Congress Urged To Stop Propping Up Fraudulent For-Profit Colleges With Federal Pell Grants | Press Release

November 16, 2021

Project On Predatory Student Lending: “Congress should no longer prop this fraudulent industry up with taxpayer funds…that are supposed to help the lowest income students.”

 

BOSTON – As part of President Biden’s Build Back Better framework, Democrats in Congress have proposed restricting for-profit colleges from receiving federal funds in the form of Pell Grant awards, a student aid program for those with significant financial need.

For-profit colleges are among the most heavily tax-subsidized of any private sector, taking more than $15 billion in taxpayer money each year in the form of federal student aid, including Pell Grants. For-profit colleges take in as high as 90 percent federal student aid and spend an average of 20 percent of their revenue on instruction, some as low as 9 percent. The majority goes to marketing and advertising, executive compensation, and shareholder profit, according to a 2019 report.

 

Statement from Eileen Connor, Director of the Project on Predatory Student Lending

“Congress should no longer prop this fraudulent industry up with taxpayer funds, particularly Pell grants that are supposed to help the lowest income students. The for-profit college business model relies almost entirely on federal student aid — specifically using taxpayer dollars to line its own pockets instead of investing in the education it claims to provide. The industry is notorious for feeding lies to those looking for opportunity through higher education and scamming them into maxing out their federal loans. It’s why for-profit colleges consistently target people who are low-income, veterans, and people of color.

This is a result of predatory and racially-targeted recruitment strategies in the form of high pressure sales tactics, racially-targeted advertising, and false statements to lure in students of color to its low-value, high-cost product. The outcomes are worse for Black and Latino students; almost 60 percent of Black borrowers who took on student debt to attend a for-profit school in 2004 defaulted on their loans by 2016, compared to only 36% of their white peers. And among borrowers, Black and Latino students are more likely to drop out than their white peers, and have higher debt burdens after attending for-profit colleges.

Restricting for-profit colleges from accessing Pell Grants is a step in the right direction toward accountability and equity in higher education. Congress and the Department of Education should act quickly and decisively to hold these schools accountable and to fix the broken system that has allowed millions of students to be defrauded by predatory for-profit schools and left with mountains of unpayable debt and worthless degrees.”

 

The Project on Predatory Student Lending has represented more than one million former for-profit college students and won landmark cases against the Department of Education and predatory colleges. Its litigation has helped cancel more than $2 billion of fraudulent student debt.

The Project represents borrowers in Britt v. Florida Career Colleges, where in 2020, students sued the Florida-based for-profit college chain for systematically targeting Black students and selling a predatory product using false representations and high-pressure sales tactics. Students are challenging a recent court order that would force them into arbitration.

 

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students and taxpayers. The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

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