On a muggy June morning in 2019, administrators from for-profit colleges took their seats in breakout rooms on the second floor of the Hyatt Regency in downtown New Orleans. They had arrived for the Career Education Colleges and Universities trade association’s annual convention and were getting ready to choose from dozens of sessions. One promised tips on how to market to Millennials, another offered advice on how to handle legal threats from disgruntled students.
In fact, many of the colleges the companies have worked with, such as Dorsey College in Michigan and Ohio Business College*, have poor graduation rates and leave students earning no more than they would have with just a high school degree. The loans and payment plans help colleges charge more for an already expensive education, and the terms can be much more onerous than those of a federal loan.
Now, it turns out, many of these colleges that make money off students have an abiding partner in the little-known tuition financing companies. The colleges, in turn, market these payment plans to students as a convenient way to afford school. In reality, they can add to a student’s debt load with high interest rates or interest that accrues before a student has even graduated.
Pearce, now 37, said school officials told her that, to keep the amount from climbing further, the payments would be extended for up to two years after she graduated. Only then could she receive her degree. The tuition financing companies can help schools with more than just increasing student enrollment and easing debt collection paperwork. Some offer infusions of cash, which allow schools to comply with a federal regulation aimed at ensuring that for-profit colleges don’t make all their money from taxpayer dollars.
Another company, Education Loan Source, in a promotional flyer, asked directly: “Does your school have 90/10 challenges?” It went on to explain that it could help colleges with cash flow. He argues that the Consumer Financial Protection Bureau should play a larger role in overseeing both the for-profit colleges that offer these types of financial aid products and the companies that provide them with the money to do so.
Regulating them won't fix the problem of indentured servitude, but this will:
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