5 of the biggest for-profit colleges accused of defrauding students
- For-profit schools across the country have closed in recent years due to fraudulent activity.
- The closures have left thousands of students in debt that they are still struggling to repay.
- Education Secretary Miguel Cardona canceled the billion dollar debt of about 72,000 students last week.
Last week, Education Secretary Miguel Cardona canceled $ 1 billion in student loan debt for approximately 72,000 defrauded borrowers.
The move, his first major as President Joe Biden’s education chief, came after a series of inquiries over the past decade of for-profit schools for engaging in fraudulent behavior linked to federal loans. The Corinthian colleges and the ITT technical institute were the main institutions linked to the canceled debt, but others were similarly charged, according to a series of legal settlements.
Since 2015, more than 200,000 students defrauded have filed requests for full forgiveness of their loans, and the Department of Education approved nearly 28,000 requests in the six-month period to January 2017. Yet under the former Secretary of Education President Donald Trump, Betsy DeVos, the processing of applications has slowed down considerably and in many cases stopped. Cardona said the new process would streamline debt relief determinations for about 72,000 borrowers whose applications have been approved to date.
Under Cardona’s new rule, anyone with a pre-approved claim is now eligible for a 100% student loan repayment. Those who have not submitted a claim but believe they have been defrauded can request a rebate on the borrower’s defense website.
“For more than four years, defrauded borrowers and their families have lived under a cloud of student debt that they shouldn’t have to pay off,” said Bobby Scott, Chairman of the Education and Labor Committee of the House of Commons. declaration. “I applaud the Biden administration for doing the right thing in healing these borrowers, and I can only imagine the mixture of joy and relief they feel today. This announcement is life changing for dozens. thousands of people across the country. ”
Here’s what Corinthian and ITT have done, along with other notable fraud investigations among other top for-profit schools:
Founded in 1995, the Corinthian Colleges once had more than 100 campuses across the country, with 74,000 students enrolled. In 2014, the Consumer Financial Protection Bureau accused she illegally collected high-interest private loans that she marketed to students.
The CFPB’s action coincided with the filing of more than 100 lawsuits in federal court over Corinthian’s practices, and the company lost federal funding due to deceptive marketing and lies about its rates. graduation, with high defaults being one of the outcomes. She filed for bankruptcy in 2015.
Senator Elizabeth Warren of Massachusetts discovered in a 2016 investigation that 80,000 former Corinthian students are still in one form or another of debt collection from the government.
When it closed, the company was responsible for $ 531 million in student loans.
ITT Technical Institute
In 2016, the government cut ITT’s access to millions of dollars in federal loans and grants, and the institution closed shortly thereafter, ending its 50-year history.
The Securities and Exchange Commission had took ITT to court in 2015 for misleading investors about high late payment rates and defaults on student loans.
Last year, 48 state attorneys general and the CFPB won more than $ 330 million in private student loan remission for 35,000 former ITT Tech students.
Education Corporation of America
Education Corporation of America was one of the biggest for-profit school closings after Corinthian and ITT Tech when it closed approximately 70 campuses across the country in 2018. A report published in 2018 by the Accreditation Council for Continuing Education and Training found that ECA schools failed to meet basic education quality standards, failed to report accurate information to students and regulators and had not prepared students for employment in their fields.
This came after the accreditor for ECA, the Accreditation Council for Independent Colleges and Schools (also the accreditor for Corinthian and ITT Tech), lost its federal recognition under the Obama administration in 2016.
The shutdown came with little warning, and Education Department spokeswoman Liz Hill said in a statement at the time that instead of “taking the next few months to shut down in an orderly fashion, the ACE took the easy way out and left 19,000 students scrambling to find a way to end it. “
The Department noted ECA students had the option of transferring to another school or requesting a loan release.
Education management company
At its peak, the Education Management Corporation operated 110 for-profit campuses across the country, and at its lowest, it filed for bankruptcy in 2018. After a series of federal investigations related to fraud, illegal recruitment of students and deceptive practices, EMC achieves a $ 99.5 million settlement with the government in 2015.
“This regulation should be a warning to other career colleges that we will not stand idly by while you illegally take advantage of students and taxpayers,” said then Education Secretary Arne Duncan. , in a press release. “The federal government will continue to work tirelessly with state attorneys general to ensure that all colleges follow the law.”
EMC also agreed to waive $ 100 million in student loans as part of the settlement.
The country’s largest for-profit chain, the University of Phoenix, agreed to a $ 191 million settlement with the Federal Trade Commission in 2019 over allegations of fraud and deceptive marketing.
Beginning in 2012, the university ran a series of announcements citing its partnerships with companies like the American Red Cross and Yahoo, but in reality those companies had no connection to the school and couldn’t help. at hiring. The Federal Trade Commission has filed a complaint in federal court, claiming the school had made “misleading claims” about the employment of military veterans.
The university did not recognize any wrongdoing in the regulations, and affected students were still required to repay their loans, although they were given the option to seek debt relief as part of the defense system. from the borrower to repayment, which allows borrowers to seek forgiveness of debt from fraudulent schools. In Cardona’s action last week canceling $ 1 billion in debt, he also said the Education Ministry was seeking to reform this ineffective system, as it existed under the old DeVos.