investing in education

Are Taxpayer Dollars Turning For-Profit Colleges Into Welfare Queens?

Are Taxpayer Dollars Turning For-Profit Colleges Into Welfare Queens?

April V. Taylor

The predatory nature of for-profit colleges has made headline news in recent months as some students have launched a debt strike, refusing to pay back student loans they took out for an education that they believe was substandard and that they were baited into by false advertisements. The Obama administration has been attempting to crack down on for-profit colleges since 2009, but the regulations were blocked by a majority of the House of Representatives, many of whom have been lobbied aggressively by the institutions.

The regulations Obama attempted to put in place included requiring proprietary institutions to provide proof that graduates had actually found “gainful employment” upon graduation, with “gainful employment” being defined as allowing graduates to have a reasonable debt-to-income ratio that allowed for the on-time repayment of student loans. They were finally enacted last year, and now many of the for-profit colleges, such as Corinthian Colleges are, “buckling under government lawsuits, regulatory scrutiny and depressed student enrollment,” as the Washington Post states.

Corinthian, one of the prominent for-profit family of colleges, was recently found to be duping the gainful-employment requirement by claiming that students who had worked through temp agencies for a matter of days or students who had been hired at Taco Bell had met the gainful employment standard.

The Obama administration also wants to address a loophole that allows some schools to violate the current “90/10” federal law that requires schools to receive no more than 90 percent of their funding from federal student aid programs. One of the ways for profit schools were able to find a loopholes was by creating their own “GI Bill” which allowed them to not count federal student aid received by combat veterans toward the 90 percent ceiling. This has led veterans to become an even bigger target for exploitation than other students at for profit colleges.

A recent article from calls out the fact that even though the shutdown of the Corinthian group of for profit schools has helped, there are still thousands of other for profit schools that are essentially “peddling fake educations to vulnerable populations,” all on the dime of taxpayers.

Just as mortgage companies made billions from selling subprime loans that they knew would most likely be defaulted on, for profit colleges are making billions of dollars from student loans that they know will also most likely be defaulted on.


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