For-profit colleges forgive $500M in student loan debt amid deception allegations
Center for Freedom & Prosperity co-founder Dan Mitchell discusses how the U.S. student loan debt reached a record $1.465 trillion last month and how it may affect the economy.
The owner of multiple for-profit colleges agreed this week to erase nearly $500 million in student loan debt in a settlement agreement with attorneys general in 48 states and Washington D.C., who accused the company of misleading students.
Career Education Corp., which operates Colorado Technical University and American InterContinental University, also agreed to overhaul its enrollment practices and pay $5 million toward the states’ legal costs. The settlement agreement calls for the company to forgive $493 million in loan debt, and separate deals with New York and California pushed the total to $556 million, the Washington Post reported.
“CEC’s unscrupulous recruitment and enrollment practices caused considerable harm to Maryland students,” Maryland Attorney General Brian Frosh said in a statement. “The company misled students. It claimed that students would get better jobs and earn more money, but its substandard programs failed to deliver on those promises. The school encouraged these students to obtain millions of dollars in loans, placing them at great financial risk. Now CEC will have to change its practices and forgo collection on those loans.”
Prosecutors alleged that Career Education employees had misled students about the actual cost of its programs, as well as which of its course credits were valid for specific licensing boards. Under the settlement, the company will now have to provide students with specific information on job placement rates and average earnings of its course graduates.
Career Education once enrolled more than 100,000 students. Roughly 34,000 students are currently enrolled at its institutions.
The settlement came amid a broader crackdown on the for-profit college industry, which has been accused of predatory and misleading practices. The U.S. Department of Education canceled $150 million in student loan debt last December for about 15,000 students, roughly half of whom had attended for-profit Corinthian Colleges before the chain shuttered in 2015.