SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
For-Profit College Chain Sued by Feds for Predatory Lending Scheme
"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."
Sep 17, 2014
The Consumer Financial Protection Bureau on Tuesday sued for-profit college chain Corinthian Colleges for its operation of an elaborate "predatory lending scheme" that ensnares tens of thousands of students in costly private loans and bullying collections tactics.
Corinthian, one of the largest for-profit, post-secondary education companies in the country, owns the Everest Institute, Everest College, WyoTech and Heald colleges, which together have a total of over 70,000 students. The company attracts students from low-income backgrounds by falsely advertising their schools as a path to good careers and stable finances, the Bureau charges. This includes falsification of job placement rates by "creating fictitious employers and reporting students as being placed at those fake employers," as well as paying employers to hire graduates for temporary periods of time without notifying the graduate of the exchange of money or the short-term nature of the job, according to a Bureau statement.
While nearly 90 percent of Corinthian's revenue comes from federal loans and grant, for-profit colleges are required by federal law to obtain at least 10 percent of their funding from private sources. This is where the private loan program comes in. The lawsuit contends that Corinthian charges exorbitant tuition rates of up to $75,000 for a bachelor's degree, at many times the cost of parallel programs at public schools. By charging well beyond the federal aid limits, Corinthian forces students into expensive private loans, known as "genesis loans," which Corinthian ends up owning. This satisfies the requirement for 10 percent private funding.
Students are mandated to start repaying genesis loans while still enrolled in school at more than double the federal interest rate. With a high default rate of 60 percent of students within three years, the company then uses aggressive and illegal tactics to collect debts. This includes taking students out of class, denying them their education, and withholding diplomas.
According to the Bureau, students took out approximately 130,000 of these private loans for expenses at Corinthian's Everest, Heald, and WyoTech colleges, with a total outstanding balance of $569 million. The lawsuit is seeking relief for these students. "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," said Bureau Director Richard Cordray.
Corinthian already faces a litany of lawsuits and investigations by 20 states, the Consumer Financial Protection Bureau, the U.S. Department of Justice, and the Securities and Exchange Commission. As part of a settlement with the Department of Education in July, the company agreed to sell or close a majority of its schools in the United States. However, the DOE is allowing Corinthian Colleges to continue in some capacity despite calls to dismantle the schools entirely. Furthermore, Corinthian and the Department agreed to "work together to establish a reserve fund" of at least $30 million to be used for student refunds. But according to the Bureau's lawsuit, "To date, no reserve fund has been established."
Meanwhile, over the past few days, Occupy Wall Street activists with the Rolling Jubilee Fund of Strike Debt have purchased and eradicated $3.8 million in debt from students enrolled in Corinthian's Everest College.
An Urgent Message From Our Co-Founder
Dear Common Dreams reader, It’s been nearly 30 years since I co-founded Common Dreams with my late wife, Lina Newhouser. We had the radical notion that journalism should serve the public good, not corporate profits. It was clear to us from the outset what it would take to build such a project. No paid advertisements. No corporate sponsors. No millionaire publisher telling us what to think or do. Many people said we wouldn't last a year, but we proved those doubters wrong. Together with a tremendous team of journalists and dedicated staff, we built an independent media outlet free from the constraints of profits and corporate control. Our mission has always been simple: To inform. To inspire. To ignite change for the common good. Building Common Dreams was not easy. Our survival was never guaranteed. When you take on the most powerful forces—Wall Street greed, fossil fuel industry destruction, Big Tech lobbyists, and uber-rich oligarchs who have spent billions upon billions rigging the economy and democracy in their favor—the only bulwark you have is supporters who believe in your work. But here’s the urgent message from me today. It's never been this bad out there. And it's never been this hard to keep us going. At the very moment Common Dreams is most needed, the threats we face are intensifying. We need your support now more than ever. We don't accept corporate advertising and never will. We don't have a paywall because we don't think people should be blocked from critical news based on their ability to pay. Everything we do is funded by the donations of readers like you. When everyone does the little they can afford, we are strong. But if that support retreats or dries up, so do we. Will you donate now to make sure Common Dreams not only survives but thrives? —Craig Brown, Co-founder |
Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
Sarah Lazare
Sarah Lazare is the editor of Workday Magazine and a contributing editor for In These Times. She is a former Staff Writer at Common Dreams. She comes from a background in independent journalism for publications including The Intercept, The Nation, and Tom Dispatch.
The Consumer Financial Protection Bureau on Tuesday sued for-profit college chain Corinthian Colleges for its operation of an elaborate "predatory lending scheme" that ensnares tens of thousands of students in costly private loans and bullying collections tactics.
Corinthian, one of the largest for-profit, post-secondary education companies in the country, owns the Everest Institute, Everest College, WyoTech and Heald colleges, which together have a total of over 70,000 students. The company attracts students from low-income backgrounds by falsely advertising their schools as a path to good careers and stable finances, the Bureau charges. This includes falsification of job placement rates by "creating fictitious employers and reporting students as being placed at those fake employers," as well as paying employers to hire graduates for temporary periods of time without notifying the graduate of the exchange of money or the short-term nature of the job, according to a Bureau statement.
While nearly 90 percent of Corinthian's revenue comes from federal loans and grant, for-profit colleges are required by federal law to obtain at least 10 percent of their funding from private sources. This is where the private loan program comes in. The lawsuit contends that Corinthian charges exorbitant tuition rates of up to $75,000 for a bachelor's degree, at many times the cost of parallel programs at public schools. By charging well beyond the federal aid limits, Corinthian forces students into expensive private loans, known as "genesis loans," which Corinthian ends up owning. This satisfies the requirement for 10 percent private funding.
Students are mandated to start repaying genesis loans while still enrolled in school at more than double the federal interest rate. With a high default rate of 60 percent of students within three years, the company then uses aggressive and illegal tactics to collect debts. This includes taking students out of class, denying them their education, and withholding diplomas.
According to the Bureau, students took out approximately 130,000 of these private loans for expenses at Corinthian's Everest, Heald, and WyoTech colleges, with a total outstanding balance of $569 million. The lawsuit is seeking relief for these students. "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," said Bureau Director Richard Cordray.
Corinthian already faces a litany of lawsuits and investigations by 20 states, the Consumer Financial Protection Bureau, the U.S. Department of Justice, and the Securities and Exchange Commission. As part of a settlement with the Department of Education in July, the company agreed to sell or close a majority of its schools in the United States. However, the DOE is allowing Corinthian Colleges to continue in some capacity despite calls to dismantle the schools entirely. Furthermore, Corinthian and the Department agreed to "work together to establish a reserve fund" of at least $30 million to be used for student refunds. But according to the Bureau's lawsuit, "To date, no reserve fund has been established."
Meanwhile, over the past few days, Occupy Wall Street activists with the Rolling Jubilee Fund of Strike Debt have purchased and eradicated $3.8 million in debt from students enrolled in Corinthian's Everest College.
Sarah Lazare
Sarah Lazare is the editor of Workday Magazine and a contributing editor for In These Times. She is a former Staff Writer at Common Dreams. She comes from a background in independent journalism for publications including The Intercept, The Nation, and Tom Dispatch.
The Consumer Financial Protection Bureau on Tuesday sued for-profit college chain Corinthian Colleges for its operation of an elaborate "predatory lending scheme" that ensnares tens of thousands of students in costly private loans and bullying collections tactics.
Corinthian, one of the largest for-profit, post-secondary education companies in the country, owns the Everest Institute, Everest College, WyoTech and Heald colleges, which together have a total of over 70,000 students. The company attracts students from low-income backgrounds by falsely advertising their schools as a path to good careers and stable finances, the Bureau charges. This includes falsification of job placement rates by "creating fictitious employers and reporting students as being placed at those fake employers," as well as paying employers to hire graduates for temporary periods of time without notifying the graduate of the exchange of money or the short-term nature of the job, according to a Bureau statement.
While nearly 90 percent of Corinthian's revenue comes from federal loans and grant, for-profit colleges are required by federal law to obtain at least 10 percent of their funding from private sources. This is where the private loan program comes in. The lawsuit contends that Corinthian charges exorbitant tuition rates of up to $75,000 for a bachelor's degree, at many times the cost of parallel programs at public schools. By charging well beyond the federal aid limits, Corinthian forces students into expensive private loans, known as "genesis loans," which Corinthian ends up owning. This satisfies the requirement for 10 percent private funding.
Students are mandated to start repaying genesis loans while still enrolled in school at more than double the federal interest rate. With a high default rate of 60 percent of students within three years, the company then uses aggressive and illegal tactics to collect debts. This includes taking students out of class, denying them their education, and withholding diplomas.
According to the Bureau, students took out approximately 130,000 of these private loans for expenses at Corinthian's Everest, Heald, and WyoTech colleges, with a total outstanding balance of $569 million. The lawsuit is seeking relief for these students. "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," said Bureau Director Richard Cordray.
Corinthian already faces a litany of lawsuits and investigations by 20 states, the Consumer Financial Protection Bureau, the U.S. Department of Justice, and the Securities and Exchange Commission. As part of a settlement with the Department of Education in July, the company agreed to sell or close a majority of its schools in the United States. However, the DOE is allowing Corinthian Colleges to continue in some capacity despite calls to dismantle the schools entirely. Furthermore, Corinthian and the Department agreed to "work together to establish a reserve fund" of at least $30 million to be used for student refunds. But according to the Bureau's lawsuit, "To date, no reserve fund has been established."
Meanwhile, over the past few days, Occupy Wall Street activists with the Rolling Jubilee Fund of Strike Debt have purchased and eradicated $3.8 million in debt from students enrolled in Corinthian's Everest College.
We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.