Sep 14, 2016 06:02 AM EDT
Does Bridgepoint's $24 Million Settlement Indicate the Fed's War against For-Profit Colleges?
Bridgepoint Education has finally given up the fight against Consumer Financial Protection Bureau and agreed to refund and forgive up to $24 million of student loans. The settlement has raised up some questions whether the federal government is planning to take down for-profit colleges across the country.
The question raised is valid since a number of for-profit colleges have found themselves in lawsuits over allegations that they have lured students into high-cost loans using underhanded marketing tactics.
The pressure that the government has placed on these for-profit educational organizations have been too much that some have been driven to bankruptcy. One of the latest to buckle up was the ITT Technical Institute after 50 years of being in the industry.
Experts have observed that the tough regulations placed by the Department of Education for student loans and employment are directed against for-profit colleges. To date, the industry has more than one million students enrolled in around 3,500 for-profit institutions across the nation. The number represents around six percent of the total student population in the United States.
Education Secretary John King explained that they are not destroying the industry but rather, they are protecting students from incurring huge student debt loans.
"We take our enforcement responsibilities seriously. That's why over the last seven years the Obama administration has taken a number of actions to protect students, borrowers, and taxpayers from the illegal behavior of some institutions and programs," King said in a recent interview.
As for Bridgepoint, the CFPB said that the organization has been dishonest about the real cost of the loans they offered to the borrowers. They misled students by saying that they could pay off the loans for as little as $24 a month. However, a consent order revealed that the real cost of payments was much higher than what the borrowers have been told.
CFBP said that Bridgepoint has been collecting around $5 million in interest and principal alone while roughly $19 million is still outstanding. The private loan program offered by the company had been in effect from 2009 to 2013.
Bridgepoint, which runs the Ashford University and the University of the Rockies, was quick to note that CFBP did not consider the interest rates of in-house loans the company offers, which have zero to low-interest rates compared to federal loans.
The same loans have been the core of CFBP lawsuit against ITT. The government watchdog agency also used the same allegations Corinthian Colleges, a for-profit institution that has long closed down. The public has been optimistic about the government crackdown against for-profit organizations saying that the move has long been overdue. However, there are those who have been devastated. For example, a student from ITT missed a chance to graduate this year because of what happened to the school.
For their part, education officials have asked community colleges to take in ITT students and accept their academic credits. This goodwill has further fueled suspicions that the government is really trying to get rid of for-profit colleges in favor of community colleges. However, only time will tell whether these suspicions are true or not.
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