A relative of mine works there and said they were about to be sued by the Department of Education over fraud in their student loan department. The settlement forced the company to sell or close all of it's colleges and no senior management or administrative staff is allowed to stay with any of the colleges.
It seems pretty clear that Corinthian did some bad things, and it's likely the clause the article mentions in federal loans might give _some_ students an way out of debt:
“In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.”
IANAL, but I think it's pretty unlikely the government would let all of the students off the hook. (For a billion dollars!)
I don't think it's up to 'the government', it's up to the courts. It seems pretty clear to me that the school should have educated the students, and didn't. Hopefully the courts will see it that way as well.
Yes, I know that means the taxpayer footing the bill. The government was responsible for accrediting, regulating and auditing the colleges. The government, and collectively the people, are responsible for any failures in that duty and any individual citizens harmed as a result deserve compensation.
Note I'm not a US citizen, so my comments are meant in general.
> student-debt problem is so severe that it seems to be reducing the formation of new households
Perfect! Housing bubble averted.
In all seriousness, this + an influx of foreign investment into american real estate + a future generational aversion to debt (from experiencing first or secondhand how crippling student loan debt can be) will make for some interesting times in the upcoming decades.
the aversion to debt isn't occurring very fast considering that outstanding auto load debt is around 886 billion dollars. Credit card debt in 2014 was very similar, with an average of 7k per household.
when it comes to school debt the Federal government would be best served by limiting what it loans based on the education desired, as they set limits on what they pay out for medical services there is little reason to not do the same for education. It might even help reign in the ever increasing costs that colleges charge which in itself a property of easy loans
It always astonish me to think it can be seen as normal, even more equitable, to require people to get so huge debts before even being trained to work.
I live in the US and was able to go to college almost for free. There were a few caveats though:
1. I waited until I was 24. This meant that my parents income did not affect my federal assistance so that I could get the maximum amount.
2. I went to a dirt cheap community college my first two years. It was so cheap that the federal grants covered my tuition, books, plus a little extra for living expenses.
3. I did really well at community college and was able to get a few scholarships at a bigger university.
4. In my state there is a block transfer program so that all of my credits at community college counted at the larger university.
5. I was able to live at home for the entire duration so I did not have to pay a huge sum for campus housing.
I was able to get a computer science degree from a state university with somewhere around $1000 in debt which I paid off entirely with my first paycheck.
I was only in $1000 in debt because I foolishly bought a $2400 gaming laptop.
A sensible system would be one like Brazil's (and possibly other countries): free education at public universities for those who qualify on the stringent entrance exams along with a system of private universities for those who don't make it and can pay for it.
This would allow all deserving students a high quality, free education while limiting the amount of waste and degree inflation that would result from a completely free university system.
To pay for someone's education someone else must be taxed. Why is it better to tax a working person for every student's education instead of just having that person pay for the exact education they received?
Agreed, where does our tax money go? It seems that other nations despite their level or method of taxation are able to provide for free to subsidized secondary education to their citizens.
“In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.”
Wait till the law students and education students figure out that their schools intentionally overproduced about twice as many grads as the market can bear. And the PHD students and the ... well, basically every program in every school in the country except the ivy league CS programs.
Its either debt jubilee time or admit the "higher ed magically provides a great job" was all a scam. When it comes to deciding between saving face and saving a buck, usually we save a buck, so I almost guarantee the proposed strategy will fail. So culturally we will momentarily see the death of "higher ed at all costs" as a gateway to a great job and all that propaganda.
Is this the start of the student-loan bubble bursting?
From what I have read student loan debt, despite it's size, doesn't threaten the rest of the economy in the same way that housing loans did. Hopefully that is the case.
> doesn't threaten the rest of the economy in the same way that housing loans did
I dunno about that - it's probably just a lot more insidious and less panic-y.
Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on:
1) Savings/retirement/etc
2) Goods and services
3) Capital investment
4) Etc.
Given the compounding nature of some of these things, and the fact that these payments constitute a higher % of your income early on (assuming steady career progression), it's a problem that may just slowly unravel as time goes on.
Don't forget we live in a service economy - adults not spending money on a diverse set of services (as opposed to say, just student loan services) will hurt us in the long run.
Yeah, there's no risk of someone repossessing the education you received, like there is of the house you've defaulted on. And a reduction in the value of a bachelor's degree doesn't affect your family's net worth like that same reduction in the value of your home.
Mass defaults (which you could argue we're already seeing at ~20%) would be terrible for lenders (private and public), and probably the schools involved, so there'd be an impact, but you wouldn't have the massive loss of aggregate wealth we saw impacting the middle class five to ten years ago.
I always hear people say things like "we don't have debtors prisons in the U.S.". If enough people start doing this, I have a very strong feeling that that will change. As student loans become more of a crisis, we're sure to see more people simply deciding not to pay. What recourse to lenders have if this happens on a large scale?
The US continues to jail people for failing to pay fines, child support, and similar. So there is in one sense still debtors prison, but it really only applies to debts owed in certain situations.
I really can't stress enough how these for-profit institutions seek to avoid any kind of responsibility otherwise assumed of an institution of higher learning. They consistently take advantage of veterans. Close to home, these companies actively and willfully take advantage of veterans benefits to reap in billions [0]. These schools actively recruit soldiers at military bases, who end up using up a good portion (or all) of their benefit without being able to get a job or before they can transfer it to their children or spouse. They're left with no education benefit, a degree that isn't transferable and, perhaps worst of all, a feeling of failure and embarrassment. PBS did an excellent show on the situation not long ago [1]. The standard argument I hear in favor of these schools is that the situation in the military is different, and a lot of veterans leaving the force already have families so going to a traditional college or university would be difficult or unmanageable. This is true, but distance learning has to become better.
I think the reason many students put up with increased costs is because they have access to subsidized loans, mainly from the government. The Consumer Financial Protection Bureau estimates that out of the $1.2 trillion in debt, $1 trillion are estimated to be guaranteed or held by the federal government [0]
I may be in the minority opinion, but I think college is still pretty affordable.
> In 2014-15, average published tuition and fee prices for in-state students at public four-year institutions range from $4,646 in Wyoming and $6,138 in Alaska to $14,419 in Vermont and $14,712 in New Hampshire. [1]
CUNY for instance is $6,030 a year [2]
The tuition is higher than it has been in the past but attending college is a lot more profitable as well. I know the state school I had attended has raised tuition over the years, but I can't help but look around and think that all the money went into a new stadium ($33 MM), new athletic gym and new (very impressive) dorms.
The average student attending an expensive for-profit (less credible) college isn't the same person as someone attending a good state school. A lot of time these colleges attract more marginal students. The payoff for most colleges is still very high and worth the cost. But there should be some cost as to discourage less productive ventures and to have some skin in the game for the student.
This bubble has to burst. The college education system in this country has gone completely insane. The cost of a year's worth of education is now $60000, when the cost for comparable universities in the UK is $10000 and in Germany is $0. Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore.
> Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore.
Public colleges are already substantially less than private institutions. I doubt subsidizing them further will have a substantial impact on private tuition.
If we stop lending money to pay for education, the colleges will see substantially reduced demand at their inflated price levels and will quickly cut prices to adjust.
Then again, they might not.
They currently segregate their customers into groups by way of "scholarships" and essentially extract the maximum amount of money they can possibly get. I can't think of another industry where such disgusting behavior is tolerated or even celebrated as generosity.
I think the most important piece of information to come out of this article is "More than a fifth of borrowers of federal student loans go into default, but people who default tend not to announce their status publicly."
This, to me, seems extremely high. Does anyone know what the default rate is on other types of loans?
"Most Corinthian students cover their tuition by taking out federal and private loans. That debt, it turns out, is far more resilient than Corinthian itself."
This here is the problem. If Corinthian can get out from paying its debts, why can't the students?
It's a bit disingenuous to claim that you shouldn't pay back any of the debt incurred in earning your degree because the educational program was worthless when you're still seeking a career in the field requiring that degree.
I agree she shouldn't have to pay all of the debt, but surely the degree isn't totally worthless.
> "...because the educational program was worthless when you're still seeking a career in the field requiring that degree"
That doesn't follow at all. The program could have been deficient. The placement program could have been fraudulent. And yet the student could make up the deficiency with other training and compete, as hopeless as that might be, against others in the same boat.
It isn't unusual for schools to defraud students by gaming placement by, for example, providing a pitiful amount of seed money for business majors to set off in a leaky lifeboat, or by forcing law students in lower-tier law schools to drop out before graduating.
You also have to consider that debt repayment in constant payments pays down very little principle at first. A student may have paid a lot of interest, but their debt remains high.
So basically students enroll in a scam college to trick people into thinking they are well educated, and then complain when the scam is revealed.
What's next, people who scam money from the elderly by pretending to be their grandchildren sue after only getting 25 cents with their birthday cards?
I realize these colleges are also using high pressure sales tactics to trick vulnerable populations into enrolling and then extorting them for money, but at some point people still need to take responsibility for their actions.
>So basically students enroll in a scam college to trick people into thinking they are well educated, and then complain when the scam is revealed.
I don't think so. There are colleges (mostly online and often postgraduate only) where the 'student' is in on the scam. They mostly serve markets where promotion or pay prospects are tied to box ticking possession of a masters or PhD with no real consideration of the academic rank of the programs. Those really are about trying to trick people into thinking they are well educated - although you could argue that if no-one cares about the quality of the 'degrees' they're not really scamming anyone.
What Corinthian was doing was charging large sums of money to students for nearly worthless, marginally accredited or unaccredited education while telling them that they were receiving valuable, career enhancing education and recognised credentials. They were the marks and not in on the con.
Of course I absolutely agree that people need to take responsibility for their actions but we need to consider the context and determine what is a reasonable amount of due diligence to undertake.
First of all, our society relentlessly pounds the message into people's heads that they need to go to college to succeed in life. Think of how often an 18 year old will have been told of the importance of going to college by teachers, counsellors, and other authority figures in their lives (all of whom have themselves been to college). How often their parents (who usually will not have been) will tell them that this is what they need to do to succeed. How often the media portrays going to college as the right thing to do. In every sitcom set in a high school or with high school aged main characters, applying to and getting into college is eventually a major plot point.
Now compare that with how often those same sources mention the difference between applying to a community college, a state college, a private non-profit, and a private for-profit college. If they even know the difference (which parents who haven't been will almost certainly not).
Think about the government services which poor people tend to interact with, and the American attitude towards public provision and realise that the educational superiority of publicly owned community colleges over privately owned colleges is actually anomalous. (and in fact the most prestigious American colleges are private, just a different kind of private). How on Earth is a teenager supposed to figure that out.
Should we expect an 18 year old to understand that regional accreditation is better than national accreditation? I mean, does that actually even make sense?
So while I agree that there is a case for people taking responsibility for their actions, I think that young people doing what society told them to do and making some poor decisions after being lied to have met the test for contextually reasonable due diligence.
[+] [-] jobu|11 years ago|reply
A relative of mine works there and said they were about to be sued by the Department of Education over fraud in their student loan department. The settlement forced the company to sell or close all of it's colleges and no senior management or administrative staff is allowed to stay with any of the colleges.
It seems pretty clear that Corinthian did some bad things, and it's likely the clause the article mentions in federal loans might give _some_ students an way out of debt:
“In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.”
IANAL, but I think it's pretty unlikely the government would let all of the students off the hook. (For a billion dollars!)
[+] [-] simonh|11 years ago|reply
Yes, I know that means the taxpayer footing the bill. The government was responsible for accrediting, regulating and auditing the colleges. The government, and collectively the people, are responsible for any failures in that duty and any individual citizens harmed as a result deserve compensation.
Note I'm not a US citizen, so my comments are meant in general.
[+] [-] jessaustin|11 years ago|reply
Eh, it's not "real" money. Students will have debts forgiven when it's politically expedient to do so.
[+] [-] ChainsawSurgery|11 years ago|reply
Perfect! Housing bubble averted.
In all seriousness, this + an influx of foreign investment into american real estate + a future generational aversion to debt (from experiencing first or secondhand how crippling student loan debt can be) will make for some interesting times in the upcoming decades.
[+] [-] Shivetya|11 years ago|reply
when it comes to school debt the Federal government would be best served by limiting what it loans based on the education desired, as they set limits on what they pay out for medical services there is little reason to not do the same for education. It might even help reign in the ever increasing costs that colleges charge which in itself a property of easy loans
[+] [-] sheepdestroyer|11 years ago|reply
It always astonish me to think it can be seen as normal, even more equitable, to require people to get so huge debts before even being trained to work.
[+] [-] jgrowl|11 years ago|reply
1. I waited until I was 24. This meant that my parents income did not affect my federal assistance so that I could get the maximum amount.
2. I went to a dirt cheap community college my first two years. It was so cheap that the federal grants covered my tuition, books, plus a little extra for living expenses.
3. I did really well at community college and was able to get a few scholarships at a bigger university.
4. In my state there is a block transfer program so that all of my credits at community college counted at the larger university.
5. I was able to live at home for the entire duration so I did not have to pay a huge sum for campus housing.
I was able to get a computer science degree from a state university with somewhere around $1000 in debt which I paid off entirely with my first paycheck.
I was only in $1000 in debt because I foolishly bought a $2400 gaming laptop.
[+] [-] bkeroack|11 years ago|reply
This would allow all deserving students a high quality, free education while limiting the amount of waste and degree inflation that would result from a completely free university system.
[+] [-] iopq|11 years ago|reply
[+] [-] cpursley|11 years ago|reply
[+] [-] VLM|11 years ago|reply
Wait till the law students and education students figure out that their schools intentionally overproduced about twice as many grads as the market can bear. And the PHD students and the ... well, basically every program in every school in the country except the ivy league CS programs.
Its either debt jubilee time or admit the "higher ed magically provides a great job" was all a scam. When it comes to deciding between saving face and saving a buck, usually we save a buck, so I almost guarantee the proposed strategy will fail. So culturally we will momentarily see the death of "higher ed at all costs" as a gateway to a great job and all that propaganda.
[+] [-] AndrewKemendo|11 years ago|reply
From what I have read student loan debt, despite it's size, doesn't threaten the rest of the economy in the same way that housing loans did. Hopefully that is the case.
[+] [-] ChainsawSurgery|11 years ago|reply
I dunno about that - it's probably just a lot more insidious and less panic-y.
Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on:
1) Savings/retirement/etc
2) Goods and services
3) Capital investment
4) Etc.
Given the compounding nature of some of these things, and the fact that these payments constitute a higher % of your income early on (assuming steady career progression), it's a problem that may just slowly unravel as time goes on.
Don't forget we live in a service economy - adults not spending money on a diverse set of services (as opposed to say, just student loan services) will hurt us in the long run.
[+] [-] whafro|11 years ago|reply
Mass defaults (which you could argue we're already seeing at ~20%) would be terrible for lenders (private and public), and probably the schools involved, so there'd be an impact, but you wouldn't have the massive loss of aggregate wealth we saw impacting the middle class five to ten years ago.
[+] [-] eat|11 years ago|reply
[+] [-] Someone1234|11 years ago|reply
[+] [-] krschultz|11 years ago|reply
[+] [-] kcole16|11 years ago|reply
If debtors stop paying, lendors will stop lending.
[+] [-] mjburgess|11 years ago|reply
[+] [-] mikeash|11 years ago|reply
[+] [-] remarkEon|11 years ago|reply
[0] http://fortune.com/2014/11/11/gi-bill-for-profit-colleges/ [1] http://www.pbs.org/newshour/bb/gi-bill-benefitting-profit-co...
[+] [-] bko|11 years ago|reply
I may be in the minority opinion, but I think college is still pretty affordable.
> In 2014-15, average published tuition and fee prices for in-state students at public four-year institutions range from $4,646 in Wyoming and $6,138 in Alaska to $14,419 in Vermont and $14,712 in New Hampshire. [1]
CUNY for instance is $6,030 a year [2]
The tuition is higher than it has been in the past but attending college is a lot more profitable as well. I know the state school I had attended has raised tuition over the years, but I can't help but look around and think that all the money went into a new stadium ($33 MM), new athletic gym and new (very impressive) dorms.
The average student attending an expensive for-profit (less credible) college isn't the same person as someone attending a good state school. A lot of time these colleges attract more marginal students. The payoff for most colleges is still very high and worth the cost. But there should be some cost as to discourage less productive ventures and to have some skin in the game for the student.
[0] http://www.consumerfinance.gov/newsroom/student-debt-swells-... [1] http://trends.collegeboard.org/college-pricing/figures-table... [2] http://www.cuny.edu/admissions/tuition-fees.html
[+] [-] TeMPOraL|11 years ago|reply
https://www.youtube.com/watch?v=P8pjd1QEA0c#t=562
"We went to the museum of Scientology for our psychiatric rotation"...
[+] [-] littletimmy|11 years ago|reply
This bubble has to burst. The college education system in this country has gone completely insane. The cost of a year's worth of education is now $60000, when the cost for comparable universities in the UK is $10000 and in Germany is $0. Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore.
[+] [-] maratd|11 years ago|reply
Public colleges are already substantially less than private institutions. I doubt subsidizing them further will have a substantial impact on private tuition.
If we stop lending money to pay for education, the colleges will see substantially reduced demand at their inflated price levels and will quickly cut prices to adjust.
Then again, they might not.
They currently segregate their customers into groups by way of "scholarships" and essentially extract the maximum amount of money they can possibly get. I can't think of another industry where such disgusting behavior is tolerated or even celebrated as generosity.
[+] [-] awesome_work_|11 years ago|reply
This, to me, seems extremely high. Does anyone know what the default rate is on other types of loans?
[+] [-] discardorama|11 years ago|reply
This here is the problem. If Corinthian can get out from paying its debts, why can't the students?
[+] [-] rcarrigan87|11 years ago|reply
As a college grad with a lot of debt I advise everyone to avoid student loans at all costs. It's not worth it and there are always alternatives.
http://blogmaverick.com/2013/01/26/will-your-college-go-out-...
[+] [-] skizm|11 years ago|reply
[+] [-] bdcravens|11 years ago|reply
[+] [-] vinceguidry|11 years ago|reply
I agree she shouldn't have to pay all of the debt, but surely the degree isn't totally worthless.
[+] [-] Zigurd|11 years ago|reply
That doesn't follow at all. The program could have been deficient. The placement program could have been fraudulent. And yet the student could make up the deficiency with other training and compete, as hopeless as that might be, against others in the same boat.
It isn't unusual for schools to defraud students by gaming placement by, for example, providing a pitiful amount of seed money for business majors to set off in a leaky lifeboat, or by forcing law students in lower-tier law schools to drop out before graduating.
You also have to consider that debt repayment in constant payments pays down very little principle at first. A student may have paid a lot of interest, but their debt remains high.
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] mattmanser|11 years ago|reply
Great argument.
[+] [-] whafro|11 years ago|reply
If that's the case, I can send you a degree from WhafroU via PDF for a tidy sum within an hour. Get in touch, folks!
[+] [-] Alex3917|11 years ago|reply
What's next, people who scam money from the elderly by pretending to be their grandchildren sue after only getting 25 cents with their birthday cards?
I realize these colleges are also using high pressure sales tactics to trick vulnerable populations into enrolling and then extorting them for money, but at some point people still need to take responsibility for their actions.
[+] [-] TomGullen|11 years ago|reply
Why didn't you mention that these colleges need to take some responsibility as well?
[+] [-] Mvandenbergh|11 years ago|reply
I don't think so. There are colleges (mostly online and often postgraduate only) where the 'student' is in on the scam. They mostly serve markets where promotion or pay prospects are tied to box ticking possession of a masters or PhD with no real consideration of the academic rank of the programs. Those really are about trying to trick people into thinking they are well educated - although you could argue that if no-one cares about the quality of the 'degrees' they're not really scamming anyone.
What Corinthian was doing was charging large sums of money to students for nearly worthless, marginally accredited or unaccredited education while telling them that they were receiving valuable, career enhancing education and recognised credentials. They were the marks and not in on the con.
Of course I absolutely agree that people need to take responsibility for their actions but we need to consider the context and determine what is a reasonable amount of due diligence to undertake.
First of all, our society relentlessly pounds the message into people's heads that they need to go to college to succeed in life. Think of how often an 18 year old will have been told of the importance of going to college by teachers, counsellors, and other authority figures in their lives (all of whom have themselves been to college). How often their parents (who usually will not have been) will tell them that this is what they need to do to succeed. How often the media portrays going to college as the right thing to do. In every sitcom set in a high school or with high school aged main characters, applying to and getting into college is eventually a major plot point.
Now compare that with how often those same sources mention the difference between applying to a community college, a state college, a private non-profit, and a private for-profit college. If they even know the difference (which parents who haven't been will almost certainly not).
Think about the government services which poor people tend to interact with, and the American attitude towards public provision and realise that the educational superiority of publicly owned community colleges over privately owned colleges is actually anomalous. (and in fact the most prestigious American colleges are private, just a different kind of private). How on Earth is a teenager supposed to figure that out.
Should we expect an 18 year old to understand that regional accreditation is better than national accreditation? I mean, does that actually even make sense?
So while I agree that there is a case for people taking responsibility for their actions, I think that young people doing what society told them to do and making some poor decisions after being lied to have met the test for contextually reasonable due diligence.
[+] [-] unknown|11 years ago|reply
[deleted]