Student Debt Blame Game

Jordan Weissman over at the Atlantic wants to know which colleges are to blame for the explosive growth of student debt.  He notes that public disinvestment is driving up debt at public schools (which generate the lion’s share of debt because they educate the majority of students) but that for-profits have the highest rates of default.  And don’t worry, he points the finger at private non-profits that have failed to rein in costs, too.  Apparently, there is plenty of blame to go around.



Guest post: Kentucky AG takes on Spencerian College

SDEJ is proud to present a series of guest posts by our research fellow, Avie Zhao.  Avie is a 3L at American University Washington College of Law, where she is a member of the Business Law Review.  She is interested in business litigation, and is currently serving as a student attorney with DC Law Students in Court where she represents indigent clients in DC Superior Court.

For the next three weeks, she will highlight some of the actions state attorneys general are taking against for-profit colleges.  These actions situate higher education squarely within the realm of consumer law, a frame that raises fascinating questions about whether better information will lead to better outcomes for students.

Commonwealth of KY v. Sullivan d/b/a/ Spencerian College

Jack Conway, Attorney General of Kentucky and leader of a national bipartisan effort into examining abuses by for-profit colleges, is now investigating Spencerian College.  In January, 2013, Conway’s office brought a consumer-protection lawsuit against Sullivan University System, Inc., the parent company of Spencerian College.  The complaint alleges that Spencerian College knowingly provided false and misleading data regarding the percentage of students who were able to obtain employment.  Spencerian allegedly inflated the employment rates of graduates by as much as 40 % in its publications and on its website.  The complaint seeks injunctive relief, civil penalties, and recovery of investigative costs.

This lawsuit against Spencerian College marks the fourth lawsuit against for-profit colleges filed by Attorney General Conway’s office.  Previously, Attorney General Conway’s office has filed civil lawsuits against Daymar College, National College, and Education Management Corp. (parent company of Brown Mackie College).

Are you sure you want to put that question to a jury?

Did Globe University fire Dean Heidi Weber for poor performance or because she blew the whistle on its deceptive marketing practices?  Heidi Weber sued Globe, a for-profit institution (profiled here by Minnesota Public Radio) in 2011, claiming that Globe fired her in retaliation for raising questions about compliance with accreditation standards in its medical assistant program.  She alleged that they paid commissions to recruiters, inflated job statistics and failed to provide training opportunities promised to students.

This week, a Minnesota jury awarded the former dean of the medical assistant program almost $400,000 for lost wages and emotional distress.  Globe alleges that they fired her for performance, but jurors seemed swayed by evidence of malfeasance, such as the school’s failure to disclose that credits were not as transferable as they had represented and to tell students that promised externships were not available.  They also seemed disturbed by the fact that the school had knowingly enrolled students with felony records, even though those students would not be able to get jobs in a field that requires background checks.  Like the verdict last month against Vaderott, this verdict seems to tap into  deep public disgust with the for-profit industry, fueled at least in part by high default rates on student loans at these schools.









How are you paying for school?

The National Center for Education Statistics released the results of its 2011-2012 National Postsecondary Student Aid Study, a survey that measures how students and their families are paying for higher education.  The AP’s summary of the study (find it here in the Washington Post) emphasizes that increased federal grants are not enough to offset the double whammy of declining state and school aid and rising tuition.







Pay-it-Forward: The New Liberal Rorschach Test

Pay-it-Forward plans are sweeping through state legislatures like so many summer wildfires.  Monica Potts over at American Prospect explores if the hot-idea-with-a-catchy-title is a progressive alternative to unsupportable levels of student debt, or a wolf in sheep’s clothing that will only further erode support for public funding of higher education.  (SPOILER ALERT: Maybe both at the same time?)

Oregon has already passed a pilot program, and legislators in Washington state and and Ohio are pushing to follow suit.

By the numbers: Almost $1.2 trillion and counting

In late July, the CFPB released new data indicating that total student debt has increased by 20% since the end of 2011.  As of May, 2013, the Bureau estimates that the combined total of federal and private loans approached $1.2 trillion.  For those keeping track at home, that’s $101 trillion in federal loans and $165 billion in private loans.

Jury awards $13M to student decieved by for-profit college

When Jennifer Kerr enrolled in a medical training program at Vatterott College, recruiters told her that she would be qualified for $15/hour jobs as a medical assistant.  After taking our more that $27,00 in loans and taking classes for over a year, she learned that she was not even in the medical assistant program, and that she’d need to cough up another $10,000 and study for 30 more weeks to be qualified for the job she wanted.

The Kansas City Star reports that a Missouri jury found that the bait-and-switch amounted to a violation of the state’s Merchandising Practices Act, and awarded her actual damages for the amount of the loans.  Then, they awarded her $13M in punitive damages, exceeding what she had requested by $9M.  Apparently there’s some pretty deep anger lurking out there in the jury pool.

Could we see more state court cases like this one?  According to the National Center for Consumer Law, there are large gaps in state oversight of for-profit schools, but there are some signs that state regulators and courts are starting to take unfair and deceptive practices (known in consumer law parlance as UDAP) complaints more seriously.