NJCA Report Students Before Profits examines for-profit schools and student debt crisis

Highland Park, NJ– New Jersey Citizen Action today released a report on the impact for-profit colleges and universities have on New Jersey’s $43.2 billion student loan debt crisis, and what actions New Jersey can take to help loan borrowers and its students. 

Students Before Profits: Regulating For-Profit Post-Secondary Schools and Programs in New Jersey finds that student loan borrowers who have attended for-profit schools incur extremely high levels of debt and are far more likely to default on their loans than their counterparts from nonprofit and public institutions. Aggressive marketing towards vulnerable populations, fraudulent practices and high tuition and costs associated with the schools account for this destructive level of indebtedness, as does the rollback of numerous federal protections for students under the Trump Administration.

“Education Secretary Betsy DeVos largely eliminated a special division of her department responsible for investigating fraud and other illegal practices by for-profit colleges,” said Beverly Brown Ruggia, Financial Justice Organizer for New Jersey Citizen Action. “And the Consumer Financial Protection Bureau (CFPB) has, in  effect, dismantled its student loan oversight division. This leaves students in New Jersey and across the country more vulnerable than ever to schools who put profits first.”

“As this report makes clear, New Jersey students who enroll in for-profit colleges are at higher risk of not completing the programs they enroll in, and walking away with substantial financial debt,” said Chuck Bell, programs director, Advocacy for Consumer Reports. “This is a huge concern, because even small amounts of unpaid student loans can damage a student’s credit standing, and severely impair their ability to complete their education.”

The study found that for-profit colleges:

·         Use aggressive and sometimes fraudulent recruitment tactics and spend more on marketing and advertising than on their education programs.

·         Generally, cost much more than public institutions.

·         Provide credits not transferable to other schools. 

·         Enroll students who take on more debt than their counterparts attending nonprofit colleges. Often this debt outstrips their expected earnings once they leave school.

·         Sometimes close suddenly, leaving students with debt but unable to complete their education.

Predictably, students leaving for-profit post-secondary schools are more than twice as likely to default on their student loans as their counterparts in public or non-profit schools. Worse, the for-profit schools disproportionately serve students of vulnerable populations including women, minorities, low-income families, the elderly, military veterans, and increasingly, active duty service-members.

The report stresses that while New Jersey has taken legislative, regulatory and even enforcement steps to deal with the for-profit school problems, much more needs to be done, especially given the Trump administration’s rollback in oversight. Various state agencies, for example, could engage in more oversight to ensure that for profit-schools are delivering the programs they advertise and ensure they are providing students with the skills, credentials and earnings they are promised to avoid being saddled with heavy debt. And two state bills appear to have stalled for now.  A5140/S3614 would require greater transparency and accountability from for-profits for them to remain eligible for state student loan assistance programs, while A5141/S3902 would require for-profits to obtain performance bonds that will fund reimbursements to students who are enrolled in a school, have paid tuition, but are unable to complete their course of study because the school closed.

“It is time for New Jersey to move much more aggressively to protect students from low-quality for-profit institutions of higher education that leave them without the education they were promised and with insurmountable debt,” said Brown Ruggia. “We can’t afford to wait for the protections the legislature can provide. It’s not reasonable for lawmakers to leave good legislation they’ve already proposed to die in the lame duck session, while students and student loan borrowers suffer.”

“The good news is that the Murphy administration and the legislature have an excellent opportunity to help vulnerable students, by collecting more comprehensive data on educational outcomes and loan default rates,” Bell said. “We urge Gov. Murphy and the legislature to strengthen state standards for higher education programs, and to target state tuition assistance effectively to promote better outcomes for today’s highly diverse student population.”

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New Jersey Citizen Action is a statewide advocacy and social service organization that fights for social, racial and economic justice for all while also meeting the pressing needs of low and moderate income New Jerseyans through education and direct service.