Using the American Dream as Bait: Offering a Lifetime of Debt

by U.S. Rep. Mike Honda and Wade Henderson

We applaud the White House and the U.S. Department of Edu-cation’s issuance of a strong gainful employment rule to ensure for-profit colleges are meeting their commitments to their students. This is a moment of true courage, when the administration and its allies are standing up to special interests and lobbyists and doing what is right for the American people.

The subprime mortgage disaster caused the greatest loss of wealth from communities of color in modern American history. When banks misled African-American, Asian-American and Latino borrowers into taking on crushing home mortgage debt they could never hope to pay back, we called it what it was predatory lending.

Today, many for-profit colleges have picked up where the subprime lenders left off. They are using the same promise of the American Dream as bait to trap vulnerable students the vast majority of whom are women and minorities into underperforming schools and saddling them with a lifetime of debt.

The costs to these students and taxpayers are tremendous. In the 2008-09 school year, the federal government invested more than $4 billion in grant aid to for-profit institutions, quadrupling its investment just a decade earlier. Despite this increased federal assistance, tuition at for-profit institutions continues to far outpace other schools, costing more than five times as much as community colleges. These for-profit schools are gaming the system undermining the value of these Pell grants and forcing students to take out more loans, not less.

As this industry’s profits have soared, so have student loan default rates. Students enrolled in for-profit schools represent just 10 percent of all undergraduate students, but account for 44 percent of all student loan defaults. The industry says that these schools offer opportunities to low-income students that they couldn’t get elsewhere. But the debt being piled on students has devastating consequences, rendering them unable to receive credit to rent an apartment, buy a car or home, or receive future education loans. When these programs fail to deliver on their promises, students suffer for the rest of their adult lives and taxpayers are left on the hook.

The industry is targeting and taking advantage of women, minority and low-income students. Approximately one out of every four African-American, Asian American, Latino and low-income students start their post-secondary education at a for-profit institution. But their graduation rates are far below the rates for such students at public and non-profit colleges. Just like the subprime mortgage lenders, this industry is profiting off the misery of our country’s most vulnerable communities.

We strongly believe that the Department of Education has taken the right step in proposing a common sense rule that would hold these schools accountable for delivering on their education and career promises. Under the rules, colleges that fail to demonstrate that their programs are preparing students for “gainful employment” would risk losing their eligibility to participate in federal education grant and loan programs.

All schools should be held accountable for the educations that they provide, including for-profits that have flown under the radar of regulation for far too long. These rules respond to the Department of Education’s recent investigation finding that some in the industry were promising students’ job placement upon completion of their programs and failing to deliver on their promises. Once the industry had gotten its cut from the government’s financial aid program, it left its students without an adequate education, without a job, and with an insurmountable debt load.

Just as Wall Street is fighting to undermine the Consumer Financial Protection Bureau and other financial reforms, the for-profit college industry is fiercely resisting this reasonable oversight. It spent more than $4 million on hired lobbyists in the first quarter of 2011 alone and has engaged in a documented campaign of staging false support in the very minority communities it is victimizing.

Nothing should stand in the way of real gainful employment rules. This industry has destroyed people’s futures, cost our government billions of dollars and has gotten rich by selling false hopes to those who most need a quality education. It’s time for common sense reforms that will hold the industry accountable to these students and to taxpayers.

http://www.mercurynews.com/milpitas/ci_18232799?nclick_check=1

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