Don’t be misled. Student Loan Forgiveness is a Good Thing

I heard another person denounce the Biden-Harris administration’s student loan forgiveness plan as one that promotes the moral turpitude of our country.

Yes, there are people who really believe in it.

If I had a dollar for every time I heard someone file the Biden-Harris forgiveness plan, I might be able to pay off that Parent’s Plus loan I took out for one of my kids. Most people simply don’t understand how student loan programs have been used by for-profit companies posing as legitimate educational institutions to take advantage of Title IV of the Higher Education Act.

Emile Guillermo

This is what allows schools that exist solely for the purpose of making direct loans to large numbers of students of color. These schools wouldn’t exist if the vast majority of their income (and profits) didn’t come from direct student loans to students.

The HEA is a built-in incentive for schools to make loans whether they are repaid or not. The important number is the ratio. Ninety percent of a school’s revenue may come from the federal student loan program. Ten percent must come from other sources, such as students repaying their loans.

Schools actually receive money directly from the federal government to lend to students as their main income and profit. They stay in the 90/10 ratio by getting income from students repaying their loans. And when students default at a high rate, the debt is often sold to collection agencies, adding another revenue stream to that 10%.

And that’s all. This is the for-profit college business model.

Too bad it looks like a de facto federal welfare model that supports many for-profit educational corporations. They don’t need to ask alumni to donate to help keep the doors open. Truth be told, the likelihood of a former rich is slim on the salary of a certified dental technician. But that’s okay, schools just need the steady stream of students who won’t know what hits them when promises of “jobs for life” or jobs after programs end don’t materialize. not.

These students support for-profit schools simply by taking out loans. So don’t blame the students. If you’re looking for a sense of “moral turpitude” in the student loan business, look no further than for-profit schools that look better on paper than they really are, selling to students seeking hope and opportunities an invoice for the goods.

The Department of Education recently added to the Hall of Shame which already includes institutions such as the former Corinthian College and ITT Tech.

Now add the new kid on the block, Westwood College. A week after Biden’s discount plan was announced, the Department of Education announced a separate $1.5 billion debt relief package for 79,000 borrowers who attended the since-closed Westwood College. 2016.

“Westwood exploited a culture of false promises, lies and manipulation in order to profit from student debt that plagued borrowers long after Westwood closed,” Education Undersecretary James Kvaal said in a statement. communicated.

Along with evidence from state attorneys general in Colorado and Illinois, the Department of Education described how Westwood “regularly misled prospective students by grossly misrepresenting that his degrees would benefit their career prospects and potential. income”.

Specifically, Westwood promised students jobs in their fields within six months of graduation that would “make them employable for the rest of their lives.” Everything was swollen. As a guarantee of employment. The department found no evidence the school ever followed up.

Tackling specific cases like Westwood shows where the egregious abusers are. It’s a small group of people. And practitioners in the field should all get the message.

In the Westwood College example, the school was run by Alta College but acquired in 2002 by a private equity firm. George Burnett was co-founder of Alta and being acquired was like a feather in his cap. He was named president of the University of Phoenix earlier this year. But Burnett quit the post shortly after Department of Education officials began investigating more deeply what happened at Westwood.

The Westwood case now brings the Department of Education’s success rate in exposing predatory college practices to a staggering $14.5 billion in rejections for nearly 1.1 million borrowers.

This is all in addition to the general student loan forgiveness plan announced by Biden that should help not only for-profit borrowers, but also borrowers attending public two- and four-year institutions, as well as traditional private colleges (10 $000 loan cancellation). for those earning $125,000, and an additional $10,000 for Pell Grant recipients).

But for the most part, the real problem with student loans are the education predators, the “private for profit” colleges, which make over 30% of all student loans.

Many of these PFPs took BIPOC students for a ride.

Government and other higher education actors need to do more to expose the for-profit business model, perhaps to reduce the loan income ratio from 90-10 to 70-30. Make schools show that they are more than loan collectors and recruiters. At a minimum, schools must deliver on promises made to their students.

In the meantime, you will hear from people on the left saying that Biden should have canceled more of his student debt. While on the right, people will argue about cost and morals. You just need to point out the real situation of student loans that need reform. Schools that exist to make loans.

They need to understand that students deserve all the loan forgiveness they can get. What about for-profit predators? They deserve our contempt.

Emil Guillermo is a journalist and commentator. He writes for the Asian American Legal Defense and Education Fund. You can follow him on Twitter @emilamok

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