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Tuesday, March 19, 2024
March 19, 2024

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In Our View: Let The Buyer Beware

A college education is vital these days, but some for-profit schools face scrutiny

The Columbian
Published:

While studies have shown that a college education is more important than ever for providing long-term financial security, the plight of students at Corinthian Colleges serves as a warning shot to consumers, as a lesson that you don’t always get what you pay for, and as a reminder of caveat emptor — let the buyer beware.

California-based Corinthian runs colleges under the banners of Everest, WyoTech, Heald College and QuickStart Intelligence, making it one of the nation’s largest for-profit college systems. As of last spring, it had about 72,000 students enrolled at more than 100 campuses in 26 states and Canada — including an Everest campus in east Vancouver. And its CEO, Jack Massimino, last year earned roughly $3 million, according to Forbes. In the world of for-profit colleges — which in previous generations would have been called vocational schools — Corinthian has built an empire. But the empire is crashing down upon itself.

On Tuesday, the Consumer Financial Protection Bureau filed a lawsuit in federal court accusing Corinthian of predatory lending practices. Among the accusations is that the company fabricated the job-placement statistics for graduates, and then used high job numbers to attract new students; that it would count graduates as being employed even if they were hired for a one-day job; that tuition was so high (as much as $75,384 for a bachelor’s program) that federal grants and loans couldn’t cover it, which led students to borrow from Corinthian’s in-house loan program; that those in-house loans had interest rates as high as 15 percent with a 6 percent origination fee, which led to a default rate of more than 60 percent; and that students who defaulted were locked out of the campus computer system or shamed by being removed from class.

“For too many students, Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair,” said Richard Cordray, director of the Consumer Financial Protection Bureau. For its part, Corinthian denied the allegations, saying the irregularities were isolated incidents that violate company policy.

The truth remains to be hashed out in court, yet the action by the CFPB does place a spotlight on two important issues: The role of for-profit colleges and the role of the Consumer Financial Protection Bureau. As we mentioned, a college education can be particularly important these days for those wishing to have a career and some financial stability throughout their lives. But that applies to a real college education. For years, many for-profit colleges have overpromised and underdelivered while providing students with educations of dubious value.

As for the CFPB, if the allegations against Corinthian — and other for-profit colleges that have come under scrutiny — are proven to be true, then the agency will have gone a long way toward justifying its existence and its methods. Created in 2011 as part of The Dodd–Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau has been under constant fire from Republicans in Congress. Dozens of bills have been proposed to alter how the bureau conducts its business, and Republicans in the Senate held up Cordray’s confirmation for two years. Republicans say the CFPB should have more accountability as it oversees and investigates Wall Street firms.

In truth, an independent Consumer Financial Protection Bureau — one whose budget is not beholden to Congress — is what’s best for consumers. As the allegations against Corinthian College remind us, buyers must always beware.

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