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Subprime student loans?
Make sure you catch Marketplace tonight. We're airing the first of two stories on for-profit colleges like the University of Phoenix. These schools make most of their money from taxpayer-backed loans to students. So it's easy to see why the schools might want to sign up as many students as possible. And of course, that leads to problems.
The University of Phoenix was sued by two former employees who claim the school violated a federal ban on giving incentives to counselors for recruiting more students. The suit was filed several years ago but remains unsettled.
Last year, 86% of the University of Phoenix's $3 billion in revenue came from federal loans made to its students. But many of those students can't or don't pay the money back. Many of them don't even graduate. One congressman has said this kind of thing looks "a lot like subprime student loans."
Marketplace and ProPublica teamed up to look into the issue.
In the story that airs tonight, we hear from student Michelle Rambo. When Rambo signed up at the University of Phoenix, she says she was told she qualified for a grant and wouldn't have to pay anything for her education. Reporter Amy Scott tells us what happened later:
SCOTT
She was almost finished with her associate degree when a school counselor called about moving her on to a bachelor's program.RAMBO
And one of the questions that she asked me completely stopped the whole conversation. She had asked me, so what kind of loan do you have?SCOTT
Rambo thought she didn't have a loan.But when she enrolled, she signed what she thought was a form inquiring about federal aid. Turns out it was an application for loans that'll cost her $18,000 when she graduates.
RAMBO
It was scary. It still is scary. I'm still scared. I still don't know what I'm going to do yet.
Tomorrow night's story features a former University of Phoenix employee who explains
some of the high-pressure sales tactics he was told to use:
BURKE
One of the things we would be told to do is call up a student who was on the fence and say, all right, I've only got one seat left. I need to know right now if you need me to save this for you. Well, that wasn't true.SCOTT
In the training session, Burke says staff asked the manager what to do if that student showed up for class and there were only six or seven people there.BURKE
And the manager said, well you tell them that the class got so full that we had to split it. Scott: So you were basically told to lie? Burke: Yeah. We were told to lie.
Marketplace and ProPublica interviewed five ex-employees and a dozen students, plus the president of the University of Phoenix, among others.
It's highly recommended listening, and of course, if you miss the on-air stories, they'll be available here at Marketplace.org.
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Marketplace yesterday aired an uncharacteristic piece of journalism for the highly regarded American Public Media—a wholly imbalanced, subjective, salacious story about University of Phoenix. In an unusual move, Marketplace outsourced its investigative reporting to ProPublica, a partisan and experimental investigative newsroom known for “muckraking tactics†and “hatchet jobs.â€
To read University of Phoenix’s entire rebuttal, go to http://www.upxnewsroom.com/ . To submit a comment to Marketplace.org, go to http://www.publicradio.org/ . For an in-depth Capital Research Center report on ProPublica, go to: http://www.capitalresearch.org/pubs/pdf/v1241117859.pdf .
There are several important differences between something like an auto loan and a student loan. Auto loans have built in collateral. If the borrower defaults, the car can be taken back. The car can be sold to alter the borrowers financial status. And the issuer of the loan usually will avoid providing the loan to borrowers without a likely potential to repay the loan.
Most student loans are initiated without meeting any of these conditions, presumably to benefit the student borrower. And in exchange for these "benefits" to the student, the government has severely restricted the borrowers ability to discharge these loans. These restrictions make the student loan very different from an auto loan. A young borrower is very unlikely to be able to recognize all the ramifications of entering into this type of arrangement that could potentially rule the borrowers financial life long past their productive adult years and into retirement.
If the government is going to so strictly limit ones ability to get out of a disastrous financial relationship, there needs to be some higher hurdles to cross to get into one, as well as stricter controls and monitoring of the predators.
Here we go again. This is yet another case of Liberals attacking a legitimate business for being successful. It is painfully obvious that anyone who has the responsibility and smarts to do well for themselves especially during an economic downturn, is thought of as a criminal by those who are searching for someone to blame.
Why don’t Michelle Rambo and other people take responsibility for their actions? Anyone who has attended any college or university and used student loan funds knows that they are doing so. If not for the information that they need to provide to obtain the loans, than for the documents that they need to review and sign. What about the yearly tax statement that a student loan recipient receives? I wonder if the term, Master Promissory Note is a bit of a clue. How about going through the process of selecting a lender like Sallie Mae or better yet a bank???
Blame, Blame, Blame. Accept responsibility Michelle. Better yet, finish your degree and see what that does for you as far as getting a decent paying job so that you can pay for the cost of your education. Unless of course you think that it was just another hand out.
I would like to know the whole story. I would truly like it if Market Place would do a balanced story. No offers to air any success stories of a half of a million University of Phoenix students, nothing from the half of a million graduates, and one short sound byte from a University of Phoenix representative. Anyone can see that this story is so slanted that if you tried to rest the truth on top of it, it would slide so far to the left, and the whole thing would come crashing down.
Regarding your former University of Phoenix employee Burke and his expected statements, I would like to know why he is no longer working for the University. What stake does he have in this? Every major college or university uses recruitment tactics and some can be pretty high pressure. Especially if you are an above average athlete or academic which we know brings money to the school. It seems to me that the University of Phoenix does not discriminate. I wonder how many working mothers with sub average grades have been recruited to attend a division one university.
University of Phoenix offers people who couldn’t otherwise achieve their goal of obtaining a higher education the ability to do so. But again, it doesn’t seem that Market Place will have the honesty or integrity in their, “reporting†to show that either. If Market Place wants to accuse the University of Phoenix of un-ethical behavior without reporting the story fairly, then Market Place themselves are guilty of ethics violations regarding the standards of journalism. But I suppose that’s not their fault right?
Anonymous:
I'm intrigued by your opening statement regarding "..another case of liberals attacking a legitimate business for being successful."
Would that also apply to those attacking AIG, Citigroup, Bank of America, etc. for being "successful" and creating a financial crisis?
And I suppose Michelle Rambo, like those prospective homeowners who signed loan papers for homes they couldn't afford, are more at fault for their lack of understanding than those who were pushing those loans in order to generate profit at someone else's expense?
The point of this Marketplace report is to shine light on questionable practices (which resulted in a $10 million fine for UofP). Critical thinking in judging the reporting is imperative; presumptions about "liberal" bias toward business because of investigative reporting is simply irrational name-calling.
As a UOP graduate,and employee this commentary could be the furthest from the truth. Prior to becoming a employee I was a student for 3 yrs. I was explained several times financial aid was part borrowed money, and grant monies subject to yearly application for qualifying. I share this with each of my potential graduates, and UOP mandates that each enrollment counselor, finance counselor academic counselors discuss responsible borrowing with students.
If it were not for UOP structure I would never been afforded the opportunity to complete my degree as a single working mother.
Thanks NPR for bringing this problem to at least some people's attention. There are predatory colleges and universities. Many of them are for profit institutions like the University of Phoenix. Some are even worse. However, there are accredited private nonprofit colleges (I work for one) that offer a second chance to people who didn't go to college right out of high school. We offer distance education and our tuition is reasonable. However, we don't have the marketing budget of the for-profit schools. How can the buyer beware if the buyer can't find the alternatives? It would be great if there were a follow up highlighting some of the alternatives to Phoenix and Kaplan.
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