Publicly traded for-profit colleges have been butting heads with state and federal regulators over allegations of steering students into high-cost loans, misleading consumers about their programs and aggressive marketing tactics. The CFPB sued ITT Technical Institute in 2014 and Corinthian College in 2015 over predatory lending practices, and the schools closed after subsequent actions were taken by the Education Department.
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For-profit college chain Bridgepoint Education must refund and forgive $23.5 million in private loans made to students for misrepresenting the amount of their monthly installment payments.
The CFPB said the for-profit education company began offering private student loans in 2009, but misled students about the total cost of the debt. But the typical payments on the loans were far higher than that amount, according to the consent order. Almost $19 million remains outstanding. The CFPB’s sanctions include a requirement that Bridgepoint use a newly created financial aid disclosure tool with its students, which includes personalized financial aid information as well student outcomes data such as graduation and loan default rates, potential salaries for graduates and postgraduation budgeting. Another $8 million civil penalty must be paid directly to the bureau.
Officials at Bridgepoint neither admitted nor denied the allegations. In a statement, the company said it did nothing wrong and provided all appropriate disclosures to students.
Bridgepoint maintains that its schools acted in good faith when it came to the student loan program.
Most of the students at the two schools take courses online. “This agreement simply allows us to return our full attention and undivided focus to our students and their success”, said Chief Executive Andrew Clark in a statement.
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The San Diego-based company has faced its share of regulatory problems this year. Bridgepoint must also stop reporting information to debt collectors and credit reporting companies about private student loan debt unless it is necessary to remove negative information on a consumer credit report. That can be a roadblock for colleges where most students cannot afford to pay any tuition out of pocket. In reality, the CFPB says, the loans were much more expensive. The government watchdog accused the company of providing zero-interest loans to students but failing to tell them that they would be kicked out of school if they didn’t repay in a year. The borrowers will not have to take any action to receive the debt relief, the CFPB said.
