“Shameful. That’s the only word for the University of Phoenix’s conduct if the allegations described in today’s Higher Ed Watch and reported in the Chronicle are true. In a nutshell: Back in the early 90’s there were a series of scandals involving unscrupulous for-profit colleges that tricked students into borrowing lots of money through federal loan programs for which the students received little or nothing in return. The students would quickly default on the loans, the colleges would keep the money, and the federal government, which guarantees student loans, would be left holding the bag. In response, the feds prohibited students from using federal loans to attend colleges where more than 25% of borrowers default within two years. (Last year Congress changed the provision to 30% within three years).Now three former Phoenix students have filed a class-action suit in Arkansas alleging that after they dropped out of the university, Phoenix payed off their federal loans without their knowledge and then turned around and demanded repayment on more onerous terms that the students would have gotten under the federal loan program. Other for-profit institutions have allegedly used similar tactics in the past, involving collection agencies and other high-pressure tactics. Basically, it’s a way of lying about default rates that hurts students in the bargain. Phoenix disputes the allegations.
I’m not among those who think that for-profit colleges and universities are necessarily bad. It’s a free country and some institutions have put together a package of services that students want to buy. For-profits often seem to be focused on meeting the needs of their customers, particularly working and non-traditional students, in ways that traditional non-profits do not. But they also tend to be expensive and highly dependent on students borrowing a great deal of money to attend. Dropout rates at for-profits are often quite high. And if more than a quarter or a third of your students are defaulting on their loans within a few years of leaving, then pretty much by definition they weren’t getting a sufficiently valuable service in exchange for their money.”
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