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Trade School Lobbyists' New Cause?
For-profit college lobbyists have suddenly become concerned about overborrowing by their institutions' students.
On Monday, a procession of career college lobbyists urged the U.S. Department of Education officials to give their schools more discretion to limit the amount of federal loans students can take out to cover their living expenses. The industry representatives made their remarks at a public hearing the Education Department held at the Community College of Philadelphia to gather ideas for strengthening federal student aid rules to improve the integrity of the programs.
"Schools are trying to limit borrowing," said Richard Dumaresq of the Pennsylvania Association of Private School Administrators, which advocates for proprietary institutions in the state. "But it's not enough to stem the tide of overborrowing, especially in a down economy." His comments were echoed by Harris Miller, the president of the Career College Association, and lobbyists for some of the largest publically traded chains of for-profit colleges, such as ITT Educational Services Inc.
At Higher Ed Watch, we would obviously be happy if students didn't have to take on such a heavy load of debt to attend for profit colleges and trade schools, many of which have had trouble graduating students. But it is hard to take the lobbyists' concerns too seriously, considering the recent conduct of many of these institutions.
As we have previously reported, some of the largest chains of for profit schools have, over the last decade, aggressively steered financially needy students to take out high-cost private loans from lenders like Sallie Mae, with annual interest rates as high as 20 percent. According to company disclosures last year, private loans made up 30 percent of the total revenue at ITT, 18 percent at Career Education Corporation, and 13 percent at Corinthian Colleges. Corinthian also revealed that 75 percent of its private loans were going to high-risk, subprime borrowers.
Overall, the percentage of students at proprietary institutions taking out private loans has skyrocketed over the past several years, from 13 percent in 2003-04 to 42 percent in 2007-08, according to recently released data by the Education Department's National Center for Education Statistics (NCES). In other words, more than 4 in 10 students took out these expensive loans last year to attend schools that have a spotty record of retaining students. In addition, the NCES data reveals that for-profit college students are borrowing private loans at rates that are extremely disproportionate to their numbers. While only 9 percent of all of this country's undergraduates attend these institutions, these students represent 27 percent of all private loan borrowers.
So why this sudden concern by the lobbyists?
Does it have to do with the fact that schools have to increasingly rely on the federal student loan programs because lenders are no longer willing to enter into sweetheart deals to provide subprime private loans to their students? And, as a result, are these schools in danger of violating a federal law requiring them to receive at least 10 percent of their revenue from sources other than federal student aid in order to continue to participate in the government's financial aid programs?
Now don't get us wrong. We're sure that many for-profit college officials are genuinely concerned about their students' debt load. But given the conduct of some of the largest chains of proprietary schools in the recent past, we'd urge the Education Department to not take the lobbyists' pleas at face value.
What do you think? Please send us your thoughts.
Not a New Cause
For 25 years I have helped students identify the best financial aid package to attend a career college that will give them their best and fastest path to career opportunity. For the last 10+ years my biggest concern has been to help students avoid excessive borrowing.
It is unfortunate that while current policies have provided additional grant funds to the neediest students, those funds are not necessarily replacing student debt. Federal loans are considered entitlements, and in most cases, receipt of ever increasing Pell Grant funds and other grant programs, has not reduced the amount a student can borrow, and we all know that many students do not have the discipline or experience to limit borrowing to their most critical needs.
Financial assistance should be about access, regardless of income. In these tough economic times, most students need access to funds to attend the college that will fit them best. But with current financial aid policies, we have many students that can access more than they need and 'overborrow', and others who can't get enough. We need to do a better job of allocating these resources to help as many students as possible. The total aid someone can access should be somewhat level, but their need would determine how much of that is funded through grant programs.
The motivation is to act in the best interest of students, parents, taxpayers, lenders, guarantors, schools....there is no one that a policy change would not benefit. We all win, so let's make something happen before we have another economic disaster. One of the biggest winners could be our government colleges that are having to disburse huge amounts of debt that could be avoided.
Blatantly Disingenuous
If these schools really cared about the debt loads of their students, they would not set their tuition at such a premium to state universities and community colleges. Period.
Misinformed
"Anonymous" is implying that a priviate institution should price the same as a government supported institution. In reality a government supported institution's budget per student is often much higher than 'these schools'. I don't think any private enterprise, non-profit, or otherwise, can compete on price with a taxpayer supported entity. The differentiators are where the value comes in, and a decision for each to make.
"VALUE"?!?!?!?
Let me see, the differentiator between my legitimate Bachelor's degree from Binghamton University (SUNY) and a piece of toilet paper from some proprietary trade school, is the "value" of such certificate vs. my four years of study? Here's a late-breaking newsflash:
The party is over. The student debt bubble is about to burst. Whether it's for-profit certificate mills or online blog chat room "universities," the fact of the matter is, these "institutions" have just marketed themselves better in the recent past in order to lend a sense of legitimacy to their "education." Twenty years ago, before the internet, most of these "schools" would have been advertising on the back of matchbooks.
Proprietary trade schools, same ole history.
20 years ago, those schools were involved in what some call "student loan farming". They were selling useless educations, and congress knew about it. Just find and read US Senate report 102-58, from the early 1990's.
Like you said, they are certificate mills. The one I attended, was sold twice, and is now owned by Corinthian colleges out of California. It is being marked as "everest" institute, and their recruitment practices are the same to day as they were back then. And they are still finding people to victimize.
I 2 different familys with whom I am friends. Each one had a student who went for the same subject, but one to the local commuinity college and got an associates degree, (2 years) and the other to Everest, (2 years). The one with the commuinty college got hired, the other one got a debt that she is now in default on, because the local companies told her the certificate from everest wasn't worth the paper it was written on.
Yet she like so many others believed the garbage these private trade schools were putting out.
Oh and remember, at those schools, if you get a job at mcdonalds flipping burgers after you graduate, you are then recoreded as being "placed" into the work force. And that is currently what Jamie is doing, trying to pay off her student loan while living with mom and dad. And shes been paying it off for 5 years now. She regrets ever taking out student loans. She has sworn off college, saying that if a company wants her to go, they will have to pay for it.
And that is what has happend to a lot of student that got suckered into going to a trade school. They get turned off to ALL higher education.
New Cause
Florida Community College at Jacksonville (FCCJ) recently delivered oral testimony in Denver at a public hearing held by the U.S. Dept. of Education on proposed negotiating rulemaking for the Title IV programs. Below is an excerpt from that testimony. Enough said.
"FCCJ sees many students who seek admission to our programs and want to transfer credits earned at other institutions. It is always difficult to tell some of these students that they need to take remedial classes before they can take college credit classes.
We had a student come to us with a special education high school diploma who had attended a for-profit university and was seeking admission into one of our selective programs. Although the student and their family told the university that the student had a special education diploma, the for-profit university accepted her into a college credit program. The student and their family took out large loans to pay the tuition and fees and the student made the academic honor roll by earning As and Bs, including an A in college algebra. This is despite later test results from FCCJ that placed the student at an elementary school level in mathematics, language and reading.
Since the student tested at an elementary school level and did not have a standard high school diploma or GED, they could not be considered for college level work. After counseling and more testing, the student opted to work on a GED and was readministered an easier assessment according to state guidelines for entry into the GED program. A 9.0 grade level is required to take GED classes, and the student tested overall at sixth grade seventh month. The student took adult studies classes to improve their scores so they could enter the GED program. The student was not able, however, to improve their scores so they could get a GED. Under state law, none of the student’s scores would have gained them entry into any of the certificate non-college credit programs operated by a public institution, much less entrance into college credit programs.
This student and their family took out $16,000 in student loans to pay for a two year degree from a for-profit university that clearly was interested only in the tuition money obtained from federally backed student loans. This student, who has been unable to find employment beyond an entry level job, will have great difficulty paying off the student loans they and their family took out.
Verification of a high school diploma with an accurate assessment of academic preparedness would have quickly brought to light the challenges this student faced. They are to be commended for their desire to better their education, but it is a travesty that they were encouraged to take out huge student loans when they had almost no chance of ever getting a job that would allow repayment. Tighter federal regulations are needed to prevent more aspiring students from facing a lifetime financial burden that they have little to no chance of retiring."
Victims of Student Loan farming - nothing new here.
" but it is a travesty that they were encouraged to take out huge student loans when they had almost no chance of ever getting a job that would allow repayment. Tighter federal regulations are needed to prevent more aspiring students from facing a lifetime financial burden that they have little to no chance of retiring."
This is nothing new. Student loan farming has been going on since the 1980's and congress KNOWS about it, yet still has done little to prevent it.
Special Education High School diploma. In the old days we called that a diploma for retarded kids (like my cousin Mark and Richie); and mind you I am not trying to insult or degrade them for who they are or anything like that. In their case, My uncle would NEVER dream of sending those kids to college. I sincerly hope that in this case, the student mentioned by your report was not in the same catagory as my cousins.
IF they are in the same catagory, then the parents are also to blame. Lets face it, some kids simply should NOT go to college.
But still, the fact is that these private colleges have been student loan farming (as its called) for years. If a student can show up for class, is "qualified" on paper to get the loan, and can sign their name, they can attend that school - for a fee. That fee being the student loan.
Congress has known about this and so has the US Dept of Education.
See US Senate report, 102-58 from somewhere around year 1994.
According to an article in the George town Law Journal, by Patrick F Linehan published in in March of 2001, what these proprietary schools did was they sold you a dream. And its the selling of the dreams that are the "student Loan Farming". These private schools are experts at it.
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