Both for-profit and non-profit colleges and universities are going to come under much more scrutiny very quickly as more people awaken to the reality they were lied to and deceived by schools to get them to go deep in debt. Want to know more, see Millions of Federal Student Loans Lining Up to Be Eliminated and Borrowers Repaid.
I’ve been making the case that schools of all flavors have engaged in practices that got people to sign on the line for loans without any likelihood those loans would result in even a better than 50-50 chance of a degree.
I’ve documented cases where non-profit colleges continue to enroll students when only one out of ten actually graduates. At some point both the student and the parent who might be cosigning should be informed that there is a 90% chance you’ll never graduate, for whatever reason, when you go into debt for $25,000 to $150,000.
Back in 1980 the Federal Trade Commission offer Congress a couple of definitions on what might be thought of as unfair and deceptive behavior. When you apply it to the situation where a college is actively and enthusiastically putting parents and students in debt with no expectation of a 50-50 chance of a good outcome, it becomes interesting.
The FTC defined “unfair” as a situation that “In most cases a substantial injury involves monetary harm, as when sellers coerce consumers into purchasing unwanted goods or services or when consumers buy defective goods or services on credit but are unable to assert against the creditor claims or defenses arising from the transaction.”
The FTC defined deception as “a representation, omission or practice that is likely to mislead the consumer.” And, “the representation, omission, or practice must be a “material” one. The basic question is whether the act or practice is likely to affect the consumer’s conduct or decision with regard to a product or service. If so, the practice is material, and consumer injury is likely, because consumers are likely to have chosen differently but for the deception.”
On January 15, 2016, a case was unsealed and the complaint made public. The case was an inside whistleblower case against ITT Technical Institute. And sure, ITT has had their issues and problems, but this former ITT Dean of Academic Affairs, Rodney Lipscomb, makes so many claims the school engaged in unfair and deceptive behavior to get students to enroll and go into debt, that you have to stand up and take notice.
Lipscomb worked in the education field for 20 years and was recognized for his skills by being employed by ITT Tech in a management capacity. But after getting to look behind the curtain, Limpscomb came away with the impression:
- ITT engages in a systematic scheme to defraud the government by receiving Title IV money while clearly violating conditions of Title IV payments.
- ITT systematically violates conditions of payments when it enrolls students that are not equipped, or prepared, to succeed in ITT’s course of study.
- ITT systematically violates conditions of payment when it pressures recruitment representatives to “dig in” to a student’s pain to pressure the student to enroll.
- ITT systematically violates conditions of payment when it lies to students about what ITT’s programs train students to do, and the kinds of jobs students can expect to get when they get out of the program.
- ITT systematically violates conditions of payment when it changes, refuses to explain, and lies to students about the financial obligations the student will have to meet during the student’s enrollment at ITT, and after the student completes the program.
- ITT systematically violates conditions of payment when it offers promotions and compensation incentives based on the number of students its recruitment representatives can enroll.
- ITT systematically violates conditions of payment when it instructs its campuses to lie about, or alter, placement rate reports.
In the case unsealed, Limpscomb documents these alarming allegations in detail and I invite you to read the entire complaint, click here.
Once you read the complaint and allegations, feel free to post your comments below and let me know what you think about the claim the school defrauded students. And if they did, should students still be required to repay the student loans?
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.