The Consumer Financial Protection Bureau estimates that 130,000 private student loans were initiated by Corinthian students from July 2011 to the present, with an outstanding balance of $569 million.
This post comes from Bob Sullivan at partner site Credit.com.
One of the nation’s largest for-profit schools engaged in a lengthy series of deceptive acts to entice poor students to enroll and take out pricey student loans, the Consumer Financial Protection Bureau alleged this week, saying the school had a “pervasive culture … that allowed employees to routinely deceive and illegally harass” student borrowers.
Corinthian Colleges Inc., which had 74,000 students in March of this year, went so far as to create sham jobs to artificially inflate job placement rates, the CFPB said. It also encouraged students to take out 15 percent interest rate loans to pay tuition that ranged from $33,000 to $75,000; forced students to pay back the loans while in school, an unusual practice; and shamed some by pulling them out of class if they were behind on payments, the bureau said.
The CFPB is suing Corinthian, seeking more than $500 million in relief for borrowers.
The CFPB estimates that 130,000 private student loans were initiated by Corinthian students from July 2011 to the present, with an outstanding balance of $569 million. Meanwhile, 60 percent of those loans landed in default within three years.
“For too many students, Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair,” said CFPB director Richard Cordray. “We believe Corinthian lured consumers into predatory loans by lying about their future job prospects, and then used illegal debt collection tactics to strong-arm students at school. 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.”
Student loans can have a huge impact on your credit standing, especially if you miss payments or default on your loans like many Corinthian borrowers did. (You can see how your student loans are affecting your credit scores for free on Credit.com.)
Corinthian did not immediately respond to a request for comment.
Most Corinthian students come from “economically disadvantaged backgrounds,” the CFPB said, with many being the first in their families to attend college.
The school is no stranger to controversy. In June, the U.S. Department of Education delayed Corinthian’s access to federal student aid dollars because of reports of misconduct. In July, the school announced it had accepted a monitor appointed by the Department of Education to oversee the company’s compliance with an operating agreement it had signed with the agency.
The publicly traded company has more than 100 school campuses across the country. It operates schools under the names Everest, Heald and WyoTech.
Allegations in the CFPB lawsuit include:
- Sham job placement rates. The CFPB alleges that this included creating fictitious employers and reporting students as being placed at those fake employers.
- One-day-long “careers.” Corinthian promised students rewarding careers, but counted a “career” as a job that merely lasted one day, with the promise of a second day.
- Pay for placement. The CFPB alleges the school inflated advertised job placement rates by paying employers to temporarily hire graduates.
- Craigslist career counseling. Students failed to get the career counseling they expected, the CFPB said. The limited career services included distributing generally available job postings from websites like Craigslist.
- Tuition at the school could be five times the price of similar degrees at other institutions, the CFPB said. To pay for it, the schools encouraged students to take out what it called “Genesis loans.” The Genesis loan interest rate was about 15 percent with an origination fee of 6 percent.
- Students who fell behind on loan payments while in school were blocked access to school computer terminals and other academic resources; some were prevented from receiving their books for their next classes.
The CFPB is seeking court relief for students who owe the school money, and issued a special note with instructions for them, which can be found here.
More from Credit.com:
- Strategies for Paying Off Student Loan Debt
- How to Consolidate Student Loans
- How Long Will You Be Paying Your Student Loans?