Looking back, Sweet admits that she was naive in trusting the recruiters. But she can’t help but wonder how she ever qualified for the loans in the first place, especially given that when she applied she was unemployed. If it were me, I never would have loaned me the money, she says. Who in their right mind would lend $100,000 in unsecured debt to an art major?
Like Sweet, graduates of proprietary colleges often struggle to find jobs in their fields. This is because, in many cases, they don’t get the skills they need to compete. After all, it’s far easier and less expensive for schools to boost enrollment numbers through aggressive advertising and recruitment than to expend the resources to build quality schools. Other chains have better reputations on these fronts, among them the University of Phoenix and DeVry University. But even they have a spotty record of graduating students.
For awhile it looked like the meltdown on Wall Street, and the ensuing credit crunch, would put an end to predatory lending at for-profit schools. In 2008 Sallie Mae quit offering subprime private loans to students at for-profit colleges because the astronomical default rates had helped throw its stock price into a nosedive. But the proprietary college industry has found a way around this roadblock, namely making private loans directly to students, much the way used-car lots loan money to buyers rather than going through a third party. For example, in a recent earnings call with investors and analysts, Corinthian said that it plans to dole out roughly $130 million in institutional loans this year, while Career Education and ITT Educational Services Inc., another for-profit chain, have reported that they expect to lend a combined total of $125 million.
Corinthian and Career Education, which own the schools Leveque and Sweet attended, have faced the most damning allegations when it comes to educational quality and steering students into shady private loans
This is because some schools are packaging them as ordinary consumer credit, which has even fewer built-in safeguards than private student loans, especially when it comes to disclosure requirements.