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Corinthian Colleges sued for predatory lending

By WTOP Staff

JOSH BOAK
AP Economics Writer

WASHINGTON (AP) — Corinthian Colleges is being sued by the federal Consumer Financial Protection Bureau for what it calls a “predatory lending scheme.”

The CFPB is seeking more than $500 million for borrowers who used the for-profit education company’s private student loans. Corinthian misled students about their job prospects, in some cases paying employers to offer temporary jobs to graduates, the agency said Tuesday.

Corinthian charged as much as $75,000 for a bachelor’s degree and pushed students into private loans with interest rates of roughly 15 percent, more than double the rate for a federal loan, the CFPB said. More than 60 percent of Corinthian students with those loans defaulted within three years.

“We believe Corinthian lured in consumers with lies about their job prospects upon graduation, sold high-cost loans to pay for that false hope, and then harassed students for overdue debts while they were still in school,” said CFPB director Richard Cordray.

Kent Jenkins, a Corinthian spokesman, disputed the claims made by the CFPB.

Jenkins said the suit is based on “isolated incidents” at Corinthian’s campuses regarding job placement. He said that the interest rate on its private loans averages 9 percent, instead of the 15 percent cited by the government. Corinthian requires that students repay the loans while attending class, having them pay an average of $35 a month.

“We ask students to make payments while in school to help them develop the discipline and practice of repaying their federal and other loan obligations,” Jenkins said.

Shares of Corinthian Colleges Inc. dropped 4 cents, or 30 percent, to 10 cents in late trading following the lawsuit announcement.

The entire for-profit education sector has come under intense government scrutiny. The Department of Education put into place new regulations that cut off federal aid if too many students default on loans or fail to earn enough money after graduation to repay them.

Earlier this year, the Obama administration proposed even tighter regulations.

The CFPB action is the latest blow to Corinthian. The company already plans to close a dozen of its U.S. campuses under an agreement with the Education Department, which also placed Corinthian under an independent monitor, former federal prosecutor Patrick Fitzgerald.

The Santa Ana, California-based company also plans to sell up to 85 of its branch campuses. The company owns Everest College, Heald College and WyoTech schools.

As of March, 74,000 students were enrolled at the company’s campuses.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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