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Marketplace Scratch Pad

Subprime student loans, take 2

Scott Jagow Nov 4, 2009

Part two of our series on for-profit universities airs tonight. Based on the reaction to the first piece, I’d say this is a hot topic.

Click here to read or listen to last night’s story by Amy Scott and Sharona Coutts. Our partner ProPublica has also published Sharona’s expanded print version of the series. Here’s a link to my post from yesterday.

The first story generated a lot of comments, including quite a few from University of Phoenix students and employees:

  • “I am a former employee, “Enrollment Counselor” of The University of Phoenix. I would like to express my disgust with the manipulative and exploitative practices in which we were trained.”

  • “All enrollment counselors go over and over and over the finance responsilblity that the student has. If any enrollment counselors lies about anything they would be fired on the spot. Maybe you should check your facts before writing something you have no-clue about.”

  • “As an Enrollment Manager for the University of Phoenix, I am always surprised by the level of intelligence or the lack there of by some students. Students are always told that financial aid is consisted of both loans and grants. Give me a break, why the hell would schooling be free. Stupid, absolutely stupid.”

  • “I am a proud alum of UOPX and I was not pressured into enrolling. I took responsibility to assure the school’s accreditation was up to par and I understood what I was signing upon enrollment. I am thankful for-profit school exist because I cannot attend a traditional university due to my work schedule.”

  • “I teach at a community college and at a private (non-profit) university in Southern California. I have had many students who were survivors of University of Phoenix and similar institutions, stuck with sizable debts and degrees that are despised by the academic and professional world.”

I hope the focus on the University of Phoenix doesn’t muddle the larger issue here. Phoenix is the biggest of the for-profit schools. It gets the most attention and is facing legal battles over the legality of its policies. Not all for-profit schools have the same reputation. There is a place in education for well-run for-profit, online schools. But many of them do have a big problem with student loan defaults. And that, as Sharona points out at ProPublica, is the big picture:

“Students who default on their student loans have their Social Security benefits intercepted, have their tax returns intercepted, have their wages garnished” and “are ineligible for any other federal benefit program until they arrive at a repayment solution,” said Nassirian, of the association that represents college admission officers. “They are ruined for life.”

Taxpayers don’t suffer because, although the public underwrites the system by providing the loans, the program makes money overall, according to Department of Education estimates.

President Obama wants more people to go to college. But previous administrations wanted more people to own a home, too. And look what happened with that. The president would do well to make sure he know what’s happening out there and why.

Catch part 2 of the series tonight on Marketplace.

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