IBJNews

For-profit colleges make costly loans, report says

Back to TopCommentsE-mailPrintBookmark and Share

For-profit colleges are making “predatory” loans to students, knowing that more than half the debt won’t be repaid, a consumer group says.

Companies including ITT Educational Services Inc., DeVry Inc and Career Education Corp. are making loans that have fixed interest rates as high as 12 percent, according to a report released Monday by the Boston-based National Consumer Law Center. Many of the loans come with “high costs” and “predatory terms,” the group said.

The research follows calls in Congress and at the U.S. Education Department to boost regulation of government aid flowing to for-profit colleges, whose federal-loan default rates are three times those of private, not-for-profit institutions. Under U.S. rules, for-profit colleges must fund at least 10 percent of their operations from sources other than government financial aid programs. Companies are making these “institutional loans” to remain eligible for U.S. funds, the report said.

“Institutional loan programs are aimed at attracting investors and keeping the federal aid pipeline flowing,” Deanne Loonin, the report’s author and a center lawyer, said in a statement. “Each failed loan represents an individual who cannot repay a debt and who may be facing aggressive collection tactics and damaged credit ratings.”

Carmel-based ITT Educational charges origination fees up to 10 percent, with variable interest rates as high as the prime rate plus 11.5 percent and capped at 25 percent, according to the report.

For-profit colleges offer institutional loans when private financial companies aren’t willing to lend to their students, Harris Miller, president of the Association of Private Sector Colleges and Universities, a Washington-based industry group, said.

“When students can’t get enough to pay for their education through a combination of federal grants and loans, and appear to be good candidates for an education, the schools are willing to loan them money, even though there’s a risk,” Miller said.

The report said institutional loan programs “had high interest rates and origination fees, particularly for less creditworthy borrowers.” In some cases, for-profit colleges use third parties to make the loans and then guarantee the debt, the report said.

A loan program at Downers Grove, Ill.-based DeVry charges 12 percent interest, with no origination fees, the report said. Hoffman Estates, Ill.- based Career Education charges 8 percent interest on institutional loans for most students, the report said.

ITT Educational uses a third party for its private student loans, and rates and fees are based on market conditions, the borrower’s creditworthiness and other considerations, said Lauren Littlefield, a company spokeswoman.

DeVry’s loan program “is a valuable service for our students,” Joan Bates, a spokeswoman, said in an e-mail. “It is similar to installment plans offered by traditional colleges and universities.”

As of June 30, the end of DeVry’s fiscal year, less than a third of students carried a balance from the program into the next year, with an average of less than $1,000, Bates said.

Mark Spencer, a spokesman for Career Education, didn’t return a telephone call

DeVry shares rose $1.54, or 3 percent, to $53.65 each in Tuesday trading. ITT gained 58 cents, or less than 1 percent, to $66.42, while Career Education climbed 71 cents, or 3.2 percent, to $23.15

The Bloomberg U.S. For-Profit Education Index of 13 publicly traded companies has fallen 21 percent over the past 12 months.


 

ADVERTISEMENT

  • for-profit colleges
    Protecting students from graduating with heavy debt and few job prospects is something the U.S. Department of Education hopes to change. It recently released stricter gainful employment rules that would bar federal tuition funding to for-profit schools whose students graduate are not able to pay back hefty federal loans. Students at for-profit institutions represent just 12 percent of all higher education students but they account for 46 percent of all student loan dollars in default, according to the Department of Education.
    http://cashadvancesus.com/federal-aid-for-for-profit-colleges-are-being-delayed/
  • Just Like the Banks
    These outfits may very well charge "predatory" rates of 12% or more on their loans. How does this differ from what America's biggest banks do with credit cards? And, at least in the past, with some home mortgages.

    Once upon a time this would have been controlled by state usury statutes. But in the early 1980s, Citicorp got the law changed so states couldn't regulate interest rates on loans. That law remains on the books.

    What we need -- but what the Obama Administration won't do because it's in the pocket of big banks -- is to reestablish those usury statutes.
  • Duh!
    As a 19 year old kid looking at going into CAD design, I looked at ITT. Even as a young kid, I could see the costs and fees were outlandish. Checked out IVY Tech and it was a much better deal, plus credits would transfer to a 4 year school.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Uh, sorry Johnnie, but you are incorrect. Despite the assertions by yourself and various defenders and captains, sports attendance is NOT off significantly at most sporting events in the US. Variances in attendance has been in the range of single digits, both + & - for years now. MLB has had most of its best overall attendance nubers in the last decade, and that trend has been consistent for most major sporting events. The number one issue cited by most fans when asked about attendance is the overall cost of attending. The presence of HD and big screen televisions in home doesn't even register, as a factor for not attending an event. VALUE in the product is the key, and apparently is something lacking in the current ICS. What other explanation is there when with what is routinely touted as the "best" racing on the planet, fans are staying away in DROVES. A "close" title battle into the last event at Fontana, with the "cars and stars" of the ICS, and who showed up? MAYBE 8K. Sorry, but HD TV isn't to blame for that kind of fan apathy.

  2. Do you need finance to establish your business ? Are you interested in getting a loan at 3% from our private company? If so please Email: suntrust_oil@blumail.org

  3. If she was worth the $ the public outcry over direct tv dropping them would have kept them on their dishes as we have seen with other companies. I too quit watching channel 13 after she showed up since I left channel 8 because of her all show rather than production results. When Randy on 8 corrected her she had a big head and incorrectly challenged his correction for pronunciation of a city. Other antics while she matures was too much for me with her very inaccurate forecasts. All the forecasters were predicting rain until Thursday except Chris. They predicted sunny on Thursday but instead of rain until Thursday upon which the sun would finally make it out in full glory Chris was right on the money just as I too predicted looking at the radar on weather.gov. One thing I love about Angela is the fear you can see in her every time it thunders in the winter. It far exceeds the entertainment value of her body language (high heel noise drags, depression, etc) when her forecasts are so incorrect. Her hair stands on end, you have to see it!!!

  4. Good Day, Apply For A Loan I am Mr Fernadez Antonio, a private Loan lender and a cooperate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and cooperate bodies at 3% interest rate We offer any kind of loans. email us via fernadezloaninvest@outlook.com LOAN APPLICATION FORM First name:......................... Middle name:......................... Last name:........................................ Date of birth (yyyy-mm-dd):....................... Gender:........................................... Marital status:................................... Total Amount Needed............................... Loan Duration.................................... Address:.......................................... City:............................................. State/province:................................... Zip/postal code:.................................. Country:.......................................... Phone:............................................ Fax:.............................................. Mobile/cellular:.................................. Monthly Income.................................... Occupation:....................................... Best Regard, Mr Fernadez Antonio.

  5. i will love to share my testimony to you all the people in world i got married to my husband about 2 year ago we start having problems at home like we stop sleeping on the same bed,fighting about little things he always comes home late at night,drinking too much and sleeping with other women out side i have never love any man in my life except him. he is the father of my child and i don't want to loose him because we have worked so hard together to become what we are and have today .few month ago he now decided to live me and the kid,being a single mother can be hard sometimes and so i have nobody to turn to and i was heart broken.i called my mom and explain every thing to her,my mother told me about DR.okoro how he helped her solve the problem between her and my dad i was surprise about it because they have been without each other for three and a half years and it was like a miracle how they came back to each other. i was directed to DR. okoro on his email:okorospell@gmail.com and explain everything to him,so he promise me not to worry that he will cast a spell and make things come back to how we where so much in love again and that it was another female spirit that was controlling my husband he told me that my problem will be solved within two days if i believe i said OK So he cast a spell for me and after two days my love came back asking me to forgive him i Am so happy now. so that why i decided to share my experience with every body that have such problem contact Dr okoro the great spell caster on his email addresses spellcasterforlove@outlook.com

ADVERTISEMENT