The government's Consumer Financial Protection Bureau has filed a potentially precedent-setting suit against ITT Educational Services, Inc., one of the nation's largest for-profit education companies.
As reported in the Chronicle of Higher Education, "The nation’s top consumer watchdog sued ITT Educational Services Inc. on Wednesday, accusing the for-profit college chain of pushing its students into high-cost private loans that it knew were likely to end up in default.The lawsuit, the first filed by the Consumer Financial Protection Bureau against a for-profit college, alleges that ITT offered its students zero-interest loans to cover the cost of their first year, knowing that they were unlikely to repay at the end of the year. When borrowers failed to do so, the company pressured them into taking out private loans to pay off their balance and finance their second year of education.The CFPB is seeking restitution for the victims, a civil fine, and an injunction against the company."ITT and another large for-profit education company, Corinthian Colleges, Inc., have been subjects of investigations by the federal agency for more than a year. The CFPB began investigating for-profit education companies shortly after the consumer protection agency was created in July 2011.
ITT, which heavily advertises and operates programs across the nation, has been closing campuses during the time when it has been the subject of the federal investigation. In 2013, ITT reportedly suspended enrollment at two campuses and merged five others into existing campuses.The new lawsuit has been hailed by attorneys who represent students harmed by predatory practices at colleges and trade schools. Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, told the Chronicle that the lawsuit was "a signal to the for-profit school industry that business as usual will no longer be tolerated." A copy of the lawsuit can be found here.
A substantial jury verdict against a for-profit school in Minnesota has been upheld by a judge. As reported
in the Huffington Post, a Minnesota judge not only refused to set aside a jury verdict of $395,000 against Globe University, but also awarded $500,000 in attorney's fees to be paid by the school.
The lawsuit was filed against the for-profit school by a former dean, Heidi Weber, who claimed she had been fired for complaining to the school about use of false job placement statistics and other misconduct.
The Huffington Post reported:"Weber's suit claimed that Globe had violated a state whistleblower law when it fired her from her job as dean of the school's medical assistant program. The Washington County, MN, jury concluded that Weber was indeed fired in 2011 for raising with management that Globe was providing false information to students about placement rates, starting salaries, and the school's accreditation; failing to provide adequate training for students; and improperly paying commissions to school recruiters. The jury awarded Weber $205,000 for lost wages and $190,000 for emotional distress.
"Globe runs 11 campuses in Minnesota, Wisconsin, and South Dakota and has more than 10,000 students. From 2011 to 2012, the company obtained more than $170 million from federal student aid. More than half of Globe's students drop out without graduating; on some campuses, three-quarters drop out."
Questionable representations about job placement are a recurring problem at for-profit colleges and trade schools. If you are an employee or student at a for-profit school with concerns about representations made to students at the school that you wish to discuss with one of the attorneys operating this College Watchdogs site, call us at 877-540-8333, or complete this form
A new survey of for-profit school students, alumni and employers gives the schools mixed results, with about a third of alumni rating their programs to be "well worth it." The survey conducted by Public Agenda and financed by the Kresge Foundation finds
that only thirty-seven percent of the alumni described their degrees as "well worth it," with thirty-two percent stating they "weren't really worth it" and another thirty percent stating it remains to be seen.
A coalition of 51 consumer groups have urged President Obama not to weaken a new rule aimed at measuring the gainful employment success of graduates of colleges, universities and trade schools that receive federal student loan funding. According to the Consumerist website
, the group is urging the Obama Administration to not weaken the proposed rule in the face of intense lobbying by the for-profit school industry to weaken it. The letter, a copy of which is here
, quotes the President's own earlier statements about the importance of protecting students from predatory practices by schools that mislead students into pursuing expensive programs with slim prospects for careers that would justify the heavy debt burden taken on by the students. In August 2013, President Obama said in part, " [T]here have been some schools that are notorious for getting students in, getting a bunch
of grant money, having those students take out a lot of loans, making big profits, but having really low graduation rates. Students aren’t getting what they need to be prepared for a particular field. They get out of these for-profit schools loaded down with enormous debt. They can’t find a job. They default. The taxpayer ends up holding the bag. Their credit is ruined, and the for-profit institution is making out like a bandit. That’s a problem."