Journalists Investigate How 'For-Profit' Colleges Have Left Students in Debt

In separate investigations, PBS' Frontline and WCNC-TV in Charlotte, N.C., aired stories about "for-profit" colleges and trade schools that leave students with a mountain of debt and worthless degrees. Recently, The New York Times and ProPublica also produced stories on the topic.

Frontline reported:

"Graduates of a for-profit school -- a college nursing program in California -- tell Frontline that they received their diplomas without ever setting foot in a hospital. Graduates at other for-profit schools report being unable to find a job, or make their student loan payments, because their degree was perceived to be of little worth by prospective employers. One woman who enrolled in a for-profit doctorate program in Dallas later learned that the school never acquired the proper accreditation she would need to get the job she trained for. She is now sinking in over $200,000 in student debt. "

For-profit schools, especially trade schools, often all but promise that graduates will find work after graduation. But Frontline found that 44 percent of students who defaulted on government loans within three years of graduation attended one of those "for-profit" schools.

The New York Times said

"At institutions that train students for careers in areas like health care, computers and food service, enrollments are soaring as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed $30,000 a year.

"But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their degree programs, selling young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty. And the schools are harvesting growing federal student aid dollars, including Pell grants awarded to low-income students."

WCNC focused on trade schools. Investigative reporter Stuart Watson reported that even at a trade school, students can accumulate up to $37,000 a year in debt. Students at one arts institute that Watson examined are defaulting at a rate five time higher than at nearby UNC. Watson reported:

"It's not just the debt these students were upset about -- it's the promise of a job.

"The school says almost nine in 10 grads find a job in their field. Experts say those numbers are suspect.

" 'The job placement data is self-reported and notoriously inaccurate,' said Deanne Loonin with the National Consumer Law Center. "

I e-mailed Watson some other questions about this investigation to find out what journalists can learn from it. You can read his edited responses below.

Al Tompkins: You say this is like "subprime goes to college." What do you mean?

Stuart Watson: Trade schools are recruiting unemployed workers as well as recent high school grads (and even some dropouts) in record numbers. Many secure Pell Grants and federal student loans doled out by Sallie Mae -- not to mention private loans at higher interest rates.

Lenders expect students to repay the loans with the promise of a job with a salary that would allow the students to repay them. But degrees from some for-profit trade schools do not command those kind of salaries. So, like the housing crisis, borrowers are defaulting and lenders are stuck with bad paper. "

Why are you so focused on trade schools as opposed to say, four-year schools?

Watson: Department of Education statistics clearly show that loan amounts and default rates are much higher at for-profit schools than at private and state schools. A Government Accountability Office report released last September on so-called "proprietary" schools cited those stats. And by the way, some "trade schools" are four year schools.

Is it true that even when students default on a loan and file bankruptcy that they still have to repay the loan?

Watson: Yes, but as I understand it, the standard differs depending on whether the loan is a federal loan or a private loan. Deanne Loonin, an attorney at the National Consumer Law Center, tried to explain this to me. She said the bankruptcy standard for dismissing a private loan is called "undue hardship."

Students as she describes them would basically have to show they had no hope of ever repaying the debt. Rep. Steve Cohen of Tennessee just chaired a hearing (April 22) of a judiciary subcommittee on his bill that would allow students to declare bankruptcy and relieve the debt. (HR 5043 -- the "Private Student Loan Bankruptcy Fairness Act of 2010")

Opponents argue that allowing students to get out of debt would make it too easy to run to the bankruptcy court and would dry up the market for private loans. Supporters say proprietary schools are taking advantage of naive students fresh out of high school and saddling them with a crushing debt load, which they will have no hope of repaying.

What advice would you give to other journalists who might want to look into this story?

Watson: It's very easy to find the players on a national level and less easy to find students. I think like a lot of consumer issues, complainants don't always know where to turn. The Better Business Bureau and the Consumer Protection Section of our attorney general's office were not exactly flooded with complaints. You can try the consumer complaint websites but they don't always have victim's names, may not be accurate and they aren't always up to date.

There is a group, the Project on Student Debt, in California but they may not always know of students in every locale. We just had a couple of students contact us and I hope we have more in the future. Like a lot of subjects, you might float the issue out there and ask for calls.

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    Al Tompkins

    Al Tompkins is The Poynter Institute’s senior faculty for broadcasting and online. He has taught thousands of journalists, journalism students and educators in newsrooms around the world.


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