The push to get students in the door also created more pressure to steer people into private loans
From the schools’ perspective, it didn’t much matter whether students would be able to pay off their debt any more than it mattered if they stuck with the program or graduated with the skills they needed. As long as students were enrolled long enough to be considered a start, meaning that they attended classes for a week or two, the schools got to keep some of the money, and they got to include students in their official enrollment tally, which gave Wall Street the impression they were expanding. Having a cache of private loan funds to dole out also allowed the schools to clinch the deal right away-no need to grind through a stack of forms or wait for a third party to approve the loan application. Thus recruiters could lock students in before they experienced buyer’s remorse.
At best, the George W. Bush administration and the Republican-led Congress turned a blind eye to these schemes. At worst, they made it easier for the schools to carry them out. In his first term, Bush packed the Department of Education with allies of the proprietary colleges. Before becoming the assistant secretary for post-secondary education, for example, Sally Stroup worked as a lobbyist for the University of Phoenix. Under her leadership, the agency took the teeth out of regulations that were designed to rein in abuses of the 1990s, including the incentive-compensation ban for recruiters.
Unlike traditional student loans, which have low, fixed interest rates, private educational loans generally have uncapped variable rates that can climb as high as 20 percent-on par with the most predatory credit cards
Not surprisingly, many schools began resorting to hard-sell tactics to bring students in. In 2004, the Department of Education found that corporate bosses at the University of Phoenix routinely pressured and intimidated their recruiters to put asses in the classes. (mais…)