Consumer Group Calls for More For-Profit College Regulation
Feb 2nd, 2011 @ 7:57 PM by Amber Nelson
For-profit colleges received another poor review for their student loan practices in a recent study from the National Consumer Law Center’s Student Loan Borrower Assistance Project. The report titled “Piling It On: The Growth of Proprietary School Loans and the Consequences for Students” dings for-profit schools for creating private student loans with high fees and “predatory” terms, while criticizing the government for its lack of regulation of the situation.
The main problem seems to stem from the “90-10” law that requires for-profit schools to prove that at least 10 percent of their revenue comes from non-federal student loan sources. In order to fulfill that requirement, these schools have been making extremely expensive loans for students who need extra funding. Most of these loans will never be repaid, but they look good on paper.
“Institutional loan programs are aimed at attracting investors and keeping the federal aid pipeline flowing,” said Deanne Loonin, Director of NCLC’s Student Loan Borrower Assistance Project and author of the report. The students are the true losers in the deal. “Each failed loan represents an individual who cannot repay a debt and who may be facing aggressive collection tactics and damaged credit ratings,” Loonin said. “Piling more debt on students already buried in federal and third party private loans is hardly in the best interests of students even if it serves a company’s bottom line.”
The worst offenses of these school loans, according to the NCLC report, include sky-high interest rates, “hair-trigger default clauses” that send the loan into default for just one missed payment, and the requirement that students make payments on their loans while still in school (if they miss a payment, they may be essentially expelled from the college.)
The report calls for greater oversight for these proprietary school loan products, such as requiring schools to provide more detailed and accurate information about their own loans, and “regulators should review institutional loan programs for possible violations of unfair and deceptive consumer protection laws.”
Many for-profit colleges have also come under fire recently for not producing academic results and degrees commensurate with the amount of federal student loan aid they receive. Congress and the Obama Adminstration are currently reviewing and scrutinizing the for-profit college system to determine if new regulations are needed.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.
I wish to get this loan to start from where i stoped.
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