For-Profit College to Forgive $1.6 Million in Student Debt

Inside Subprime: July 10, 2019

By Lindsay Frankel

Massachusetts Attorney General Maura Healy has announced that a for-profit college and its parent company will forgive $1.6 million in student loan debt in a settlement. The for-profit college allegedly failed to provide students with required disclosures about job placement, graduation rates, and loan repayment. In addition, the settlement prohibits the institution from operating in the state of Massachusetts.

“[The college] misled students and deprived them of the information they needed to make informed choices about their education,” said AG Healey. “This settlement will provide students the relief they deserve and stop this predatory for-profit school from doing business in our state.”

The college can no longer recruit Massachusetts students, even for online or remote programs. Additionally, the parent group will pay the Commonwealth $100,000, relieve $1.6 million in student loan debt, and make every attempt to remove related negative information from students’ credit reports.

In 2014, the Attorney General’s office enacted unprecedented state regulations requiring for-profit schools to provide students with certain information prior to enrollment in an effort to prevent abuses. Essentially, for-profit colleges can’t use false advertising to convince students that a low-quality education program will yield lucrative opportunities post-graduation. The Attorney General’s office also issued an advisory warning students to be cautious of for-profit programs.

That’s because students who go into debt to finance their for-profit education end up earning less overall than the average high school graduate, federal data revealed. Graduates of for-profit certificate programs also have more trouble finding jobs and paying down their student loan debt.

That’s true for students at the parent group’s campuses; according to disclosures released in 2018, job placement rates were below 60 percent for around one third of its programs. Students report feeling swindled by the sales pitch presented to them, especially after graduating and discovering poor outcomes. Earnings were not as high as promised for graduates, either, and students needed to spend more than 30 percent of their discretionary income on debt repayment in 2017.

“We do not believe the allegations are accurate or reflective of the experience of our students,” the parent group Vice President wrote in an email.

To make matters more complicated for prospective students, the Department of Education recently “announced that it would rescind an Obama-era rule designed to protect students from abuses by for-profit colleges. The Department is instead providing online resources and placing the burden on students to evaluate the quality of education and outcomes tied to for-profit programs.

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