The subprime mortgage disaster caused the greatest loss of wealth from communities of color in modern American history. When banks misled African-American, Asian-American and Latino borrowers into taking on crushing home mortgage debt they could never hope to pay back, we called it what it was: predatory lending.
Today, many for-profit colleges have picked up where the subprime lenders left off. They are using the same promise of the American dream as bait to trap vulnerable students -- the vast majority of whom are women and minorities -- into underperforming schools and saddling them with a lifetime of debt.
The costs to these students and taxpayers are tremendous. In the 2008-09 school year, the federal government invested more than $4 billion in grant aid to for-profit institutions, quadrupling its investment from just a decade earlier.
Despite this increased federal assistance, tuition at for-profit institutions continues to far outpace other schools, costing more than five times as much as community colleges. These for-profit schools are gaming the system -- undermining the value of Pell Grants and forcing students to take out more loans.
As this industry's profits have soared, so have student-loan default rates. Students enrolled in for-profit schools represent just 10 percent of all undergraduate students, but they account for 44 percent of all student-loan defaults.
The industry says these schools offer opportunities to low-income students that they couldn't get elsewhere. But the debt being piled on students has devastating consequences, rendering them unable to receive credit to rent an apartment, buy a car or home, or receive future education loans. When these programs fail to deliver on their promises, students suffer for the rest of their adult lives and taxpayers are left on the hook.
The industry is targeting and taking advantage of women, minorities and low-income students. About one out of every four African-American, Asian-American, Latino and low-income students starts his or her postsecondary education at a for-profit institution. But these students' graduation rates are far below the rates for such students at public and nonprofit colleges. Just like the subprime mortgage lenders, this industry is profiting off the misery of our country's most vulnerable communities.
We believe the Department of Education took the right step in issuing a rule that holds these schools accountable for delivering on their education and career promises.
Under the rule, colleges that fail to demonstrate their programs are preparing students for "gainful employment" would risk losing their eligibility to participate in federal education grant and loan programs. This rule is not nearly as strong as it could be, but is a long-overdue and important step in protecting students and taxpayers from unscrupulous career-education programs.
While the rule does not include many important protections urged by civil rights, student, women's, labor and consumer organizations, it sends a strong message to many for-profit programs to start putting students first. Its focus has been narrowed to those programs that, after four years, still fall far short of delivering a quality education. Those programs that serve their students well, however, will easily pass muster under the rule.
All schools should be held accountable for the educations they provide, including for-profits that have flown under the radar of regulation for far too long. These rules respond to the Department of Education's recent investigation finding that some in the industry were promising students job placement upon completion of their programs and failing to deliver on that promise.
Once the industry got its cut from the government's financial aid program, it left its students without an adequate education, without a job and with an insurmountable debt load.
Just as Wall Street is fighting to undermine the Consumer Financial Protection Bureau and other financial reforms, the for-profit college industry is fiercely resisting this reasonable oversight.
It spent more than $4 million on lobbyists in the first quarter of 2011 alone and has engaged in a documented campaign of staging false support in the very minority communities it is victimizing.
Nothing should stand in the way of real gainful-employment rules. This industry has destroyed people's futures, cost our government billions of dollars and gotten rich by selling false hopes to those who most need a quality education. Now that the rule has been issued, we expect conscientious Members of Congress to resist the temptation to bow to pressure from this multibillion-dollar industry.
Rep. Mike Honda (D-Calif.) is a member of the House Budget and Appropriations committees and chairman emeritus of the Congressional Asian Pacific American Caucus. Follow Rep Honda on Facebook and Twitter. Wade Henderson is president and CEO of the Leadership Conference on Civil and Human Rights and the Leadership Conference Education Fund.
Follow Rep. Mike Honda on Twitter: www.twitter.com/repmikehonda
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I am not a big fan of protecting people from their own stupidity or their own financial ignorance, especially when it comes at the price of freedom and choice. There is no doubt that predatory lending is an issue but it is not a problem attributable to the lender. They, after all, should be allowed to charge whatever they want for their services, whether it is 100,000% credit cards or 5,000% school loans. The lender is the problem for accepting the terms. And where does protecting me from predation stop really?
Starbuck? I go to Starbucks and they charge me $5 dollars for coffee beans I know that they purchase for mere cents. Do I need protection from this predatory pricing?
Or what about Whole Foods? I buy an apple there, that grows for free on a tree and are readily available, perhaps like weeds. Should I be protected from my choice to buy an expensive apple?
Harvard? I mean that college is really expensive. Are they ripping me off?
In short, why does your judgment on what is good for me or what I want to purchase or borrow, and at what terms, take precedent over my own. Why are you a better at making choices for me, thus limiting my rights to make my own choices?
By the way, I think you paid too much for your suit. Should I protect you from that decision?
Kai
How would people react it Congress carved out another portion of the market, say, the Historically Black Colleges and Universities. They would find that those ~ 255 schools performed significantly WORSE than the average for-profit in graduation, job placement etc. Yet, I see no outrage from Congress or the DOE.
What is good for the goose.... Regulate the ENTIRE industry. Force all schools to disclose job placement, grad school placement and salary data. Instead of showing a bias against business, demonstrate real concern for students.
2) Community colleges and state colleges do offer online courses.
She's making quite a bit of money doing SOMETHING GOOD FOR SOCIETY. Yeah, they should forbid economics for leading to employment in the private sector that does NOTHING but enrich that said individual
As for Predatory student loans. Yes they will do anything to get you to sign up. They collect on the Pell Grant and if you default you owe the rest back for life. One way or another they get paid and it does not matter what they teach you. This happen to me 20 years ago on another Fly- By- Nite- school. Problem is when the little guy reports it, your state Reps. say "Sorry you graduated." The scam is full proof. This is why I personally have given up on our justice and system.
Google, Souther University in Louisiana a state school running a scam.
Make loans for education illegal.
The colleges will the be forced to lower tuitions, cut out the bloat in their operations and start operating in a financially responsible manner.
Have you ever wondered why college professors (Summers, Obama, etc.) are totally ineffective at fiscal management? Because in their environment what is applauded as good is actually horrendous.
I helped my sons with theirs.
What's your point?
The influence of profits and loans has corrupted the entire financial structure of our advanced education system. The only way to get it back to affordable is to cut out the corruption: get the banks off of our campuses.
We need to find ways to fund higher education properly on a state level. Not everyone is in a position to succeed at a 4-year institution right away, and if that is all that exists in your neighborhood, where else can you turn for a chance to learn.
Additionally, the curriculum needs to change. Let's think of these new candidates as untapped potential, not just work horses that should pick between cutting hair and putting up drywall. Also not going to work is promising a business certificate that "should" make them the next Goldman Sachs hotshot wall street broker. We need entrepreneurs, inventors, creators, new ventures, new idea people, and in my observation, this stuff can't be culled from books, but is inspired and waiting for discovery.
Bravo to the "creator" of the business model for these for-profit schools, that bottom line must be writing some sweet checks. But shame on the owners of these schools for not adopting a mission statement that serves the greater purpose of the community and this country.
This is outrageous and needs to be investigated.
Wasn't something similar said to justify the practices of the sub-prime mortgage lenders, that they were simply facilitating the "American Dream" for those who couldn't qualify for a traditional mortgage? That worked out really well, didn't it?
Excellent post. Time to stop the masquerade.
If they can't pay it back, or find employment, you will be on the hook for another person's debt.
If you do not know what cosigning means and are cosigning there is a process called evolution that needs to take its course.
I teach at a junior college, and have seen the same thing. Several students in my developmental (remedial) math courses have "degrees" and tens of thousands of dollars in debt from one particular for-profit school.