An investigation into student- financing practices of for-profit colleges is being expanded by the Consumer Financial Security Bureau and state attorneys common, according to government officials and regulating filings.
The Wsj reported that Jack Conway, Kentucky Attorney General and chair of a group of 32 state attorney generals investigating such colleges, said that states are working with the CFPB to bud out unfair or otherwise deceptive pupil lending practices.
“ I expect in 2014 you’ ll see action by the CFPB in coordination with states in coming months, ” Conway told the WSJ.
Corinthian Colleges, along with ITT Educational Services, disclosed in recent regulatory filings that the CFPB is considering lawful action over the companies’ lending methods. A CFPB spokeswoman declined to comment on this claim.
According to the WSJ, the probe “focuses in part on loans provided by outside investors through the colleges as well as on the particular for-profit-colleges’ job-placement promises, ramping upward pressure on an industry that receives about $30 billion annually in taxpayer-funded federal grants and loans. ”
The federal government crackdown is occurring during a larger battle between federal regulators and the for-profit-school sector. That sector has been belittled by both the Obama administration and Democratic lawmakers for “allegedly charging high-interest loans without fully disclosing the particular loan terms and exaggerating students’ future earnings potential, ” based on the WSJ.
The larger showdown has set in motion probes by the Securities and Exchange Commission and Proper rights Department. In addition , the WSJ reported that the Education Department is also “moving forward with a plan to deny federal government student-aid dollars to vocational programs at for-profit and community colleges if their former students defaulted at high rates or had higher debt levels relative to their earnings after graduating. ”
ITT and Corinthian disclosed the particular SEC probes last year. And this previous September Corinthian disclosed a Proper rights Department investigation “into whether the company manipulated attendance records to retain federal government education funds. The probe also looked at the company’ s prospecting and financial-aid practices, ” the particular WSJ reported.
CFPB officials appear focused on whether college students are adequately informed of loan risks. “ We’ ve seen instances when some of the for-profit schools are usually anticipating as much as a 50% default rate on loans they make to students, ” CFPB Director Richard Cordray said in an interview having a student-advocacy group in 2012. “ They’ re not telling the college students that, but they are disclosing that information to their investors. ”
“ We believe that all of our actions were lawful and we plan to vigorously defend ourselves, ” an ITT spokeswoman said of the CFPB and SEC probes. A Corinthian spokesman said all students are supplied with detailed descriptions of the terms of their loans and are told “ clearly and in writing that no student or graduate can be guaranteed employment. ”
Corinthian was also sued in October by California Attorney General Kamala Harris. The lawsuit cited internal Corinthian documents saying the company targets college students who are “ isolated” or “ individuals with low self-esteem, ” by means of TV ads and telemarketing advertisments.
ITT has said it has “ not identified any kind of third-party private education loan programs for our students’ use since 2011, ” according to an ITT speaker said. A Corinthian spokesman said loans made through its system are “ well-below” market prices, with a maximum rate of 9. 9%.
According to the WSJ, for-profit colleges account for a increasing share of federal financial aid in recent years, increasing from 11% of federal government student loans in 2000 to 23% in 2010. These estimates are based on a written report by the Center for Analysis of Postsecondary Education and Employment.
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