Project on Predatory Student Lending Supports Warren, Pocan Effort to Hold Private Equity Firms Accountable for Enabling Predatory For-Profit Colleges | Press Release
September 17, 2019
BOSTON, MA –The Project on Predatory Student Lending issued the following statement after U.S. Senator Elizabeth Warren (D-MA) and U.S. Representative Mark Pocan (D-WI) called on six private equity firms to provide details about those firms’ management of predatory for-profit colleges.
“For-profit colleges are already some of the worst-of-the-worst companies. They prey on vulnerable students, promise valuable educations and job offers after graduation, and then leave those students in the cold and loaded up with debt,” said Eileen Connor, Legal Director at the Project. “Over the past decade, there has been an increase in private equity investment in these schools which has made the situations for students even worse — propping up schools that blatantly defraud students and pushing more students into further debt. This is the essence of corruption. We strongly support Senator Warren and Rep. Pocan’s work to get to the root of these problems. We have been working to help defrauded students get their debt cancelled and will continue to hold Betsy DeVos and all bad actors accountable.”
Warren and Pocan citeda recent National Bureau of Economic Research study, which found that private equity buyouts of for-profit colleges result in, “higher tuition, lower education inputs, lower graduation rates, higher student borrowing, lower repayment rates, and lower wage earnings,” all of which are accompanied by a 10-20 percentage point increase in reliance on federal aid and a tripling of profits for the private equity firms. NBER also noted that for-profit schools owned or formerly owned by private equity firms account for about 35 percent of enrollment, and sustain themselves primarily through federal student loans, which on average, make up 80 percent of their revenue.
As a result, several for-profit colleges backed by private equity firms have particularly high rates of borrower defense claims,in which defrauded students are seeking debt cancellation from the U.S. Department of Education. For example:
- Apollo Group, Inc. (University of Phoenix) – 8,139 pending claims from students
- Education Management Corporation – 6,284 pending claims from students
- Education Corporation of America – 1,387 pending claims from students
- Bridgepoint Education, Inc. – 962 pending claims from students
- ATI Enterprises, Inc. (ATI Career Training Centers, ATI Technical Training Center, ATRI Career Training) – 739 pending claims from students
Students represented by the Project filed a lawsuiton behalf of180,000 borrowers with pending borrower defense applications to hold Secretary DeVos accountable for her failure to process their loan cancellation applications as required by law. The Project will also soon challenge DeVos in courtover her reckless decision to strip the regulations protecting these students.
For-profit colleges account for 13 percent of the student population, but 47 percent of federal loan defaults. And 98 percentof all loan cancellation applications sent to the federal government in 2018 were due to predatory for-profit colleges.