Why Are Some For-Profit Schools in Trouble with the Government?

Posted on December 28, 2016 at 12:00pm by
Will PSLF survive?

Not all for-profit schools are bad, but a few have built a reputation for misleading students with promises of lucrative careers. The following institutions have faced scrutiny from the Department of Education and Federal Trade Commission (FTC) for deceptive marketing tactics and other unethical business practices.

DeVry University just reached a $100 million settlement with the FTC over allegations its ads misled current and past students with inflated job placement and post-graduate income statistics.

According to the FTC, DeVry claimed 90 percent of its graduates were working in jobs related to their degrees. In one instance, DeVry counted a business administration graduate as “working in his or her field.” The graduate was working as a server at Cheesecake Factory. Graduates of the technical management program were counted as working their fields, despite the fact they were working as unpaid volunteers at a medical center.

Other for-profit schools have faced similar allegations. The Department of Education barred ITT Tech from using federal student loans for misleading job placement rates and lack of accreditation for its programs.

Perhaps the worst offenders are for-profit law schools, who charge students hundreds of thousands of dollars for tuition. These schools typically take students with low LSAT scores, who are less likely to pass the bar exam after graduation. A for-profit law school in Florida reported bar exam failure rates of over 50 percent!

Can Former Students of For-Profit Schools Discharge Their Loans?

Student loan borrowers who attended some for-profit schools may be able to seek loan forgiveness. Graduates and former students with federal loans may be able to take advantage of the Department of Education’s borrower defense to repayment rule. Under this rule, students can seek a tax-free discharge of their loans if the schools they attended have committed fraud under state law.

Students who attended these universities should also explore bankruptcy as an option. Although it is more difficult to file for bankruptcy on student loans, it is not impossible.