of Independent Businesses member companies to pursue a degree for $3,000 a year.

Private loans may be a problem

If you were attending ITT using private student loans, you'll find your options are more limited. In most cases, you'll have to pay it back. However, CFPB notes that some states have programs to assist students with private student loans in their college shuts its doors.

The U.S. Department of Education barred federal funds from being used at ITT because it said the for-profit school was not in compliance with accrediting criteria and probably would not be able to get in compliance. Secretary of Education John B. King Jr. said the department acted out of its responsibility to both students and taxpayers.

California has ordered ITT to stop enrolling new students. The order came Friday, just one day after the U.S. Department of Education banned ITT from enrolling new students using federal financial aid funds in certain locations. It also vowed to increase its financial oversight of the chain of for-profit schools.

“The federal action raises grave concerns about the continued financial viability of ITT,” said Joanne Wenzel, chief of the state Department of Consumer Affairs Bureau for Private Postsecond Education (BPPE). “We took today’s action in the interest of protecting potential students who are considering enrolling in ITT.”

The order becomes effective Sept. 1 and affects all 15 ITT locations in California.

BPPE said it will file an accusation on the charges and allegations set forth in the emergency order within 10 days. The accusation will seek to revoke ITT’s approval to operate in California.

Students who have questions or need additional information can call BPPE toll-free at (888) 370-7589 or visit the bureau’s website.

The U.S. Department of Education said it took the action after ITT's accrediting agency found that the institution was not in compliance with accrediting criteria and was unlikely to be able to correct its deficiencies.

“Our responsibility is first and foremost to protect students and taxpayers,” said Education Secretary John B. King Jr. in a statement. “Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds.”

Since skyrocketing student loan debt became a major cause for concern, there has been some debate on the value of an expensive college education. Higher education, quite understandably, insists it pays off in the long run.

But what do the people who took out the loans and are saddled with the debt think? Reveal from the Center for Investigative Reporting, partnering with Consumer Reports, did ask, and has compiled a report based on interviews with a representative sample of people with student loan debt.

Despite the contention, and plenty of data backing it up, that a college education results in a lifetime of higher earnings, a surprising number of the students in the survey aren't buying it.

Of those out of college but still paying off student loans, 45% said their college education was not worth the cost. Drilling deeper into that group, the survey found 38% of them did not graduate.

In addition, 69% said they have had trouble making loan payments. Seventy-eight percent earn less than $50,000 a year. And perhaps most telling, 43% did not get help or advice from parents when they made financial aid decisions.

High-impact debt

The Consumer Reports survey found that once students leave college, their loan debt makes itself felt in a variety of ways. The survey found 44% had to adjust their day-to-day living expenses while 37% said they put off starting a retirement savings plan or other financial goals.

It's also affected the real estate market, with 28% saying it had caused them to delay buying a house and 12% said they postponed marriage. Fourteen percent said they even changed careers because of their student loan debt.

Advice

The report concludes with some advice for students and parents on how to avoid student loan traps. It starts with having a candid family talk about goals and objectives. Having a plan is key, since only 39% of college students graduate in four years. Changing majors is costly, since it usually results in another year or two of expensive education.

Also, the report advises students and parents to nail down the actual cost of college. This can be tricky, but we reported a couple of years ago about a free app called College Abacus. It's a net cost calculator that can help students arrive at the net cost of college for each particular school being considered.

Finally, look at all options for reducing costs. Completing the first two years of college at a community college will save money. So will studying abroad. And working for a company that will pay your tuition while you work could result in graduating with no student debt at all.

The end may be near for the organization that issues accreditations to for-profit universities. Department of Education staff members who have been investigating the Accrediting Council for Independent Colleges and Schools (ACICS) have recommended cutting ACICS' federal recognition. 

“The staff recommendation is to withdraw recognition, which would mean the agency could not remedy its compliance issues,” the staff report said, charging that the ACICS had ignored warning flags at Corinthian Colleges, allowing billions of dollars of federal aid to flow to the now-defunct schools.

The report follows calls for action from consumer advocates, educators, and state attorneys general, including California's Kamala Harris who earlier this month said the accrediting group's actions hurt thousands of students. 

"The predatory scheme devised by executives at Corinthian Colleges, Inc. was unconscionable. And despite enforcement actions by the California Department of Justice and the federal government against Corinthian, ACICS continued to accredit Corinthian, hurting thousands of students in the process,” Harris said. “Students relied on Corinthian’s accreditation status, believing they were obtaining a high quality-education with real job prospects."

The staff report found “extensive and pervasive deficiencies” at ACICS and recommended to the National Advisory Committee on Institutional Quality and Integrity (NACIQI) that it terminate the organization’s federal recognition.

But the wheels grind slowly in federal agencies, and final action is still likely to be at least 18 months away, a DOE official said. A federal advisory body will discuss the staff report next week and additional reviews will follow.

What happens to students?

ACICS currently accredits 243 institutions, most of them for-profit schools. If the Education Department finally denies recognition to ACICS, those schools will be unaccredited and ineligible for federal aid.

In a blog posting, Matt Lehrich, communications director at DOE, said students at ACICS-accredited schools shouldn't panic.

"The chain of events that plays out next will take – at minimum – more than 18 months. That means that many of the students who already have started at one of these schools will be able to complete their certificates or degrees before there is a chance of anything changing," Lehrich wrote.

"Generally speaking, if you’re near the end of your program or you’re preparing to transfer to another college or university, this news probably won’t interrupt your program."

Lehrich has other advice for students in his blog posting, which you can read here. 

California Attorney General Kamala Harris thinks the largest national accrediting agency for degree-granting institutions should lose its accreditation.

Harris has written the U.S. Department of Education, urging it to revoke federal recognition of the Accrediting Council for Independent Colleges and Schools (ACICS), which among its other accomplishments accedited the now-defunct Corinthian Colleges, Inc., which left tens of thousands of students with useless degrees and millions of dollars in debts.

“The predatory scheme devised by executives at Corinthian Colleges, Inc. was unconscionable. And despite enforcement actions by the California Department of Justice and the federal government against Corinthian, ACICS continued to accredit Corinthian, hurting thousands of students in the process,” Harris said. “Students relied on Corinthian’s accreditation status, believing they were obtaining a high quality-education with real job prospects."

ACICS boasts of accrediting more colleges than any other agency but a quick perusal of its roster finds that most of them are small vocational training institutions, offering certificates and associate degrees in such fields as dental assistance and office management. 

Harris joins 13 other state AGs who are opposing the renewal of ACICS as an accreditation agency. Harris and 10 other AGs are also calling for tougher standards for college recruiters on military bases.

This is the time of year when students and their parents begin taking out student loans in preparation for starting or returning to college next fall. It's a good time to pause and reflect on a few things, especially the fact that student loans cannot be discharged through bankruptcy. If you name is on the dotted line, you will have to repay every penny of the loan amount, plus interest.

This can have very unpleasant consequences for parents and students alike. We heard just this morning from Tim, who co-signed for his daughter's student loans, which now total more than $180,000. 

"I will never retire at this point," Tim said. "I have been threatened by Navient (Sallie Mae) after my daughter was a day late paying her loans. They called me on that day and continued for five days while the payment made it through their system. I just don't know what to do. Everyone talks about how not to get into this situation. How about if you are already over your head in this situation?"

Sadly, there's not much Tim can do, except hope his daughter isn't majoring in art history. He can also learn about consolidating student loans here. For everyone not yet over their heads, there are steps you can take to maintain some semblance of financial health while seeking a higher education.

Be frugal

The most obvious way to hold down debt is to live at home and attend a community college for two years. In many states, students who successfully complete two years of community college are automatically granted admission to four-year state schools and can complete their education there. Avoid for-profit colleges, which generally charge more and deliver less.

There is also the little matter called working. It used to be fairly normal for college students to work part-time. While this may result in lost sleep and socializing, it can also result in sharply reduced debt later in life.

Scholarships and grants can help relieve much of the cost of college for those who are diligent students. Be very careful with grants, though. Many -- even those promoted by the U.S. Education Department -- have been called "legalized theft" by students who did everything they promised but failed to cross a "t" or dot an "i" on the annual paperwork and found themselves facing an unanticipated debt.

Avoid scams

The college financial landscape is filled with scam artists. Students should be very cautious of private companies that charge for loan services that are available for free elsewhere.

It is not necessary to pay a private company to assist with student loan applications or consolidcations or to submit the Free Application for Federal Student Aid (FAFSA). In fact, anyone who is college-bound should be able to fill these forms out themselves, checking with their high school counselors if they need help.

Students should be sure they understand what they are signing. Loan documents mean what they say. Don't assume it will be easy to repay $100,000 or more after graduation. Large debts can be a lifelong burden.

Co-signers, like Tim, should be especially careful. It's one thing for a 22-year-old to be saddled with a six-figure debt. It's something else for someone who is 50 or 60 years old and may face an impoverished old age because of a child's student debt.

Presidential candidates may promise to forgive student loans, but wise consumers know they can't take those promises to the bank. 

Free advice

California Attorney General Kamala Harris recently issued tips to prospective students, including:

• Do not sign a loan document electronically without first reviewing and understanding the terms of the loan agreement.  Make sure to understand how much money is being loaned, the interest rate of the loan, and when the loan will need to be repaid.  Inquire about the available options if loan payments cannot be made on time.

• Be aware of the differences between federal and private student loans. Federal student loans may offer lower, fixed interest rates, while private student loans may have higher, variable interest rates.  Additionally, federal student loans generally do not need to be repaid until the student graduates, which may not be the case with private loans.     

• Beware of companies that charge an application fee and monthly fees for assisting with consolidating federal student loan debt.  Consolidating federal student loans is FREE through the Federal Direct Consolidation Program.

• Ask about the student loan’s grace period and be aware that the grace period may change depending on circumstances.  Engaging in active military duty, returning to school, and consolidating loans may alter grace periods. 
• Defaulting on student loans will adversely affect credit and will impede the ability to make purchases down the road.  It is important to stay in touch with student loan servicers, especially if there is a difficulty in making timely payments.

Follow these steps and you may avoid the financial morass Tim now faces.

Students choose a for-profit college for a lot of different reasons.

For-profit schools, like DeVry, University of Phoenix, and Strayer, were among the first to offer online courses, ideally suited to non-traditional students who wanted to pursue a degree while already in the workforce.

By and large, for-profit colleges have open enrollment, meaning almost anyone with a high school diploma who applies gets in. Traditional colleges over the last two decades have erected barriers, selecting only the students they want.

Finally, for-profit schools advertise, meaning more prospective students are aware of them and might be more likely to choose a for-profit school without looking into the alternatives.

Unfortuately, for-profit schools can be pretty expensive – and in the recent case of Corinthian College – accreditation has been an issue. Many students have left for-profit schools, with and without degrees, carrying a mountain of debt.

In recent years, for-profit schools have gotten some stiff competition from traditional colleges and universities, which are able to provide a quality, online education at much more affordable prices.

Most of them don't advertise, so here are five that deserve a closer look. If they are state supported schools, they usually charge more for out-of-state students. We selected schools that either don't charge extra, or the difference isn't that great.

New Mexico Highlands University

The school, with a campus in Las Vegas, New Mexico., was established in 1893. It offers degree programs in arts and sciences, business, education, and social work.

Tuition in its online programs costs $200 per credit hour for New Mexico residents and $314 for out of state students.

Murray State University

Murray State was founded in the early 20th century in Murray, Ky. It offers a large number of both graduate and undergraduate degree programs that are accessible online.

The in-state tuition rate is $317 a credit hour. Murray State has reciprocal arrangements with some other states in the region for reduced out of state tuition. For example, the cost is $383.50 for Alabama residents, $387 for Ohio residents, $335 for Tennessee residents, and $367 for residents of Missouri.

Columbia College

Columbia College is a private school, founded in 1851, with its campus in Columbia, Missouri. Since 2000, it has poured resources into its online degree programs and charges the same for in-state and out-of-state students – $275 per credit hour.

Bellevue University

Located in Bellevue, Nebraska, Bellevue University is another private school where the tuition is the same for everyone, regardless of where the student lives. It has ranked highly in the U.S. News annual college edition and offers 47 online undergraduate degree programs at a cost of $275 per credit hour.

Middle Georgia State University

Part of the University of Georgia system, Middle Georgia is located in Macon and offers a wide range of graduate and undergraduate programs online.

Students pursing an online degree pay a tuition of $169 per credit hour.

Since state supported colleges are usually cheaper for in-state residents, looks for an inexpensive education alternative where you live. Check out options in your state here.

Students at 91 former Corinthian College campuses in 24 states will have an clearer path to loan forgiveness, U.S. Education Secretary John B. King Jr. said today.

The action comes just one day after Corinthian was hit with a $1.1 billion judgment that may help provide additional relief to struggling ex-students.

The 91 campuses were identified as having the largest groups of borrowers eligible for loan relief by investigators from the Department of Education and state attorneys general.

The program is available to students who attended Everest and WyoTech colleges in these states: 

• California,
• Colorado,
• Florida,  
• Georgia, 
• Illinois,
• Indiana, 
• Maryland, 
• Michigan,
• Minnesota,
• Missouri, 
• Nevada,
• Ohio, 
• Oregon, 
• Pennsylvania, 
• Massachusetts,  
• New Jersey, 
• New York, 
• Texas,
• Utah, 
• Virginia, 
• Washington,
• West Virginia,  
• Wisconsin, and
• Wyoming.

If that includes you, you can apply for debt relief through a form posted here. The Department is reaching out to those students through postal mail, email, partner organizations and other means.

The DOE has approved loan discharges for more than 8,800 former Corinthian students nationwide, totaling more than $130 million.

"With a straw ..."

The DOE's efforts are not a raging success in the eyes of critics, however. One non-profit group, The Institute for College Access and Success (TICAS) said the debt relief program so far has been "like draining a swimming pool with a straw."

"Despite the Department’s outreach to date, few students are aware that debt relief is available.  Only a fraction of eligible Corinthian students have applied and less than three percent have been approved (with most approved because their school closed, not based on fraud), TICAS vice president Pauline Abernathy said in a statement.  

"It’s like draining a swimming pool with a straw -- even a streamlined application is an unnecessary barrier to the relief these students deserve because the Department has already determined that their school committed fraud," Abernathy said. "We urge the Department to provide automatic discharges to all groups of students covered by findings of fraud, rather than requiring them to submit individual applications."  

Placement rates

King made the announcement in Boston with Massachusetts Attorney General Maura Healey, who said her investigation found that Corinthian's two Everest Institute campuses in Massachusetts misrepresented their job placement rates.

"When Americans invest their time, money and effort to gain new skills, they have a right to expect they'll get an education that leads to a better life for them and their families. Corinthian was more worried about profits than about students' lives," King said.

Last summer, the DOE created a similar form for students at 12 Heald College campuses after fining the institution $30 million for misrepresenting job placement rates to current and prospective students. In November 2015, the department published additional findings of misrepresentation at 20 Everest and WyoTech campuses in California and Florida.

Students in other states may be eligible for debt relief as the investigations continue.

Republican presidential candidate Donald Trump may have won big on Super Tuesday primary night, but earlier in the day he lost in New York's Appellate Court.

The justices declined Trump's request to dismiss fraud charges brought by New York Attorney General Eric Schneiderman against Trump University.

In his complaint, Scheiderman maintains Trump and business partner Michael Sexton were operating an unlicensed educational institution since 2005.

“By letter dated May 27, 2005, the New York State Department of Education (SED) notified Donald Trump individually, Sexton, and Trump University that they were violating the New York Education Law by using the word "University" when it was not actually chartered as one,” the justices wrote in their decision. “Likewise, SED notified these respondents that Trump University was also violating the Education law because it lacked a license to offer student instruction or training in New York State. SED stated, however, that Trump University would not be subject to the license requirement if it had no physical presence in New York State, moved the business organization outside of New York, and ceased running live programs in the State. In June 2005, Sexton informed SED that Trump University would merge its operation into a new Delaware LLC, and would indeed cease holding live programming in New York State.”

Never happened

But the justices agreed with Schneiderman that never happened. They also dismissed Trump's claim that the statute of limitations had expired.

“We hold that the Attorney General is, in fact, authorized to bring a cause of action for fraud under Executive Law § 63(12),” the court ruled.

In a statement, Schneiderman said the court's ruling was a “clear victory” to hold Trump and Trump University accountable for defrauding students.

“The state Supreme Court had already granted our request for summary judgment determining that Trump and his University are liable for operating illegally in New York as an unlicensed educational institution,” Schneiderman said. “Today’s decision means our entire fraud case can move forward, and confirms that the case is subject to a six year statute of limitations.”

2013 lawsuit

Schneiderman sued Trump for $40 million in 2013, claiming Trump University deceived its students and failed to deliver the apprenticeships it promised. In addition to the attorney general's action, several students have also filed a class action suit against Trump University.

It has even become an issue in the presidential campaign, with Trump rival Sen. Marco Rubio (D-FL) raising it during a recent debate.

"There are people who borrowed $36,000 to go to Trump University, and they're suing now – $36,000 to go to a university that's a fake school," Rubio charged. "And you know what they got? They got to take a picture with a cardboard cutout of Donald Trump."

Meanwhile, Schneiderman says he's pleased to be moving ahead with the case.

“We look forward to demonstrating in a court of law that Donald Trump and his sham for-profit college defrauded more than 5,000 consumers out of millions of dollars,” he said.

The Republican presidential candidates hammered fellow candidate and front-runner Donald Trump last week over Trump University, a for-profit school he set up to provide real estate training.

"There are people who borrowed $36,000 to go to Trump University, and they're suing now — $36,000 to go to a university that's a fake school," said Sen. Marco Rubio (R-FL), during last week's debate. "And you know what they got? They got to take a picture with a cardboard cutout of Donald Trump."

Trump University is the defendant in a class action lawsuit, originally filed in 2010, that claims, among other things, that students were promised a one-year apprenticeship, but it ended after they paid for a three-day seminar. Attendees who were promised a personal photo with Trump received only the chance to take a photo with a cardboard cutout; many of the instructors had little or no academic qualifications.

The Republican presidential campaign has actually focused renewed attention on for-profit universities and their role in mounting student loan debt.

While Trump University was more of an industry-specific training institute rather than university, many students who have enrolled in for-profit colleges have lived to regret it, especially those who borrowed large sums to attend now-defunct Corinthian College.

California Attorney General Kamala Harris is calling on the U.S. Department of Education (ED) to do more to protect students defrauded by Corinthian Colleges and other for-profit schools.

New regulations

The ED recently held the second of three negotiated rulemaking sessions to determine how student borrowers can get relief from federal student loans when these loans were used at a school engaging in decietful and abusive policies. Harris' office was one of two representatives for state attorneys general taking part.

“Too many students defrauded by for-profit colleges remain buried under mountains of student debt,” Harris said in a release. “I call on the Department of Education to revise their proposed regulations to ensure meaningful debt relief is available to any student misled by a predatory college."

Harris's office worked with federal investigators when looking into Corinthian College practices. The investigation found job placement rates were widely misrepresented to enrolled and prospective Corinthian students.

As a result, thousands of students who attended Corinthian have asked the ED to discharge their federal loans because they were deceived by Corinthian’s inflated job placement rates.

Attention on other for-profit schools

Harris maintains that Corinthian was not the only for-profit school engaging in this kind of activity. She says other for-profit institutions have used similar dishonest tactics against their students, and it is expected that many more students will need to utilize this defense.

Harris says another problem lies in vague federal regulations that make it hard to determine exactly who is eligible to have their student loans discharged. She says she would like to see new regulations define the criteria more clearly.

She's calling for a number of changes in the new draft of ED rules, including a broadening of the categories of school misconduct that would give rise to a defense to repayment.

The problems students have had with some for-profit school are well documented. Remember Corinthian College?

You don't have to have a long memory. In September 2014 the U.S. government sued the for-profit college for what it called an illegal predatory lending scheme.

The Consumer Financial Protection Bureau (CFPB) charged that  Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. To make matters worse, CFPB said Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.

Before it declared bankruptcy and closed less than a year later, thousands of students had borrowed huge sums to attend, with nothing to show for it.

Proactive move

Now, the Department of Education wants to make sure potential train wrecks like Corinthian cross its radar screen before consumers have been harmed. It has announced creation of a Student Aid Enforcement Unit to respond more quickly and efficiently at the first suggestions of trouble.

"When Americans invest their time, money and effort to gain new skills, they have a right to expect they'll actually get an education that leads to a better life for them and their families," Acting Secretary of Education John B. King Jr. said in a release. "When that doesn't happen we all pay the price. So let me be clear: schools looking to cheat students and taxpayers will be held accountable."

To head up the unit, Robert Kaye is coming over from the Federal Trade Commission (FTC), where he was a top enforcement attorney.

Four divisions

The new unit will have four divisions that will perform special roles. The Investigations Group will be the early warning system, on the lookout for potential misconduct or high-risk activity among higher education institutions so that it can protect federal funding.

The Borrower Defense Group will provide legal support, It will analyze claims and make injury determinations.

The Administrative Actions And Appeals Service Group will impose administrative actions, such as suspending an institution and levying a fine. It will also try to resolve appeals by program participants.

The Clery Group will make sure for-profit colleges comply with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, requiring colleges and universities participating in federal financial aid programs to disclose campus crime statistics and security information.

DeVry University is the latest for-profit college to run afoul of regulators. The Federal Trade Commission has sued DeVry, alleging that its advertisements deceived consumers about the likelihood that students would find jobs in their fields of study and would earn more than those graduating with bachelor's degrees from other colleges or universities. DeVry said it will "vigorously fight" the complaint.

“Millions of Americans look to higher education for training that will lead to meaningful employment and good pay,” said FTC Chairwoman Edith Ramirez. “Educational institutions like DeVry owe prospective students the truth about their graduates’ success finding employment in their field of study and the income they can earn.” 

In its complaint, the FTC says DeVry claims that 90% of graduates landed jobs in their field within six months -- a claim the feds say is deceptive. The suit also alleges DeVry's claim that its graduates had 15% higher average incomes one year after graduation than the graduates of all other colleges or universities was deceptive.

Melanie of Suamico, Wisconsin, recently recounted her experience with DeVry in a ConsumerAffairs review. 

"When I graduated in 2010 with a computer bachelor's degree I was excited to get my job and start my career. Well I was fooled," she said. "I got no help from the school (even though I asked for help), I put in hundreds of resumes/apps on my own and got nothing. It is almost like the companies look at the degree that says DeVry on it and they run the opposite direction. I was thinking that I was doing something wrong, but the only thing I did wrong was trust that DeVry would help me get a job."

DeVry says it will "vigorously fight" the charges. "DeVry University measured the employment and earnings results of its graduates in a sound, rational and transparent basis," the company said in a prepared statement. 

"DeVry Group believes that the FTC’s complaint – filed 40 years after DeVry University began publishing accurate graduate employment statistics – is without a valid legal basis. In addition, the FTC’s complaint contains anecdotal examples that exaggerate the allegations but do not prove them," DeVry said. "DeVry University measures the employment and earnings results of its graduates on a sound, rational and transparent basis, and has published these results in a consistent manner over the years to provide students meaningful information." 

Hundreds of offers

The FTC's suit notes that a DeVry television ad showed people in business attire hanging hundreds of “offer letters” on a wall, with a voiceover that said all of the offer letters seen came from just the last year – followed by the 90% claim. The complaint alleges that DeVry counted numerous graduates as working “in their field” when they were not.

That might sound familiar to Gary of Wappingers Falls, N.Y., who said that despite getting his degree and going $62,000 in debt, he has been unable to find a job.

"When I joined the college they stated that they had a 92% placement for graduates within 6 months in their field of study," he said. "If I could trade my worthless degree for satisfaction of my student debts, I would do it in heartbeat."

"The college was no help in setting me up with any interviews, they only looked at my resume and made suggestions. I have been on my own since I graduated and have had no luck," Gary added. "I currently work as a courier to pay my bills, which I could have done without a college degree."

DOE action

In a related action, the U.S. Department of Education is also taking action against DeVry for its marketing practices.  It is providing notice to DeVry that it will be requiring the institution both to stop certain advertising regarding the post-graduation employment outcomes of its students and to take additional steps to ensure that DeVry can substantiate the truthfulness of its post-graduation employment outcomes.

“As required by the law and expected by the public, institutions need to be accurate in their marketing and recruiting to prospective students. And we confirm this truthfulness of advertisements through the backup information schools provide upon request,” said Under Secretary of Education Ted Mitchell.  “The Department and the FTC’s related announcements today are the result of much collaboration and cooperation. We are grateful to our partners at the FTC for their hard work and dedication on this matter.”

More former Corinthian College students may be eligible for debt relief following an investigation by the U.S. Department of Education and California Attorney General Kamala Harris.

The investigation concluded that Corinthian's Wyotech and Everest programs misrepresented their placement rates, leading prospective students to overestimate their chances of getting lucrative jobs, encouraging them to take on large student debts that many are now unable to repay.

The findings from this investigation apply to Everest and Wyotech locations in California, as well as Everest University online programs based in Florida, and add to the existing findings concerning programs at Heald College, the agencies said in a joint news release.

The findings apply to Corinthian campuses that served approximately 85,000 Wyotech and Everest students. Earlier this year, the Education Department created an expedited debt relief process for Heald students who attended programs with misstated placement rates. The new findings will be referred to the administrator of the debt relief program.

Former Corinthian students can learn more about debt relief here. 

"Corinthian preyed on vulnerable students who are now buried under mountains of student debt," said Attorney General Harris. "Today's joint investigation findings will expand the pool of Corinthian students eligible for streamlined student loan relief options, helping them rebuild their lives and pursue a brighter future. I thank the Department of Education for joining my office to keep Corinthian accountable for their actions and providing debt relief to students who were misled."

The Department of Justice announced today that they have finally reached a settlement with Education Management Corporation (EDMC) for charges of illegal recruiting, consumer fraud, and other violations. The for-profit education company has agreed to pay $95.5 million to settle these allegations.

The case against EDMC actually stretches back all the way to 2007 after two Education Management employees complained about the company's deceptive recruiting practices. One employee filed charges in federal court through use of the False Claims Act– a piece of legislation that allows a citizen to sue if they know that fraud has been committed against the government; in essence, the citizen would be suing in the government's name. By 2011, the Department of Justice, four states, and the second employee would join the case.

Unfair compensation and fraud

The primary charge that EDMC faced was their alleged practice of paying admissions personnel based on the number of students that they were able to enroll in the school, which violates the Higher Education Act's (HEA) Incentive Compensation Ban. Employees who had good enrollment numbers were able to reap bonuses like all-expense paid vacations with loved ones to destinations like Cancun, Puerto Vallarta, Mexico, and Las Vegas.

Additionally, the company faced numerous charges of consumer fraud involving deceptive and misleading recruiting practices. The company is charged with using “hyperaggressive boiler room tactics” to recruit students and collect tuition money. It is estimated that nearly $11 billion was collected by the company between July of 2003 and June of 2011 using these tactics.

“Companies cannot enrich their corporate coffers at the expense of students seeking a quality education, or on the backs of taxpayers who are funding our critical financial aid programs,” said U.S. Attorney David J. Hickton. “Today's global settlement sends an unmistakable message to all for-profit education companies: the United States will aggressively ferret out fraud and protect innocent students and taxpayer dollars from this kind of egregious abuse.”

Historic resolution

The $95.5 million settlement was reached after examining EDMC's ability to pay and financial condition, which has declined as of late. However, the New York Times reports that if the case had gone to trial then the company could have been faced with paying a billion-dollar verdict.

Attorneys involved with the case believe, however, that justice has been carried out against EDMC and that it sets a good example. “This historic resolution exemplifies the Justice Department's deep commitment to protecting precious public resources; to defending American consumers; and to standing up for those who are vulnerable to mistreatment, abuse, and exploitation,” said U.S. Attorney General Loretta E. Lynch.  

Four members of the U.S. Senate, all Democrats, are backing legislation that would further limit the amount of revenue for-profit schools can get from federal aid.

The lawmakers – Jack Reed of Rhode Island, Dick Durbin of Illinois, Richard Blumenthal of Connecticut, and Elizabeth Warren of Massachusetts, have introduced the Protecting Our Students and Taxpayers (POST) Act, that would prohibit for-profit colleges and universities from receiving more than 85% of their revenue from the federal government and change the calculation of federal revenue to include all federal funds.

Current law allows for-profit schools to receive up to 90% of revenue from federal programs, but the lawmakers say it contains a very large loophole, allowing these schools to receive a lot more.

Loophole

“Money from the new Post 9/11 GI Bill and from Department of Defense tuition assistance programs isn’t counted, which leaves hundreds of millions of taxpayers’ dollars virtually unregulated,” Durbin said. “Consequently, these schools aggressively target veterans and servicemembers who too often don’t receive the quality of education they deserve. We can’t let this invitation to exploit our veterans continue.”

At issue is what students pay to attend for-profit schools and what they get out of it. After 2010, the U.S. government put rules in place to hold colleges accountable for students who couldn't get jobs after graduation. The high level of student loan default rates was another concern.

In July, the Obama administration enacted rules to choke off the flow of federal dollars to schools whose graduates don't do well in the job market. It was intended to save taxpayer dollars and protect students from running up debt for a degree doing them little good.

Protecting veterans

Warren said POST builds on that effort, while extending needed protections for military veterans.

“Too many servicemembers and veterans have been targeted by predatory for-profit colleges, and our men and women in uniform deserve better,” said Warren. “The POST Act will tighten the rules and help protect veterans by closing the loophole that permits for-profit schools to prey on our servicemembers.”

Earlier this year for-profit Corinthian College closed its doors after the U.S. government sued it for predatory lending.

The four senators point out another for-profit school, ITT Tech, is under investigation by at least 18 state attorneys general and the U.S. Department of Justice and is being sued by the New Mexico Attorney General, the Consumer Financial Protection Bureau, and the Securities and Exchange Commission.

The lawmakers say for-profit institutions of higher education enroll about 10% of all college students, but take in 20% of the Department of Education’s federal student aid funds and account for 40% of student loan defaults.  

You read it everywhere: advice to prospective college students that they look first to public community colleges rather than for-profit schools, which can be five times as expensive.

Now a study by researchers at the University of Missouri finds that hiring managers show no preference for hiring people with for-profit college credentials compared to those holding comparable credentials from public community colleges.

"Tuition at for-profit colleges can be as much as five times higher than at two-year community colleges," said lead researcher Cory Koedel. "When people are weighing their higher-education options, tuition cost and the ability to gain employment after school should be considered heavily. This study shows that no significant difference exists with respect to generating employer interest between individuals with community college and for-profit degrees. For many people, community college may be the better option financially."

Random résumés

For their study, Koedel, Rajeev Darolia, an assistant professor in the MU Truman School of Public Affairs, and their co-authors, randomly generated thousands of résumés that included either a for-profit college credential, a two-year community college credential, or only a high school diploma. The researchers then sent the résumés to a number of job openings for open positions in fields including sales, customer service, information technology, medical assistance and office, and administrative assistance. T

They found that hiring managers called back to inquire about fake candidates at the same rate, regardless of whether the candidates held community college or for-profit credentials.

"It is clear that employers are not placing any kind of higher value on for-profit credentials relative to community college credentials," Koedel said. "While for-profit colleges may be a good solution for some people, they are expensive, and our study indicates that there are other, more cost-effective education options that are perceived similarly by employers."

This study was published in the Journal of Policy Analysis and Management.

The Consumer Financial Protection Bureau has won a $530 million default judgment against Corinthian Colleges, the defunct for-profit chain that has already declared bankruptcy and been liquidated.

“Today’s ruling marks the end of our litigation against a company that severely harmed tens of thousands of students, turning dreams of higher education into a nightmare,” said CFPB Director Richard Cordray. “We all have much more work to do before current and past students who were hurt by Corinthian’s illegal practices can be made whole. We remain deeply concerned about risks facing student borrowers in the for-profit space and will continue to be vigilant in rooting out harmful practices.”

A federal court entered the default judgment yesterday, resolving a lawsuit filed by the CFPB in September 2014.

The Bureau’s lawsuit alleged that Corinthian lured tens of thousands of students into taking out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.

The court ordered that Corinthian was liable for more than $530 million and prohibited the company from engaging in future misconduct.

Company has been liquidated

Earlier this year, Corinthian Colleges filed for bankruptcy and was liquidated, making it unlikely the $530 million will ever be paid, although the CFPB said it will continue to pursue relief for consumers harmed by Corinthian’s unlawful conduct.

The CFPB said it "remains concerned about efforts to collect on loans made in association with Corinthian’s illegal conduct."   

In November 2014, the ECMC Group worked with the U.S. Department of Education to reach an agreement to acquire a substantial number of Everest and WyoTech campuses, which were owned by Corinthian. In February 2015, the CFPB announced that, through an action with ECMC, the Bureau secured hundreds of millions of dollars in forgiveness for borrowers who took out Corinthian Colleges’ high-cost private student loans.

The Department of Education is stepping up its scrutiny of ITT Educational Services, citing federal fraud allegations against two ITT executives and the company’s “failure of the general standards of financial responsibility.”

ITT had already been under heightened oversight, along with other for-profit schools that receive much of their revenue from federally backed student loans and the G.I. Bill.

The feds said they had found several discrepancies during the heightened scrutiny, including a failure to reconcile federal aid accounts promptly and conflicting information about Pell Grant awards.

“Taken together, these facts demonstrate a failure by ITT to meet its fiduciary obligations, to properly and timely reconcile Title IV program funds as per the regulations and Federal Student Aid guidance, and to meet the standards of administrative capability required of institutions participating in Title IV, Higher Education Act programs,” the department wrote in a letter to ITT.

Faces lawsuits

A company spokeswoman, Nicole Elam, said the company was in the process of straightening out the reporting and administration issues.

"While the additional requirements will result in an increased administrative burden, the company does not believe they will have a material negative impact on our financial results, or in any manner affect the timely award of financial aid to eligible students or the operation of our campuses," she said.

Among other things, ITT will be required to submit a monthly enrollment roster, as well as information about all federal aid funds it disbursed during the previous month.

ITT is facing several other legal challenges, including lawsuits filed by the Consumer Financial Protection Bureau and attorneys general in several states. The company enrolls about 50,000 studnets at its 135 locations.

Consumers hoping to advance in a career are often attracted by for-profit institutions that, even though they can be expensive, admit anyone who applies. But not all these school can deliver on promises.

In North Carolina, state Attorney General Roy Cooper has obtained a court order temporarily halting operations at a private, for-profit career school that Cooper maintains charged students hundreds of dollars for unlicensed, unaccredited medical courses and put them to work without proper training.

On Thursday, Wake County, North Carolina Superior Court Judge G. Bryan Collins, Jr., granted Cooper’s request to temporarily bar North Carolina Medical Institute and its owner, Sherita McQueen, from advertising, offering, or accepting payment for any educational products or services in the state.

Cooper is asking the court for a permanent ban on NC Medical Institute’s operation and refunds for students.

Keeping an eye on career schools

“Students seeking training to upgrade their job skills deserve to get what they pay for, and patients deserve care from properly trained employees,” Cooper said. “If you notice a career school taking advantage of students, my office wants to hear about it.”

Cooper claims that the school could endanger patients in his state by certifying some students as qualified nursing aides after completing course work, which Cooper claims is far less training than required by law.

The complaint alleges that McQueen used a former employee’s nursing license and Social Security number to enter 50 unqualified Nursing Aide II students into the State Board of Nursing’s electronic registry, permitting them to get jobs.

License yanked

Back in May the North Carolina State Board of Proprietary Schools and the North Carolina State Board of Nursing refused to renew NC Medical Institute’s license. It previously determined that the school advertised and enrolled students in unlicensed courses, employed unapproved teaching instructors, and presented misleading information to the State Board of Community Colleges.

Cooper said it didn't stop there. He says after losing required licenses, McQueen misled prospective students by telling them that the courses offered by her school were accredited. He said NC Medical Institute continued to charge fees as high as $800 per course for unlicensed medical training programs, including pharmacy technician, medical assistant, and first aid courses.

After completing the classes, students often found themselves unprepared or ineligible for jobs in their fields of study.

Illegal practices

Cooper further alleges NC Medical Institute engaged in illegal practices while licensed. According to an affidavit filed by a North Carolina Board of Nursing employee, the school continued to offer a Nursing Aide II program despite repeatedly failing to meet state requirements.

While this might seem scary and discouraging for someone who hopes to advance in the medical field, Cooper says it shouldn't. Consumers just have to be careful.

“Enrolling in a vocational program can lead to a brighter future, but make sure the school you select is legitimate before you pay any money to enroll,” he said.

He suggests checking out your local or regional community college, where he says students are much more likely to receive quality training at a fair price.

Three federal agencies have issued guidelines to student loan servicers to help students repay their loans and avoid default.

The guiding principals from the Departments of Education and Treasury and the Consumer Financial Protection Bureau (CFPB) are designed to make sure borrowers are protected and have the information they need, even if they are struggling under the burden of their debts. It also is meant to provide ways to quickly resolve errors and hold federally-contracted companies accountable.

The guidelines say servicer policies should be consistent, accurate, accountable, and transparent.

Student loan debt has become an issue as outstanding loans now approach $1.3 trillion, saddling many recent graduates – not to mention those who left school before getting a degree – with significant debt as they start careers.

Types of loans

There are four main types of post-secondary education loans under which borrowers have outstanding balances. Direct Loans are federal loans made directly to borrowers by the U.S. Department of Education through the William D. Ford Federal Direct Loan program.

Federal Family Education Loan Program (FFELP) loans were originated by private lenders and guaranteed by the federal government.

Federal Perkins Loans, which are co-funded by institutions of higher education and the federal government, are originated and administered by participating institutions.

Private student loans are made by depository and non-depository financial institutions, states, colleges, and other entities.

Alternatives to loans

Finding alternatives to student loans has become a priority as college costs continue to rise. As we previously reported, College Abacus is a free online tool allowing students and families to calculate the amount of aid they qualify for when applying at more than 5,000 colleges and universities.

Now it has launched a new site, Pell Abacus, which it says will simplify and streamline the college search process for low-income students who are likely eligible for federal Pell Grants.

“By making this process simple to navigate without tax forms and accessible on mobile phones, we’re removing some of the key barriers preventing low-income students from exploring their full range of college options,” said Abigail Seldin, co-founder of College Abacus and vice president of Innovation & Product Management at ECMC Group. “Our goal with Pell Abacus is to not only streamline the college search process for underserved students, but to empower them by providing meaningful context around the most important financial factors impacting college choice, from personalized net prices to school-specific loan repayment information.”

The new Pell Abacus desktop site provides school-specific data on different financial factors, such as average loan payments for Pell students, the percentage of students who receive Pell Grants and the average monthly income percentage spent on federal loan repayments after college.

Pell Grants are government stipends that allow students, based on need, to pay for college. Grants, unlike loans, do not have to be repaid, making it a great alternative to student loans.

In a previous interview with ConsumerAffairs, Seldin said the College Abacus tool helps students access grant money, reducing the need for borrowing. Check it out here.

Community colleges are almost all state-supported and have always cost significantly less than four-year colleges.

So it was something of a surprise a couple of weeks ago when the Brookings Institution lumped community colleges in with for-profit schools as institutions where student loan recipients were most likely to default on their loans.

Admittedly, the much larger risk is for students at expensive for-profit schools, but the report's authors note, with some concern, that community college students taking out loans – and then defaulting – is a relatively new development.

The Association of Community College Trustees (ACCT) has dug deeper into community college student borrowing and repayment behavior. It has compiled a report using data from all 16 community colleges in Iowa to examine who borrows and who defaults.

Persistence and completion

"Our institutions are more focused on persistence and completion now than ever before," said ACCT President and CEO Noah Brown. "This report emphasizes just how important those factors are to post-enrollment success."

In their report, the Brookings researchers appeared to suggest that students attending non-selective schools – for-profit and community colleges have open enrollment, accepting all who apply – were most at risk of defaulting on loans. The ACCT report suggests it might be more complicated than that.

The report found that students who borrow the least amount of money, not the most, are more at risk of default. Many defaulting students take no action on their loans, suggesting the complexity of the repayment system and lack of information may be a contributing factor.

"For borrowers with less than $5,000 in debt, there are almost as many borrowers in default as those who are actively repaying their loan debt," said Jee Hang Lee, ACCT's vice president for public policy and external relations. "The solutions that we have for struggling borrowers, like public service loan forgiveness and income-based repayment, are geared toward middle-income earners with high debts. We need a policy solution for the students who borrow a little but still struggle to make the minimum monthly payment."

Who borrows and who doesn't

The more successful community college students don't borrow money; students who do so are more likely to drop out. Those who default on their loans are even more likely to not finish school with a credential.

Finally, community colleges have no easy way to share data that could help institutions address student loan defaults and better manage them.

"As institutional policymakers, Iowa's Community College Trustees recognize the value of using data to drive our decision-making process," said Cheryl Langston, Des Moines Area Community College trustee and Iowa Association of Community College Trustees board chair. "This report demonstrates how community colleges can be more reflective and forward-looking by understanding where we are doing a good job and where we need to improve to help our students be as successful as possible."

The report includes policy reform recommendations for colleges, as well as for Congress to incorporate into the Higher Education Act's reauthorization.

Student loan debt is about $1.2 trillion and growing, with not everyone who took out students loans able to pay them back.

Student loan default rates doubled between 2000 and 2011, according to Brookings Institution researchers who analyzed U.S. Department of Education administrative data on federal student borrowing, linked to earnings records derived from tax records.

Their report traces most student loan defaults to students who attended for-profit colleges and, to a lesser extent, community colleges. A common thread, the researchers found, was non-traditional students – typically older than the average student – and those attending “non-selective” institutions – schools that accept anyone – were most likely to default.

Weak educational outcomes

“These non-traditional borrowers were drawn from lower income families, attended institutions with relatively weak educational outcomes, and experienced poor labor market outcomes after leaving school,” the authors write.

At the same time, the authors contend students attending traditional public or private non-profit colleges were much less likely to default and have done better in the job market after graduation.

The finding that a significant portion of student loan defaults occurs among students attending for-profit schools is not exactly a new charge. Federal data released last year showed nearly half of the 650,000 federal student loan defaults between 2011 and 2013 were by students at for-profit schools.

Taking issue

Still, some for-profit schools are finding flaws with the Brookings study's conclusions. Mark Brenner, an Apollo Education Group executive, whose subsidiaries include University of Phoenix, told Marketwatch the Brookings study was based on “limited data.”

The Brookings study appears to suggest students who are not qualified to attend college – they choose schools that have no admission requirements – are the ones who take on too much debt and default. The authors say a relatively new development is community college students are defaulting on student loans. In the past, the report says, few of these students took out loans to pay for college.

Accounting for 70% of defaults

“By 2011 borrowers at for-profit and two-year institutions represented almost half of student-loan borrowers leaving school and starting to repay loans, and accounted for 70% of student loan defaults,” the authors write. “In 2000, only one of the top 25 schools whose students owed the most federal debt was a for-profit institution, whereas in 2014, 13 were.”

According to the report, the borrowers from those 13 schools owed about $109 billion—almost 10% of all federal student loans. And once out of school, they faced more difficult employment prospects.

For example, the researchers say the median borrower from a for-profit institution who left school in 2011 and found a job in 2013 earned about $20,900 a year. At the same time, 21% were unemployed.

By comparison, community college borrowers earned $23,900 and only 17% were unemployed.  

The attorneys general of 11 different states are urging the Department of Education to discharge the federal student loan debts of students whose for-profit schools were shut down for violating various laws – especially victims of schools that operated as part of the now-defunct Corinthian Colleges chain.

Yesterday, presumably in response to the DoE's stated intention of establishing a “clearer, more comprehensive” debt forgiveness program for defrauded students, Illinois Attorney General Lisa Madigan released a statement saying that she, “along with the Attorneys General of 10 other states, called on the U.S. Department of Education to cancel federal student loans in cases where schools have broken state laws, and to provide clear processes for students seeking relief.”

Granted, this is not exactly new news. Madigan and other attorneys general made a similar argument in April. “We must protect the victims of the predatory practices of for-profit schools such as Corinthian, which was more concerned with their profits than they were about the quality of education they provided,” she said in a letter released at the time.

She also noted that the DoE already has the legal authority to discharge the federally backed student loans of students who took those loans out to attend harmful, fraudulent schools such as Corinthian's.

Madigan's April letter, also endorsed by the AGs of California, Connecticut, Kentucky, Massachusetts, New Mexico, New York, Oregon and Washington, noted that the Higher Education Act, DoE's own regulations and federal student loan documents all make it clear that students can assert legal claims against schools as a defense to repayment of their loans.

First glance

And in early June, a month after Corinthian schools shut their doors and filed for bankruptcy protection, the Department announced a debt-relief program which, at first glance, appeared to be exactly what AG Madigan and her other-state colleagues asked for: a chance for student debtors to assert legal claims against their scammy schools as a defense against repayment.

Problem is, the DoE will not let students satisfy that requirement by merely pointing out “The entire chain of schools was shut down, my campus included, after years of constant legal troubles and multimillion-dollar fines which can all be summarized as 'the school violated multiple laws'.”

Instead, the DoE's plan required students to provide transcripts and other documents that are difficult if not impossible to acquire from an out-of-business school, and – as part of the “legal claims” assertion – answer some rather sophisticated legal questions which non-attorneys are unlikely to know, including “details about the conduct of the school that the borrower believes violated state law including, but not limited to: The state and applicable law or cause of action (if available); Specific acts (including failures to act) of alleged misconduct by the school ....”

So yesterday, Madigan and other attorneys general recommended that the DoE streamline and simplify this process in many ways, to “eas[e] the burden on students to obtain [debt] relief.”

Rather than the current Byzantine requirements set for Corinthian debtors seeking relief, the attorneys general recommend “To obtain relief, students should simply have to state how the school deceptively induced them to enroll or how the school engaged in other unlawful acts.”

Discharge in groups

Better yet, the DoE could discharge loans in groups, rather than individually: “The Department should provide a mechanism by which the loans of entire groups of students may be discharged. The Department also should accept findings or evidence from government entities on behalf of the students.”

In other words: rather than expect every individual ex-Corinthian student to personally make his or her own case for debt forgiveness, the attorneys general would rather have the DoE decide something more along the lines of “All federal debts attached to students enrolled at Corinthian's Scamville campus from [this date] through [that date] are forgiven.”

That's also why the attorneys are asking the DoE to “ensur[e] relief regardless of loan status …. [including] Direct loans, the Federal Family Education Loan Program loans, the PLUS program loans, and loans that have been consolidated into new debt. The Department should also make clear that students may recover amounts they already paid on Title IV loans.”

In early June, a month after the Corinthian Colleges chain of for-profit schools ended years of legal battles (including charges of fraudulent lending, illegal debt-collection practices, lying about job prospects and educational quality, and worse) by closing its doors and filing for bankruptcy, the Department of Education announced that it would offer debt relief for Corinthian students.

The debt relief program was billed as part of an attempt to “ensure Americans are protected from unscrupulous colleges that deny students meaningful educational opportunities and leave taxpayers holding the bag.”

Under ordinary consumer-protection situations, such loan forgiveness would arguably be a no-brainer: if a company is shut down for fraudulent business practices, any outstanding customer debt based on such fraud would is often forgiven or reimbursement is paid to victims. 

But federally backed student loans (which, along with U.S. military veterans' educational benefits, provided the bulk of the school's profits) are different under the law: unlike most bad debts, they can't be discharged in bankruptcy. And from the money-lender's perspective, the loans are backed by the federal government – meaning, if a student can't or won't pay it back, the taxpayers are on the hook.

Relief plan condemned by critics

Hence the need for the Department of Education to announce a special debt relief program for the defrauded students of now-defunct schools.

Yet student advocates and other critics immediately condemned the DoE's plan as worthless if not worse: “a process that re-victimizes students as a solution to a problem they [the DoE] created,” as the Debt Collective put it at the time.

More specifically, the DoE plan required students to provide transcripts and other documentation which might be impossible to get (mainly because the school generating such documents is out of business and no longer exists).

Students applying for loan forgiveness also had to answer some rather sophisticated legal questions which few if any non-lawyers could manage, including “details about the conduct of the school that the borrower believes violated state law including, but not limited to: The state and applicable law or cause of action (if available)….”

But on Wednesday, the Department of Education said that starting next month, it will launch an “effort to better help defrauded students seeking debt relief,” and also “aim to create a system that makes sure that colleges–not taxpayers–are on the hook for wrongdoing.”

U.S. Education Secretary Arne Duncan was quoted as promising “a clearer, more comprehensive system to assist students who believe they were defrauded by their college.”

Little relief for the present

Unfortunately for students still struggling with the June debt-forgiveness regulations, the DoE press release lauding next month's planned effort at “better help” for “defrauded students” still ends with the following discouraging paragraph:

This regulatory process will not impact the ongoing debt relief efforts the Department outlined in June. Until these regulations are developed and put into effect, borrower defense claims will continue to be reviewed through existing processes and through those developed by the Special Master. Borrowers who believe they have valid claims for defenses to repayment can visit www.studentaid.ed.gov/Corinthian or call a special toll-free borrower defense hotline at (855) 279-6207 for more information.

So the new rules might not help any student victims of Corinthian's frauds, but they might, in the future, keep taxpayers off the hook the next time a school victimizes students in similar fashion.

Whatever the new improved rules are, DoE officials said they hope to have them in place by November 2016, and taking effect in July 2017. However, as the Washington Post noted, “Given the timeline, the rule could be subject to changes if a Republican takes the White House; the GOP has tried to block tougher regulations for for-profit colleges.”

For most college students, parents are a major partner. They help shape college choices, career paths, and are likely to help foot the education bill. So what parents have to say about the process matters.

A survey of parents by HSBC finds that parents are growing more pessimistic about higher education. Nearly three quarters of those surveyed – 71% – now believe higher education is unaffordable for the majority of Americans.

At the same time, almost two thirds – 60% – consider a college degree to be essential in enabling their children to achieve important lifetime goals.

No doubt skyrocketing tuition costs have fueled parental pessimism. The cost of a college education has risen many times faster than the rate of inflation over the last few decades.

Some critics of higher education have blamed the increased availability of student loans and financial aid, and a new report from the New York Federal Reserve Bank lends some ammunition to that argument.

Higher tuition and loan demand

“When students fund their education through loans, changes in student borrowing and tuition are interlinked,” the report concludes. “Higher tuition costs raise loan demand, but loan supply also affects equilibrium tuition costs—for example, by relaxing students’ funding constraints.”

The authors said they found colleges and universities more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65%.

“We also find that Pell Grant aid and the unsubsidized federal loan program have pass-through effects on tuition, although these are economically and statistically not as strong,” they wrote.

The analysis found that the subsidized loan effect on tuition is most pronounced for expensive, private institutions that “are somewhat, but not among the most, selective.”

Housing bubble parallels

The Fed report explores an interesting parallel between the rising cost of college tuition and the rapid increase in home prices during the housing bubble. It examines the argument that one big reason home prices escalated so quickly is because so many consumers had access to so much credit they were able to bid up prices beyond what was justified.

While noting there is little empirical evidence linking credit availability and rising tuition, the report notes that the two events occurred at about the same time.

“Yearly student loan originations grew from $53 billion to $120 billion between 2001 and 2012, with about 90% of originations in recent years occurring through federal student aid programs,” the authors write. “Against this backdrop of increased borrowing, average sticker tuition rose 46% in constant 2012 dollars between 2001 and 2012, from $6,950 to $10,200, resembling the twin house price and mortgage balance booms.”

Parents, meanwhile, are squeezed between daunting costs and the desire to see their children succeed. The HSBC survey suggests they will continue to go into debt to reach that goal. And the debt may spread across two generations.

Sixty-five percent of parents with children under the age of 5 expect that their children will personally contribute toward their own tuition, and 59% admit their child will need to take on debt in order to do that. Around 3 in 10 – 29% -- of parents surveyed whose children are yet to begin their college education anticipate that grandparents will also share the financial burden.  

Good news for former students of Corinthian Colleges, the now-defunct chain of for-profit schools that operated under the names Everest, WyoTech and Heald: as a result of court documents filed last Friday, the Department of Education will temporarily halt collection efforts against students in default, until at least November 6.

Corinthian declared bankruptcy in May after years of trouble with state and federal-level legal authorities. To offer a small sampling of those troubles: in Corinthian's last year of operation, the federal Consumer Financial Protection Bureau sued the company for predatory lending (ultimately resulting in a collective $480 million in debt relief for former students); the Department of Education levied tens of millions of dollars in fines against it after an investigation “confirmed cases” that the company misrepresented the schools' job placement rates to current and prospective students; and the attorneys general of multiple states went so far as to urge the feds to relieve all Corinthian student debt on the grounds that Corinthian misled students about pretty much everything: the quality of its educational programs, transferability of credits, likelihood of job placement afterwards, the availability of internships … pretty much everything a student needs to consider before choosing a school.

Federally financed scam

Under ordinary circumstances, suspending Corinthian-related student debt would be a no-brainer: the company was essentially running a scam, with students as the victims. But the federal government has so far been reluctant to offer a broad-sweeping debt amnesty, because that would leave the feds on the hook for the money: like most for-profit schools, Corinthian was almost entirely dependent on federally backed student aid (especially student loans that cannot be discharged in bankruptcy) for its operating costs and profit margins.

That's probably why, as the Huffington Post noted earlier this month, Education Secretary Arne Duncan is “'thrilled' to close Corinthian Colleges, not so ready to help its former students.”

Indeed, during Corinthian's final year of operation, even as various state and federal agencies suspended aid or levied fines against the company, the Department of Education bent over backwards to try keeping the company afloat. In June 2014, for example, when the DoE temporarily suspended all federal aid for Corinthian students, Corinthian initially protested that the action could put it out of business (possibly the only 100% truthful statement the company ever made about its operations). But Corinthian was able to hang on a few months longer, after reaching a “memorandum of understanding with the U.S. Department of Education that maintains uninterrupted daily operations at its schools.”

The federal government spent years financing a harmful scam, and thus far the victims of that scam are still left holding the bag. Who will pick it up after this November remains to be seen.

The Obama Administration today puts its foot down on the metaphorical hose through which federal funds flow to for-profit colleges, likely leading to another round of bankruptcies and campus closings.

Choking off the flow of federal dollars to schools whose graduates don't do well in the job market is intended to save taxpayers money and protect students from spending their time and money on degrees that do them little or no good -- and that often wind up costing much more than students expect.

"The student advisor said the degree I was interested in would be $16k total for tuition, with payments of $50.00. Upon graduation, the total for tuition turned out to be $34k with a combined payment of over $400.00 a month," a Payson, Utah, student said in a ConsumerAffairs review of Everest University last year. 

A growth industry

It was only a few years ago that for-profit schools were seen as a growth industry and were touted as more efficient and responsive than traditional nonprofit public and private colleges. But then a hard truth emerged: graduates of the for-profit schools were having trouble finding jobs.

Students found that many employers simply didn't equate a degree from a for-profit college with one from a public or nonprofit private school.

That was the situation Gina of Seattle encountered when she graduated from ITT: "ITT basically made many promises but never came true. I have a BA in criminal justice and can not find a job to save my life. None of my fellow students have either. It's been almost two years. My student loans are around $80,000," Gina said in a ConsumerAffairs review.

In October 2014, after issuing the new rules, the White House listed shortcomings of for-profit schools:  

• Students who attend a two-year for-profit institution pay four times as much as attending a community college.
• Eighty-eight percent of associate degree graduates from for-profit institutions had student debt, while only 40 percent of associate degree recipients from community colleges had any student debt.
• Students at for-profit institutions represent only about 11 percent of the total higher education population but receive 19 percent of all federal loans and make up 44 percent of all loan defaulters.

Gainful employment

The weapon being wielded by the Obama White House is the Education Department's "gainful employment" rule, which was upheld by a federal court last week. It requires colleges to track their students' success in finding jobs and shuts down funding for those with poor placement records.

The rule applies to nonprofit schools as well but in the vast majority of cases, graduates of traditional nonprofits have a much better record of finding jobs in the field for which they trained and also have a much better record of paying back their student loans. 

The department has estimated that the rule will result in the closure of 1,400 programs that enroll more than 840,000 students, nearly all at for-profit schools. 

Out of business

Many of the nation's larger for-profit chains have already severely cut back or gone out of business. Corinthian Colleges, which includes Everest College and several others, shut down in April. 

Besides the Education Department initiative, large for-profit schools like ITT are facing lawsuits by students as well as federal and state agencies. Just last month, Education Affiliates agreed to pay $13 million to resolve a Justice Department claim that it had submitted false claims to the Education Department for federal student aid.

In January, Kaplan Higher Education -- once owned by The Washington Post Company -- agreed to pay $1.3 million to settle a Justice Department suit that it employed unqualified instructors.

Most of the time it is the colleges with the highest student loan default rates – the Corinthian Colleges of the world – that get the attention.

So it is refreshing to learn that there are plenty of public and private schools graduating students out into the world who are able to pay back their student loans. BestColleges.com has released its 2015 ranking, finding Virginia's George Mason University has the best default rate of any public college and California's Claremont McKenna College the best record among private schools.

Among public colleges and universities, Virginia institutions rank 1 and 2 for the lowest student default rates. George Mason University, in Fairfax, Va., just outside the nation's capital, leads the nation with a default rate of only 1.8%. James Madison University, in Harrisonburg, Va., was close behind.

According to the Department of Education, the national average student loan default rate is 13.7%.

Able to get jobs

“It shows that our students get jobs and are able to pay back their loans, and that is the most significant part,” said Carol Brosseau, George Mason University’s senior associate director for student financial aid.

It helps that George Mason's in-state tuition is a bargain for a quality public university – just over $5,000 per semester.

About 58% of Mason students graduate with a loan debt that averages $26,710, Brosseau said. Generally, students have 10 years in which to pay back their loans.

“It's telling you students are graduating and finding jobs,” Brosseau said. “And that is what everyone hopes for.”

In addition to providing millions of dollars in funding every year, BestColleges.com says George Mason is focused on preparing students to be competitive for top jobs upon graduation. Innovative internship programs and continual career networking opportunities ensure students gain experience and build contacts throughout their education, giving them a number of options upon graduation.

Fewer students take out loans

On the private side, Claremont, Calif.'s Claremont McKenna has the lowest default rate, in part, perhaps, because fewer of its students take out loans. According to the ranking, only 16% of the students take out loans to pay for their education. Those who do, however, graduate with about $35,000 in debt.

Approximately half of the study body received scholarship and grant aid in 2014, averaging $35,693 per student.

Claremont, Calif. is also home to Pomona College, a private school that coincidentally places number 2 in the rankings. The university is known for providing excellent scholarship and grant opportunities. Only 15% of all students took out a loan to pay for their education, with the average amount $4,490 per year.

While annual tuition totals $45,500, in the 2013-14 academic year, the average financial aid reward was $41,213.

Meanwhile, here is a list of the colleges whose students have the toughest time paying back their student loans.

Make no mistake, student loan defaults are a serious problem, not just for the students who are drowning in debt but for the financial institutions holding the notes. According to the St. Louis Federal Reserve Bank, the implied delinquency rate for all student loan borrowers is over 27%.

With high school graduation season reaching its peak, millions of 18-year olds who plan to attend college in the fall have just been through the nerve-wracking process of college admissions.

A college degree has always been viewed as a ticket to the middle class, but in recent years that ticket has been harder to come by, even if you could afford it.

Sometime during the 1990s even state-supported colleges and universities got more choosy about the students they admitted.

Open enrollment, whereby any resident of the state who had received a high school diploma was automatically admitted, gave way to selective enrollment, long practiced at elite private schools. If you wanted to get a college degree you had to make it past the college admissions gatekeepers, who didn't just look at grades and SAT scores but delved into a host of personal attributes as well.

In a noteworthy piece in April 2000, The New York Times explored the admission process at one school, Wesleyan University, finding that the subjective criteria of a compelling personal saga could sway a committee of gatekeepers and often make the difference between making it to college or being shut out of the middle class.

Plenty of student loans available

Of course, most people aspiring to the middle class wanted to attend college. As it became more competitive to get in, colleges found they could raise tuition rates without diminishing the pool of students. After all, student aid was available, as were student loans.

While inflation in the general economy slowed to a crawl, the average cost of tuition at a four-year college has increased by 41% in the past 10 years, according to the College Board. It's up nearly 100% since 2000.

As a result millions of students who were smart, skilled and savvy enough to make it past the gatekeepers are contending with tens of thousands of dollars in student loan debt. Even if they have been lucky enough to get a good job after graduation, their monthly student loan payments sometimes make it feel like they haven't quite made it to the middle class.

So it may not be all that surprising that the latest Allstate/National Journal Heartland Monitor Poll finds many younger Americans no longer believe college provides the only route to success. Their definition of success has some things in common with their parents and some things that aren't.

Different paths

“Young people want the ‘American Dream’ of homeownership, career and financial security, though they’re working hard to achieve it on different paths compared to their parents and other generations,” said Troy Hawkes, Field Senior Vice President of Allstate.

For example, it's more important to young people to live in an area with a strong sense of community and volunteerism and more public services. And, they think it might be a better choice to wait for financial stability before getting married and having children.

That's because, according to the poll, 45% of them are still paying student loans. A separate survey by the National Foundation for Credit Counseling found that 53% of the college students it polled said concern about their student loan debt was causing the most stress in their lives. Stress over credit card bills was only 22%.

Opting out of college

While most young people still believe a college degree is important to success, a growing number are deciding to reach for success without it. In May the National Student Clearinghouse Research Center (NSCRC) reported college enrollments are declining because fewer Millennials are attending.

Among the interpretations of the NSCRS report is young adults in their mid 20s are choosing to go to work rather than attend college. The report does not make clear whether these young adults are leaving school to pursue the workplace or not attending college in the first place.

Yesterday the Department of Education (DoE) made the surprise announcement that it would offer “Debt relief for Corinthian Colleges students,” as part of an attempt “to ensure Americans are protected from unscrupulous colleges that deny students meaningful educational opportunities and leave taxpayers holding the bag.”

Yet critics call the DoE's plan “a process that re-victimizes students as a solution to a problem they [the DoE] created.”

The Corinthian Colleges debacle offers illustrative examples of almost every complaint made against the modern for-profit college industry: namely, exorbitantly high tuition rates not only leave students deeply in debt which cannot be discharged in bankruptcy, but the college degree or credits they earned in exchange for all that debt turn out to be worthless. Traditional four-year colleges and universities rarely if ever accept transfer credits from such schools, state professional certification boards won't accept them, and potential employers won't either.

Corinthian, which owned and operated schools under the brand names Everest, WyoTech and Heald, filed for bankruptcy last month after years of legal troubles.

But the true beginning of the end for Corinthian arguably came last June, when the Department of Education temporarily halted all federal student aid, including bankruptcy-proof federal student loans, to various Corinthian-owned schools. Though federal funding was re-instated a couple of days later, Corinthian had to agree to many strict conditions including a “'teach-out' of schools that are under-performing.” At the time, Corinthian was already under investigation in 20 different states, in addition to its troubles with the feds.

Selling campuses

In early July, Corinthian started selling off some of its campuses after it missed one of the deadlines the feds had established as part of its previous month's agreement with the company.

At the end of that month, Sen. Tom Harkin (D-Iowa) and the Senate Health, Education, Labor and Pensions Committee released a report showing that for-profit schools such as Corinthian were collecting a “disproportionate share of new Post-9/11 GI Bill benefits” paid out to military veterans.

In September, the Consumer Financial Protection Bureau sued Corinthian for what the CFPB called an illegal, predatory lending scheme. CFPB Director Richard Corday said “We believe Corinthian lured consumers into predatory loans by lying about their future job prospects, and then used illegal debt collection tactics to strong-arm students at school. We want to put an end to these predatory practices and get relief for the students who are bearing the weight of more than half a billion dollars in Corinthian’s private student loans.”

The lawsuit charged that Corinthian used “misleading claims” in order to convince students its schools were worth attending. Among other things, Corinthian allegedly paid employers to hire graduates for temporary jobs, which Corinthian then counted as as in-field work toward its job-placement statistics. Corinthian even allegedly created fake employers, then falsely claimed students worked for them. Meanwhile, Corinthian's “career counseling” services included urging students to check job postings on websites such as Craigslist.

In October, the state of Wisconsin made similar claims in a lawsuit it filed against Corinthian-owned Everest College in Milwaukee (which had shut down in August 2013).

Debt relief for students

In February, the DoE and CFPB announced $480 million in debt relief for Corinthian students who'd taken out high-cost, private “Genesis” loans. CFPB Director Corday said it would “provide substantial relief to current and past students who were harmed by Corinthian’s predatory lending scheme.” Affected students were told they could see their individual Genesis debt burdens be reduced by up to 40% – which was another way of saying the students were still on the hook for 60% of those predatory loans.

Then, in April, the attorneys general of nine states (Illinois, California, Connecticut, Kentucky, Massachusetts, New Mexico, New York, Oregon and Washington) published an open letter urging the DoE to immediately relieve the federal student-loan debt burdens of all Corinthian and Everest students. Illinois AG Lisa Madigan said that such students were “victims of the predatory practices of for-profit schools such as Corinthian, which was more concerned with their profits than they were about the quality of education they provided.”

A week later, Corinthian was fined $30 million and forbidden from enrolling any new students at certain of its campuses, for “misrepresenting” job placement rates for its graduates.

According to the DoE, Corinthian's deceptive practices included paying temporary employment agencies to hire graduates for on-campus jobs lasting as little as two days, so the company could then count those students as having found work in their field after graduation.

School's out

Near the end of that month, on Sunday, April 26, Corinthian abruptly announced that it would close all of its remaining campuses effective the next day. Then the company declared bankruptcy the following week.

And now, almost exactly 12 months after the Department of Education first halted federal funding to Corinthian, it announced on its official “HomeRoom” blog that it would offer debt relief to certain Corinthian students.

Some Corinthian schools closed down, while others were sold but remain open. We are establishing plans to ensure debt relief for:

• Students whose schools have closed down

• Students who believe they were victims of fraud, whether their school closed or not

….

If you are a Corinthian student seeking debt relief of either type, please visit the FSA website or call toll-free at (855) 279-6207 and a staff member will provide the information you need.

The DoE also put out an online “fact sheet” about “Protecting students from abusive career colleges.” Among other things, the fact sheet promises that the DoE is “Establishing a streamlined process” for Corinthian students seeking debt relief:

the Department will create a simple application for debt relief, which borrowers can complete online or by email or postal mail. Starting today, former Corinthian students can visit studentaid.gov/Corinthian to learn more, and in the coming weeks, the Department will have an online form available for these borrowers. In addition, students can call a special toll-free borrower defense hotline at (855) 279-6207 to ask about their options.

A long list

But just how streamlined is that process? The Student Aid page says that “In your Borrower Defense to Repayment submission materials, you should include at a minimum” a long, bullet-pointed list of information. The list starts out reasonably enough – you need “A statement that the borrower wishes to assert a borrower defense to repayment based on state law,” and of course you must include some personal identifying details – your full name, date of birth, current contact information and similar things.

Then it says you also must provide this:

• Documentation to confirm the borrower’s school, program of study, and dates of enrollment. Suggested items include transcripts and registration documents indicating your specific program of study and dates of enrollment.

• Any details about the conduct of the school that the borrower believes violated state law including, but not limited to:

  • The state and applicable law or cause of action (if available)

  • Specific acts (including failures to act) of alleged misconduct by the school

  • How the alleged misconduct affected the borrower’s decision to attend the school and take out a loan to pay to attend the school

  • The injury suffered by the borrower as a result of the school’s alleged misconduct

  • Any other supporting information that would help the Department of Education review the borrower’s claim

As Salon pointed out:

Even getting a transcript from Corinthian, especially if the particular campus went out of business, may be challenging. Additionally, the application demands highly specific legal formulations, and borrowers would have to make the right citations of state law and fulfill the proper definitions of injury. This is a job for a lawyer, not a struggling borrower, who may not even be aware of Corinthian’s behind-the-scenes machinations.

Last February, shortly after the CFPB announced $480 million in loan forgiveness for the holders of certain private (not federal) Corinthian-based student loans, a group of former a group of former Corinthian students associated with an offshoot of the Occupy movement known as the Debt Collective announced that they were staging a “debt strike” and refusing to repay their student loans in order to protest the government's legal and financial support of Corinthian.

At the time, the “Corinthian 15” (so called because they started with 15 members) posted an open letter to the Department of Education saying that:

Who are we? We are the first generation made poor by the business of education. …

We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in. … We are not alone in this fight. Corinthian’s predatory empire pushed hundreds of thousands into a debt trap. But even beyond for-profit schools, tens of millions of students are in more debt than they can ever repay. And you are the debt collector, with powers beyond a payday lender’s wildest dreams. …

And yesterday, in response to the DoE's debt-relief announcement, the Debt Collective responded by saying that the “Department of Education refuses to do its job, again”:

How many times do Corinthian students have to be lied to?

Just as Corinthian Colleges portrayed its programs as a path to a better life when they were in fact debt traps, the Department of Education is portraying a process that re-victimizes students as a solution to a problem they created.

If Education Secretary Arne Duncan was truly “committed to making sure students receive every penny of relief they are entitled to under law” he would sign the “Order for Discharge of Federal Student Loan Debts” the Debt Collective sent him last week, immediately and automatically discharging Corinthian students' debts. Students are entitled to receive full relief under law. The legal and most painless possible process for students is no process—they deserve an automatic discharge of their debts. … In place of this obvious option, the Department of Education's "solution" is a bureaucratically tortured process designed to provide relief only to those who hear about it and can figure out how to navigate unnecessary red tape.

The Debt Collective also argues that without DoE funding – primarily, the federal promotion and backing or bankruptcy-proof student loans intended to cover tuition costs – schools such as Corinthian wouldn't have stayed in business in the first place:

The Department of Education has been misusing taxpayer dollars for decades, funding up to 90% of Corinthian and other exploitative for-profit college chains. Hundreds of thousands of students were led into a debt trap funded by tax dollars. Automatic, class-wide discharges are not only just, they would also serve as a corrective for the Department's flagrant failures to allocate public funds wisely.

Credits wiped out

If you are a former Corinthian student who does have the necessary documentation and legal expertise to apply for the Department of Education's current debt relief program, bear in mind that doing so will completely wipe out any credits or degrees you might have collected from a Corinthian school. Or, as the DoE webpage puts it:

Please note that if you choose closed-school debt relief, you can’t transfer your credits to a comparable program at another institution. However, if you believe you have a claim against your school under state law, such as fraud, you may still pursue debt relief based on borrower defense to repayment, as described below – even if you transfer your credits to another school.

Quite frankly: if you're a former Corinthian student, you should not let fear of losing Corinthian-generated course credit deter you from applying for debt relief, because those credits are probably worthless anyway. The only other schools likely to accept Corinthian-generated transfer credits are other for-profit schools no better than Corinthian. In February 2013, for example, an Everest graduate sued his school, alleging that none of the credits he took at Everest were transferable to a state community college, and many consumers posting on ConsumerAffairs have complained of problems transferring their credits.

“I attended Everest here in Miami in 2010,” a consumer named Lucy said in a ConsumerAffairs posting from last summer. “At the time I had no high school diploma. I completed a test that qualified me for the pharmacy technician program. ... I passed with flying colors.”

But that hasn't done Lucy any good. “To make a long story short, I am $13,000 in debt and still no employment in my field of study,” she said. “We cannot transfer our education credits because it's not considered real.”

The education may not be real, but the crushing debt and financial ruin are.

It's bad enough that America's current and former college students are struggling under a collective $1.2 trillion in bankruptcy-proof student loan debt, without scam artists bearing bogus offers of debt relief enriching themselves by preying on students' sense of desperation.

Early in May, Illinois' Attorney General Lisa Madigan filed suit against five student-loan “debt settlement companies” which, she says, used false promises suggesting their debt burdens could be reduced or even forgiven entirely in order to defraud student-loan borrowers out of hundreds or even thousands of dollars in fees. Madigan also filed suit against two other such companies last July.

Yesterday, Madigan asked the U.S. Department of Education to “initiate a program to provide certified nonprofit credit counselors for the millions of student loan borrowers seeking help to repay their federal student loans.” She mentioned scammy debt-relief companies to explain why “more qualified sources for help are needed.”

Certification needed

In a letter to Education Secretary Arne Duncan, Madigan urged the DoE to certify nonprofit credit counselors who can help borrowers who need help understanding what repayment options they have, because “Student loan borrowers have nowhere to turn right now to access legitimate information and assistance about their repayment options,” so “It is critical that we provide these borrowers a lifeline before they make costly mistakes by turning to scam artists for help.”

In the meanwhile, borrowers must remain wary of scammy debt-relief services. Last December, when the feds shut down two other scammy student debt-relief companies, it reminded federal student loan borrowers that enrollment in alternative repayment programs, such as the Income-Based Repayment or Pay As You Earn program, is available at no cost.

Also, all debtors – not just those owing student loans – should avoid any company pressuring them to pay high upfront fees. In fact, avoid any debt-relief program requiring you to pay money before they actually do anything for you – especially if they ask you to sign a contract, or ask for your credit or debit-card number, or bank acocunt information.

Also, student loan borrowers should be cautious of any company asking for your Federal Student Aid PIN, because anyone who has your PIN has the ability to perform actions on your student loan. Honest companies will work with you to devise a plan without your PIN.

For-profit colleges lost a round in court this week as a federal judge dismissed an industry lawsuit challenging the U.S. Department of Education's "gainful employment" rule.

The rule, scheduled to go into effect in July, cuts off federal aid to schools whose students graduate with high debt loads and low earnings. The schools' lawsuit said the rule violated their right to due process.

U.S.  District Judge Lewis Kaplan of New York ruled that the Education Department had the legal power to create the controversial rule in the first place and that it followed proper procedures in developing its second iteration of the regulations. The first version of the rule was thrown out in 2012 in an earlier lawsuit.

Dorie Nolt, press secretary at the U.S. Department of Education, said the department was pleased with the ruling.

"Every student deserves to graduate from higher education with a degree or certificate that equips them for success. These regulations will hold career colleges accountable for the programs they offer and promote improvements that protect students, benefit consumers, and honor taxpayers’ investment,” Nolt said.

"Steadfast conviction"

The lawsuit was brought by the Association of Proprietary Colleges, which represents 20 for-profit colleges in New York.

The group's executive director, Donna Stelling-Gurnett, said she was disappointed with the ruling.

“While we agreed with the department’s goals for this rule from the outset, we remain steadfast in our conviction that this regulation does not achieve those goals,” Stelling-Gurnett said in a statement.

In dismissing the suit, Judge Kaplan said that for-profit colleges don’t have a “vested right" to participate in federal student aid programs and they therefore don't need to be afforded due process protections.

“While for-profit colleges have become heavily reliant on federal student aid, that reliance is of their own creation, not of necessity,” he wrote.

Kaplan had sharp words for the association's argument that the rule infringed upon the states' role in overseeing colleges.

“This argument is quite surprising, but not for its merit,” Kaplan wrote. “It is surprising because it is at best ill-conceived and at worst misleading.”

The Federal Trade Commission announced yesterday that for-profit Ashworth College “agreed to settle” charges that Ashworth misled potential students about the value of an Ashworth education.

Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said that “When schools promise students they can transfer course credits or get a better job after completing their programs, they’d better be able to back up those claims. Ashworth College didn’t tell the truth when it made those promises to prospective students.”

Ashworth's settlement with the FTC includes an $11 million judgment — which is currently “suspended” due to Ashworth's “inability to pay.” In addition to not-paying this fine, Ashworth is also expected to not-make certain misleading claims to students. Or, as the FTC said:

The proposed stipulated court order prohibits Ashworth College from misrepresenting that:

• completing Ashworth’s program will qualify students to obtain vocational licenses without any additional training or experience;

• Ashworth’s programs provide all the training and credentials required to switch careers or obtain a job in a new field;

• there will be job security or steady employment for consumers completing its programs; and that

• course credits are generally recognized by, and accepted, by other postsecondary institutions.

For-profit schools

Ashworth is the latest in a series of for-profit schools to come under legal scrutiny for similar reasons. Corinthian Colleges, which operated schools under the Heald, Everest and WyoTech brands, had to cease operations and close its remaining schools late last month (and declared bankruptcy a week later), after years of legal troubles including multimillion-dollar fines, suspensions of federal student aid, federal lawsuits charging “predatory lending,” and more.

In mid-April, shortly before Corinthian closed its remaining schools and filed for bankruptcy, it was fined $30 million for misrepresenting its job placement rates to students.

ITT Educational Services also started coming under increased scrutiny this month. A couple weeks ago, Congresswoman Jackie Speier urged the Department of Education to investigate ITT for “deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid.”

A few days later, California suspended GI Bill benefits for ITT Technical Institute locations in the state.

Students at ITT and Corinthian schools both paid high tuition rates (or, more likely, went deep into bankruptcy-proof student loan debt) in order to get what turned out to be useless degrees: traditional four-year colleges or universities generally wouldn't accept course credits from these schools, and neither will state professional licensing boards.

No student loans

The FTC settlement with Ashworth suggests that Ashworth students have the same problem, but they do have one slight advantage (or one less disadvantage) than students of ITT, Everest and similar for-profit schools. The FTC says:

Tuition at Ashworth College ranges from hundreds to several thousand dollars. Ashworth College does not accept student loans, and students are required to pay tuition in full or make monthly payments. However, it does accept military benefits including GI Bill payments, and has directed some of its advertising to military servicemembers and their families.      

So Ashworth students may waste large amounts of money or squander their military tuition benefits on what turns out to be relatively worthless college-course credits — but at least they don't have bankruptcy-proof student-debt millstones weighing them down, too. By the sad standards of contemporary American for-profit higher-educational victims, that actually leaves Ashworth students ahead of the game.

Last week, California Congresswoman Jackie Speier urged the Department of Education (DoE) to investigate the for-profit college operator ITT Educational Services, Inc., which she said has allegedly “engaged in deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid, at vast taxpayer expense” at its ITT Technical Institute schools.

And this week, the California Department of Veterans Affairs (CalVet), which among other things oversees GI Bill tuition benefits for military veterans in the state, ordered 15 ITT locations to stop enrolling new or returning students who use the GI Bill for payment.

Military.com reports that “The suspension only stops future enrollments or reenrollments of Veterans, or their dependents, using the GI Bill,” but “does not affect current students.”

Financial statements

CalVet instituted the suspension because ITT apparently will not or can not produce audited financial statements, as required by both the Securities and Exchange Commission and the DoE.

Speier mentioned something similar in her complaints to the DoE last week, saying in an open letter to the Secretary of Education that “The Securities and Exchange Commission (SEC) filed charges on May 12, 2015 alleging that that [sic] the CEO and CFO of ITT Educational Services covered up ballooning loan obligations stemming from the company's …. predatory lending programs.”

But ITT responded to the SEC's charges by releasing a statement saying “We vehemently disagree with the SEC’s position and we are confident that the evidence does not support the SEC’s claims …. We are eager to have the court clear our reputation that has been unnecessarily endangered by the SEC’s action.”

Whatever the courts ultimately decide about ITT's financial activities, another problem shared by ITT students and graduates involves the school's lack of worthwhile accreditation. Speier said that even ITT grads who'd earned high grade-point averages discovered their degrees were worthless: no reputable four-year college or university would accept ITT transfer credits, and potential employers aren't impressed by ITT-generated credentials, either.

Grads' complaints

Last week, when we reported Speier's complaint about ITT, we also shared the stories of several ITT grads. One woman who studied electronics at an ITT school discovered just how little employers think of ITT: “I have gone on numerous interviews just to be laughed at and questioned about why ITT.”

Another man who had to start his four-year college degree from scratch after no school would accept his two-year ITT degree advised all potential students to stay away from ITT: “Since it is not an accredited school if you ever plan to further your education and want to transfer to a real college you are much better off going to a real college from the start.”

A two-year state community college will cost you much less than a for-profit “institute” such as ITT, and the credits you earn at an accredited state community college are far more likely to either transfer to other traditional four-year schools or be accepted by potential employers.

After the downfall of Corinthian Colleges, which declared bankruptcy earlier this month following years of legal troubles which included federal agencies ranging from the Department of Education (DoE) to the Consumer Financial Protection Bureau (CFPB), plus the attorneys general of several different states, all alleging that Corinthian-owned schools defrauded students in various ways, lawmakers and other public officials have turned a sharper eye to other for-profit schools dependent upon a steady stream of federally backed, bankruptcy-proof student loans to stay in business.

Today, Congresswoman Jackie Speier (D-California) released an open letter to Education Secretary Arne Duncan urging the DoE to “conduct an investigation of and exercise increased oversight over the for-profit college operator ITT Educational Services, Inc.,” which has allegedly “engaged in deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid, at vast taxpayer expense.”

Speier's letter, available in .pdf form here, includes a list of complaints which sound depressingly familiar to anyone who knows Corinthian's story.

Predatory lending

Last year, for example, the feds sued Corinthian for “predatory lending practices,” and Speier's letter mentions similar practices from ITT: “The Securities and Exchange Commission (SEC) filed charges on May 12, 2015 alleging that that [sic] the CEO and CFO of ITT Educational Services covered up balloning loan obligations stemming from the company's …. predatory lending programs.”

Last November, a former ITT student in Pennsylvania wrote us to say “I was one of those students who signed for a private loan in order to continue my education. Unaware of the lies and deceit that was going on within the company. The program of study was electronics.... I was assured that upon graduation I would have a career, not a job.”

But after graduating in 2011, she discovered her degree was useless: “I am a temporary employee. My credit is shot and I make a little above minimum wage. I have gone on numerous interviews just to be laughed at and questioned about why ITT. … I am over $50,000 in debt because I believed I was getting a good education that would lead to a good future.”

And remember: that debt, like almost all student-loan debt, can't even be discharged in bankruptcy. But a former student who goes over his head in debt to attend a traditional, accredited state college or university at least has an authentic college degree (or credits to count toward one) to show for that outrageous debt load. ITT students say they don't even get that.

Good grades but ...

Mike from Oregon told us in January: “I went to ITT and I finally graduated with really good grades, 3.8 … in 1994.” A few years later, Mike wanted to enroll in a regular four-year school to earn a bachelor's degree, but learned that no reputable school would “transfer any credits at all from ITT, so I had to start over from scratch …. since it is not an accredited school if you ever plan to further your education and want to transfer to a real college you are much better off going to a real college from the start.”

Still, Mike says, his degree from ITT isn't completely useless: “you can hang it on the wall to cover up a hole or you can use it to cover a stain.”

Jay in Massachusetts made a similar observation from a different perspective. He spent one academic year – September 2013 through the following June – teaching at an ITT “Electronic Technology School.”

"Rot-gut shameless"

I have been a PhD electrical engineer for 25 years, mostly in the defense sector. But have never worked for such a rot-gut shameless enterprise, not even close. You need to understand [the] whole enterprise, ITT I mean, is a colossal nationwide profiteering scam. There are so many problems with ITT, I hardly know where to begin …. Recruiters routinely tell students that ITT courses will transfer should a student decide to complete a conventional 4-year program at another school after, say, completing an associates degree program at ITT. This is false. Credits will transfer to another ITT school (or possibly to another for-profit school like ITT) - that much is true - but not to an accredited state university.

In her letter to Education Secretary Duncan, Rep. Speier alludes to such complaints, and previous problems with the now-defunct Conrinthian schools, when she says:

The Department of Education has conducted increased oversight and exercised enforcement options in the past, as it did with the Corinthian Colleges [but] those investigations have been plagued with delays. In fact, Corinthian Colleges, Inc. was investigated by the SEC in June 2013 – a full year before ED opened their own June 2014 investigation …. This delay harmed students who continued to take loans on a worthless education, and taxpayers who footed the bill. I ask that in this case you take action quickly and responsibly.

In recent years high school students and their parents have obsessed over the college admissions process.

Certain colleges have become like designer consumer products, a sign of status and announcing to the world that this young person is embarking on a meaningful and successful career. Of course, it doesn't always work out that way.

Some graduates of name-brand colleges flame out in their careers. Others fall into depression because they weren't accepted by the school of their choice.

In his book “Where You Go is Not Who You'll Be,” New York Times columnist Frank Bruni argues that the Ivy League has no monopoly on corner offices, governors' mansions, or the most prestigious academic and scientific grants.

His book is a recounting of the stories of highly successful people who didn't attend the most exclusive schools. In fact, he writes there are many great colleges and universities that aren't well known. You just have to be able to find them.

University Research & Review, which offers college placement advice, has issued a list of what it believes are the best colleges you've never heard of. Attending one of them, the company says, will offer a great education and set the stage for a successful career.

Here's their list:

Abraham Baldwin Agricultural College Located in rural Georgia this school, as the name implies, might be ideal for those pursuing a career in making things grow. The school offers a degree in, among other things, turfgrass management for those aspiring to a career in the golf course industry. They even have their own golf course where students practice what they learn.

Amridge University Flexible is one way to describe Amridge University. All of its courses are also offered online with live course lectures viewed in real time and optimized for mobile devices. The school's low tuition also makes it attractive.

Brandman University University Research & Review calls Brandman “one of the most progressive institutions in the country. It now embraces competency based education, meaning if you know the subject matter you are not held back by outdated seat time requirements. This could be a good choice for serious adult learners who want to get on with life and career.

Brescia University There are only about a thousand students at Kentucky's Brescia University, offering both classroom and online programs. Most of the school’s mostly female students are full-time and enroll in programs such as social work, teacher education, and business.

Kettering College This might be a good choice for someone planning on a career in health care. It wins high marks for a professional and committed faculty and a responsive administration.

Lincoln Memorial University Lincoln Memorial is also popular among those interested in health careers. Students can become a doctor of osteopathic medicine, or of veterinary medicine, or maybe earn one of several master’s degrees.

Special features

Park University, Patten University, Western Governors University and William Carey University all have attributes that set them apart. About 90% of Park's students are part-time and about half take their courses online.

Patten University tries to help students avoid taking out loans by developing an inexpensive monthly payment program where a student can take all the courses he or she can handle. All courses are available online.

Western Governors University is a pioneer in competency based education, meaning you can get a degree sooner than you might think. Its course offerings are also 100% online.

William Carey University has unique scholarship and assistance programs available for students. There are special assistance programs for low income families, and students with excellent academic records may qualify for full tuition and fees plus a room allowance.

If you're looking for a single recent anecdote illustrating almost everything dysfunctional about the modern American system of funding higher education, try this one: On Monday, one week after the long-embattled chain of for-profit schools abruptly closed all of its remaining campuses, Corinthian Colleges filed for bankruptcy.

However, Corinthian's former students lack the same opportunity to wipe out their bad debts and start over again at Net Worth Zero (plus an abysmal credit rating), because student-loan debt, for the most part, cannot be discharged in bankruptcy.

What led to Corinthian's downfall? Like most for-profit schools, it was almost entirely dependent on federally backed student aid (especially those bankruptcy-proof loans) to function. The beginning of the end for Corinthian arguably came last June, when the feds temporarily halted all financial aid to Corinthian schools.

Federal agencies ranging from the Department of Education (DoE) to the Consumer Financial Protection Bureau (CFPB), in addition to the attorneys general of several different states, have alleged that Corinthian-owned schools defrauded their students in multiple ways: inflating or lying about post-graduation job-placement rates, teaching courses whose credits were not accepted by reputable universities or state professional-licensing boards, even engaging in what the CFPB called “predatory lending scheme[s]” bad enough that in February, the DoE and CFPB announced $480 million in debt relief for certain Corinthian students.

Affected students could see their debt burdens reduced by up to 40% — which is another way of saying affected students are still on the hook for at least 60% of those “predatory” loans.

Debt strike

Meanwhile, a group of former Corinthian students went on “Debt Strike,” refusing to repay the federally backed loans they took out to pay for their Corinthian school attendance. The “Corinthian 15” (so called because they started out with 15 members) started their strike in February, by posting an open letter to the DoE saying, in part, that:

We wanted an education because we were driven to learn and to achieve a better life for ourselves and for our families.

We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in. … Corinthian’s predatory empire pushed hundreds of thousands into a debt trap. But even beyond for-profit schools, tens of millions of students are in more debt than they can ever repay. And you are the debt collector, with powers beyond a payday lender’s wildest dreams. …

“More debt than they can ever repay.” That's exactly the sort of person bankruptcy is supposed to help. So, of all possible subgroupings of Americans to be denied that second chance, why single out the indebted students, most of whom took on that debt when they were still teens or young twentysomethings?

$1.2 trillion

As of March, the total outstanding student loan debt in the U.S. surpassed $1.2 trillion. And of the former students who started repaying their federal student loans in 2011, 650,000 had defaulted by 2013. Average default rates were 19.1% for students at for-profit schools, and 7.2% at non-profit colleges.

College tuition rates have risen faster than inflation every year for at least a generation now. And the people – mostly young people – behind these depressing numbers can't even seek the protection of bankruptcy.

It wasn't always like that. Originally, student loan debt was pretty much like any other, where bankruptcy was concerned. But in 1976, Congress changed the bankruptcy code to bar the discharge of student loan debt within five years of graduation. In the 1990s, that limit was raised to seven years. Then, as Inside Higher Ed said, “the 2005 code revision made it all but impossible to have student loan debt canceled.”

I've heard arguments saying that's only fair, on the grounds “Bankruptcy shouldn't apply to college debt, because a college education can't be repossessed.” Yet that's true of many kinds of debt: you can't repossess medical procedures, vacations, restaurant dinners, gambling debts, property value lost when the housing bubble collapsed – but if you go over your head in debt to acquire such things, you can declare bankruptcy and get a financial second chance. Over-their-head former students cannot.

Reminder to legal adults who are still under 21 years old: the federal government doesn't think you're responsible enough to buy or drink a beer — yet you can sign on for enormous amounts of bankruptcy-proof college debt with that same government's blessing and active encouragement.

Corinthian Colleges filed for bankruptcy earlier this week, shortly after the long-embattled chain of for-profit schools abruptly closed all of its remaining campuses.

Like most for-profit colleges, Corinthian was largely dependent on federal student aid – primarily bankruptcy-proof education loans issued to students. Last June, the feds temporarily suspended funding for Corinthian-owned schools, after the Department of Education argued, among other things, that credits from Corinthian schools often proved useless to students, since those credits were not accepted by regionally accredited state schools, nor by various professional licensing boards.

These and similar problems explain why last October, the attorneys general of 14 different states announced their support for a proposed Congressional measure to increase regulations on the for-profit education industry. (Remember, too, that student loan debt is much worse than other forms, because it can't even be discharged in bankruptcy.)

More recently, the Obama administration tried setting new standards on for-profit schools, standards slated to come into effect this July.

Unsurprisingly, for-profit schools are generally opposed to the newer, stricter regulations. But they have a surprising ally. ProPublica's Alec MacGillis yesterday published the results of an in-depth investigation showing that traditional colleges and universities are also working against the new regulations.

For years, the higher education establishment has viewed the for-profit education business as both a rival and an unsavory relation — the cousin with the rap sheet who seeks a cut of the family inheritance. Yet in a striking but little-noticed shift, nearly all of the college establishment’s representatives in Washington are siding with for-profit colleges in opposing the government’s crackdown. … The emerging alliance points to a new calculation by the higher education lobby. By throwing in with the for-profits, traditional schools might be able to capitalize on Republican control of Congress to limit the government’s reach into their own campuses. Among other things, colleges and universities would like to block the proposed new federal ratings system designed to help families choose institutions based on how of their many students graduate and where they get jobs.

Inflated job placement rates

Corinthian and other for-profit schools have long been accused of inflated or outright fraudulent job-placement rates. For example: in mid-April, only a couple weeks before Corinthian's bankruptcy declaration this week, the Department of Education levied a $30 million fine against Corinthian, alleging among other things that Corinthian-owned Heald Colleges paid companies to hire graduates for temporary positions lasting as little as two days, performing such basic tasks as moving computers and organizing cables, then counted those graduates as “placed in field.”

Heald also counted obvious out-of-field jobs as in-field placements, including one graduate of an accounting program whose food-service job at Taco Bell was counted as “in-field” work.

But why would reputable, accredited traditional universities oppose regulations intended to crack down on such fraudulent behaviors? As ProPublica said:

the higher education lobby represents an industry as self-interested as any other—the two largest of the its many trade groups reported spending $500,000 on federal lobbying last year—and it spies an opportunity in the deregulatory instincts of the Republican majority.

The gambit underscores one of the under-appreciated truths about lobbying in Washington in an era of divided government: Special interests are often as interested in preserving a favorable status quo as they are in getting government to take an action to their benefit. To that end, gridlock can be a feature to be encouraged, not a bug.

At stake in this case is the roughly $150 billion that the federal government shovels annually into colleges and universities in the form of Pell grants and subsidized loans for students. Current and former higher education regulators say the federal government is obliged to assure that taxpayers are getting results for that spending.

Tuition rising

Are taxpayers getting their money's worth? Higher education costs – at traditional universities, not even counting the for-profit schools – have risen considerably faster than inflation every year for at least a generation now.

(Personal anecdote: I attended Cheap State U at in-state rates for four consecutive years in the 1990s, and my senior year tuition costs were significantly higher than freshman year's. Adjusted for inflation, I paid $1,760 per semester as a full-time freshman, compared to $2,661 per semester as a senior. For Fall 2015, the in-state tuition cost will be just under $6,270 per semester. Of course, those cited tuition costs do not include the cost of textbooks, housing, food, parking fees, lab fees, student fees, or any other costs related to college.)

So a high school senior today who enrolls at Cheap State U will pay, in inflation-adjusted dollars, at least three times more money than I did for the same degree. Which wouldn't necessarily be a problem if the job market had similarly expanded, so that today's newly minted college grads can reasonably expect salaries two or three times higher than what I made at the same entry-level gigs.

But that hasn't happened. Wages have been stagnating or even falling, even as the cost of educational credentials continues to rise. Students – and, ultimately, federal taxpayers – are spending more money on education than ever. Are they [we] getting results for all that spending?

Perhaps that's a question the “higher education lobby” would prefer nobody ask.

It's not enough that millions of Americans are struggling under $1.2 trillion in student loan debt. They often must must try to avoid getting taken by bogus offers of relief.

Any offer of relief can be very tempting for someone who has run out of options. Illinois Attorney General Lisa Madigan says this has drawn the attention of numerous scammers who make big promises in return for big fees, but deliver nothing but disappointment.

Madigan has filed suit against five companies she says charged student loan borrowers hundreds to thousands of dollars in upfront fees with false promises. She says the promises suggested that the debt load could be reduced, or forgiven entirely, under programs endorsed by President Obama’s administration.

The suits were filed against:

• Consumer Financial Resources LLC, of Texas, which operated as Student Loan Resolve
• Federal Student Loan Alliance LLC, based in California
• Interactiv Education LLC, based in Florida, that operated as Direct Student Aid
• Chicago-based Nationwide Student Aid
• Student Consulting Group Inc., based in Georgia, that solicited consumers as University of One and Help Assist Me Default Resolution Services

The approach

The lawsuits paint a picture of a highly deceptive approach. The state says the companies run heavy marketing campaigns, claiming expertise and offering loaded-down borrowers several options to ease their debt burden.

In reality, Madigan alleges, the companies she named in the suit try to persuade desperate people to pay as much as $1,250 upfront for services she describes as “bogus.” These often include enrolling in loan forgiveness programs for public service employees, including teachers, nurses, police officers, firefighters and employees of non-profit organizations.

In many cases, she says, the companies hold out the possibility of complete debt relief without even looking at borrowers’ individual situations, to determine whether they are eligible for the programs. Seldom, she says, is there any explanation of all the required steps borrowers must take to qualify for loan forgiveness.

Proof of the problem

“These scams are proof that the rate of student loan debt in this country has skyrocketed, and it has already destabilized the financial security of millions of people across the country,” Madigan said. “When people cannot make their loan payments, they don’t get to build the future that they dreamed about when they went to college. We cannot allow these scams to continue.”

This isn't the first time the Illinois Attorney General has taken on companies promising student loan debt relief. Last July she sued 2 other companies – First American Tax Defense LLC and Broadsword Student Advantage LLC, charging them with deceptive marketing practices and illegally charging consumers hundreds in upfront fees to reduce or eliminate their student loan debt burden.

The student loan debt settlement industry appears to be a new incarnation of the debt settlement industry that most recently targeted homeowners in distress. In 2011 six defendants agreed to settle Federal Trade Commission (FTC) charges that they participated in a fraudulent mortgage modification and foreclosure relief scheme.

Under that settlement five defendants were ordered to pay back money they collected and all 6 were permanently banned from selling any mortgage assistance or debt relief products.

Meanwhile, consumers looking for options when it comes to repaying student loan debt might want to start with the federal Consumer Financial Protection Bureau.

Corinthian Colleges, the long-embattled chain of for-profit (and not necessarily accredited) schools, announced on its website that it would close all of its remaining campuses effective today. Those campuses include “Everest and WyoTech campuses in California, Everest College Phoenix and Everest Online Tempe in Arizona, the Everest Institute in New York, and 150-year-old Heald College -- including its 10 locations in California, one in Hawaii and one in Oregon.”

Take note: although Corinthian does – or did – operate schools under the Everest name, not all Everest schools were run by Corinthian, so not all of them will be closing. For example: when ConsumerAffairs called the Everest College campus in Woodbridge, Virginia, this morning, we were told that it was not shutting down since Corinthian did not own it.

The CCI website says, “The company is working with other schools to provide continuing educational opportunities for its approximately 16,000 students. Corinthian said those efforts depend to a great degree on cooperation with partnering institutions and regulatory authorities.”

Translation: Those efforts depend to a great degree on whether any reputable, regionally accredited educational institutions will accept transfer credits from Corinthian courses -- and Everest schools, Corinthian-owned or otherwise, have a poor track record in that regard.

California Attorney General Kamala D. Harris said Corinthian "continued to deceive its students to the end."

"Closure of these campuses should help students get out from under the mountains of debt Corinthian imposed upon them through its lies," Harris said. "Federal and state regulators rightly acted to prevent taxpayer dollars from flowing to Corinthian, which preyed on the educational dreams of vulnerable people such as low-income individuals, single mothers and veterans by misleading students and investors about job placement rates and course offerings."

Multiple troubles

In February 2013, for example, an Everest graduate sued the school, alleging that none of the credits he took at Everest were transferable to a state community college. Many consumers posting on ConsumerAffairs have complained of problems transferring their credits.

“I attended Everest here in Miami in 2010,” former student Lucy said in a ConsumerAffairs posting last summer. “At the time I had no high school diploma. I completed a test that qualified me for the pharmacy technician program. ... I passed with flying colors.”

But that hasn't done Lucy much good. “To make a long story short, I am $13,000 in debt and still no employment in my field of study,” she said. “We cannot transfer our education credits because it's not considered real.”

Last June, the Department of Education temporarily halted all federal student aid to Corinthian-owned schools. In September, the feds sued Corinthian on charges of predatory lending practices toward its students. (Remember, too, that student loan debt is far worse than other kinds, because student loans can't even be discharged in bankruptcy.)

Hefty fine levied

Less than two weeks ago, the Department of Education levied a $30 million fine against Corinthian, and ordered its Heald College schools to stop enrolling new students, after an investigation “confirmed cases” that the company misrepresented the schools' job placement rates to current and prospective students of Corinthian-owned Heald Colleges.

For example: the DoE's investigation found that Heald paid companies to hire graduates for temporary positions lasting as little as two days, performing such basic tasks as moving computers and organizing cables, then counted those graduates as “placed in field.” (In many instances, those temp jobs were actually on Heald campuses.) Heald also counted obvious out-of-field jobs as in-field placements, including one graduate of an accounting program whose food-service gig at Taco Bell was counted as “in-field” work.

Despite all of this, the closing announcement on the Corinthian Colleges website says that, “The Company said that its historic graduation rate and job placement rates compared favorably with community colleges,” and quoted Corinthian's CEO, Jack Massimino, as saying “We believe that we have attempted to do everything within our power to provide a quality education and an opportunity for a better future for our students.”

The Department of Education has levied a $30 million fine against Corinthian Colleges, Inc. after an investigation “confirmed cases” that the company misrepresented the schools' job placement rates to current and prospective students of Corinthian-owned Heald Colleges.

The DoE agreement also forbids Heald from enrolling any more students, and requires the school to help current students either complete their education or continue it elsewhere.

According to the DoE, Corinthian's deceptive practices include paying temporary employment agencies to hire graduates for on-campus jobs lasting as little as two days, so that Heald could then count those students as having found work in their field after graduation.

Nothing new

Such allegations against the company are nothing new. The DoE's fine is merely the latest in a series of legal actions taken against the embattled chain of for-profit colleges.

Last September, when the Consumer Financial Protection Bureau sued Corinthian for predatory lending, the charges included allegations that the company would pay temp agencies to hire Corinthian grads to inflate the schools' placement rates, and also that the company promised good “career” options to graduates of Corinthian-owned Everest, WyoTech or Heald schools, yet Corinthian counted as a “career” any job lasting only one day, so long as there was the possibility of a second day of work.

In February, Corinthian students who'd taken out “Genesis” private loans got a collective $480 million in debt relief, resulting in debt reductions of up to 40 percent.

The schools' reputation among some groups is so unsavory that earlier this month, the attorneys general of nine states urged the federal government to forgive the federal debt burdens incurred by students holding the overpriced and worthless degrees.

And this week, when the Department of Education announced the $30 million fine against Corinthian, Education Secretary Arne Duncan said in a statement that “This should be a wake-up call for consumers across the country about the abuses that can exist within the for-profit college sector. We will continue to hold the career college industry accountable and demand reform for the good of students and taxpayers. And we will need Congress to join us in that effort.”

"Violent students' and taxpayers' trust"

The DoE's investigation found that Corinthian had badly mislead potential and current students of Heald Colleges, to the point where the students might not have enrolled in that school at all, had they known the truth.

U.S. Undersecretary of Education Ted Mitchell said in a statement, “Instead of providing clear and accurate information to help students choose which college to attend, Corinthian violated students' and taxpayers' trust. Their substantial misrepresentations evidence a blatant disregard not just for professional standards, but for students' futures.”

Among other things, the Department's investigation found that Heald paid companies to hire graduates for temporary positions lasting as little as two days, performing such basic tasks as moving computers and organizing cables, then counted those graduates as “placed in field.” Heald also counted obvious out-of-field jobs as in-field placements, including one graduate of an accounting program whose food-service job at Taco Bell was counted as “in-field” work.

In addition, the DoE said, “Heald College failed to disclose that it counted as 'placed' those graduates whose employment began prior to graduation, and in some cases even prior to the graduate's attendance at Heald.”

Like that Accounting graduate working at Taco Bell: she graduated from Heald in 2011 but had started at Taco Bell five years earlier, in June 2006.

A Corinthian spokesperson said in a statement that the Department of Education's conclusions were “highly questionable” and “unfounded,” and that “These unfounded, punitive actions do nothing to advance quality education … but would certainly shatter the dreams and aspirations of Heald students and the careers of its employees.” The spokesperson also said that Corinthian plans to appeal.

Illinois Attorney General Lisa Madigan and eight other state AGs today urged the federal government to immediately relieve the federal debt burden of thousands of students who attended Corinthian and Everest Colleges, the for-profit schools that closed most of their campuses last year.

In a letter to the U.S. Department of Education, Madigan said the agency has legal authority to discharge the federal loans of students who have been harmed by for-profit schools like Corinthian.

“We must protect the victims of the predatory practices of for-profit schools such as Corinthian, which was more concerned with their profits than they were about the quality of education they provided,” Madigan said.

The letter, which was also joined by the attorneys general of California, Connecticut, Kentucky, Massachusetts, New Mexico, New York, Oregon and Washington, notes that the Higher Education Act, Department regulations and federal student loan documents all make it clear that students can assert legal claims against schools as a defense to repayment of their loans.

A number of state and federal lawsuits allege that Corinthian misrepresented to students:

• the urgency of enrollment to secure a spot in a program;
• the school’s historical success placing students in jobs in the students’ field of study;
• the earnings of graduates;
• the availability of advertised programs;
• the employment assistance the school provides graduates;
• the school’s role in its private loan program;
• the nature, character and quality of educational programs;
• the school’s purported affiliation with the United States Military;
• the transferability of credits;
• the availability of externships; and
• the nature and availability of financial aid.

“These cases against Corinthian have unmasked a school that relentlessly pursued potential students — including veterans, single parents, and first-time higher education seekers — promising jobs and high earnings, and preying on their hopes in an effort to secure federal funds,” the letter states.

The attorneys general note that the legal enforcement actions against Corinthian will not be enough to provide relief to Corinthian’s victims. The school has indicated it plans to file for bankruptcy, and therefore will likely try to limit relief available to students burdened with thousands of dollars in debt and many without a degree to show for their outstanding loan balance.

Clarify the grounds

In addition to calling for the cancellation of Corinthian loans, the letter urges the department to clarify the grounds needed for students to obtain a discharge of their loans and to specify a process by which students can raise these issues with their loan servicers in order to obtain relief.

The letter also suggests that DOE develop a process by which the findings in a state attorney general’s investigation could be utilized as a defense to repayment for all affected students.

An estimated 40 million Americans have an outstanding student loan, up from 29 million in 2008. Borrowers carry an average balance of $29,000 in student loan debt. Nationwide, student loan debt now stands at $1.2 trillion, representing an increase of more than 150 percent since 2005.

The U.S. Senate Health, Education, Labor and Pensions Committee reported that, during the 2009-2010 school year, for-profit colleges took in $32 billion in taxpayer-backed student aid and spent nearly 25 percent of their revenue on marketing and recruiting, exceeding what was spent on student instruction.

Washington state is suing a company that promises to "adjust" student debt. Attorney General Bob Ferguson filed a lawsuit Monday charging StudentLoanProcessing.US (SLP) and its president James Krause with violating Washington’s Debt Adjusting Act and Consumer Protection Act, including charging illegal fees for debt adjusting and failing to inform customers of important rights as is legally required.

The same services SLP offers are available — for free — through the U.S. Dept. of Education (DOE), Ferguson said.

“My office will aggressively crack down on those who prey on student loan borrowers — many of whom are already overburdened — for profit,” Ferguson said. “This firm charged exorbitant and illegal fees for services that student loan borrowers can obtain for free.”

Many student loan debt adjustment firms have sprung up as a result of the $1.2 trillion debt burden carried by nearly 40 million American borrowers. Most offer to help students fill out and submit paperwork to DOE to consolidate their federal student loans.

Since July 2011, SLP has marketed and advertised for-cost services to assist student loan borrowers applying for DOE federal student loan repayment programs, including the Income-Based Repayment Program, and Direct Consolidation Loans.

$250 upfront

SLP charged each consumer an upfront enrollment fee of $250, or one percent of their outstanding loan balance, whichever was greater. A vast majority of consumers paid more than the $250 enrollment fee, even as high as $2,000. Washington’s Debt Adjustment Act places a strict limit of $25 on initial fees, meaning even SLP’s minimum fee was ten times the legal limit, the Attorney General’s Office alleges.

The Debt Adjustment Act also dictates that a debt adjuster’s fee may not exceed 15 percent of each payment, which SLP’s monthly fee of $39 did for most Washington consumers.

Ferguson also alleges SLP failed to include language in its contracts informing consumers of their three-day “right to cancel” period, a further violation of the Debt Adjustment Act. 

A total of 88 Washington consumers, with an average student loan debt of approximately $58,000, used SLP’s services. SLP has received roughly $132,000 in fees from these consumers.

What to do

For most federal borrowers, the consolidation process is fairly straightforward:  The borrower fills out a two-page application, verifies his or her employment and income, and submits the package to the DOE.  This service is done through the U.S. Department of Education for free and typically takes four to six weeks. 

Once almost exclusively a feature of for-profit colleges, online degree programs have since flourished at non-profit private and public universities. As a result, a college education has recently become more flexible and more affordable.

More flexible in that a college student can work full or part time while completing their degree from the comfort of their living room, doing the course work at any hour of the day or night.

Affordable, in that the competition between colleges and universities for online students has kept tuition hikes in check.

Ranking online schools

So which online college is best? There are any number of ratings services but BestCollegeReviews.com has just reviewed 400 online colleges and picked its top 25.

It used three criteria to measure the colleges and universities – criteria that consumers might also use in selecting a school.

First, the reviewers looked at affordability, measuring the average cost of attending one semester, taking 15 credit hours.

Second, they assessed flexibility, counting the number of bachelor's degree-granting programs students may enter. A secondary consideration – the flexibility with which students may obtain a degree.

Finally, the reviewers measured academic rigor and support, looking at the strength and reputation of the online program’s parent institution as well as the range of support services for online college students.

$2,500 per semester

When all was said in done, Northern Arizona University topped the list. It won praise for its 45 bachelor’s level degrees that can be completed entirely online.

It was also one of the most affordable schools on the list with an estimated per-semester cost of only $2,500. Students may take an unlimited number of courses online for a six month period. There are no lab or course fees, and all materials required by the courses are available online.

Arizona State University was second on the list. It's far from the least expensive school, but won praise for its 47 bachelor’s degree programs that are fully online. There are 80-plus programs when specializations and non-bachelor’s level programs are included.

Value for the money

Degree offerings are comprehensive, ranging from art, business, communications, culture, education, engineering, health, language, to STEM. There are 6 start dates available per year, allowing students to start on their degree when it works best for them. The $7672 per semester tuition is considered a good value for the education and flexibility it provides.

Granite State College places third on the list, with 29 fully online bachelor’s level degrees that may be completed at full-time, part-time, or accelerated rates. Program offerings are comprehensive, ranging from digital and social media, to nursing, to education. Its tuition is the 10th most affordable, coming in at $4,675 per semester.

Rounding out the top 10 are:

4. University of Central Florida

5. State University of New York

6. Oregon State University

7. American Public University System

8. Ft. Hayes State University

9. Pennsylvania State World Campus

10. Grand Canyon University