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We have more reporting in the works on burdensome student debt issues. Be on the lookout for more newsletters on that and other stories in our Hidden Debt Trap series. You can sign up for the newsletters here, as well as ask questions or send us comments.
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Dear readers,
One of the first stories in our Hidden Debt Trap series was about loans that for-profit colleges make directly to students, which lack the safeguards of federal student loans.
Last week, Consumer Financial Protection Bureau officials announced that, for the first time, they will begin examining those institutional loans and holding colleges accountable. The agency said it would update its procedures to include this category of loans in its reviews, out of concern that, too often, they are abusive. A spokesperson confirmed for us that the bureau has identified specific institutional loan programs to examine in the coming year.
The executive director of the Student Borrower Protection Center, Mike Pierce, said he views the CFPB’s announcement as a sign that the agency will prioritize investigating this type of debt.
The CFPB said it would look for several potentially problematic practices, including whether schools restrict students who are late in their payments from enrolling in classes or demand full repayment if a student withdraws. The agency will also look at whether schools withhold transcripts from students who owe the school money.
That’s what happened with Kashia Campbell, one of the people we wrote about in our article, also published in The New York Times. She was unable to take a certification exam after graduating from a patient care technician program at Florida Career College. The school refused to release her transcript, telling us that students must be current on their loan payments for them to do so.
Heather Pearce was told something similar by her school, the Art Institute of Pittsburgh. She recalled finding out she needed to finish paying off her tuition before she could get the degree she had earned. But Pearce didn’t have a loan from Art Institute; she had signed up for what they called a “payment plan.”
These payment plans that for-profit colleges offer students (and the companies that help them do so) led to another Hechinger story, published with the Washington Monthly. In it we showed that often the payment plans function essentially as an institutional loan, with interest rates or payments extending beyond graduation.
Under the new CFPB policy, arrangements such as payment plans would likely be treated the same as a loan and the same consumer protections would be required.
“That’s the most exciting part,” said Pierce. “Schools have been engaged in this game for a long time to just leave people on the hook for debt.”
And while the CFPB’s announcement focuses only on for-profit college, Pierce says that nonprofit and public institutions should take note as well, particularly when it comes to withholding transcripts for unpaid debt.
Secretary of Education Miguel Cardona has said that he thinks this practice should be stopped, following reporting by our Jon Marcus and GBH's Kirk Carapezza, also part of our Hidden Debt Trap series. Many more colleges and universities have dropped the practice, including, just last week, the State University of New York system. Some states already ban it, and at least six more have recently introduced legislation to ban it.
Sarah Butrymowicz
Senior Editor for Investigations
Meredith Kolodner
Senior Investigative Reporter
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