Welcome to the “Career College” Scam

The following is a guest post by Peter Laarman

So it’s the worst economy and worst job market in decades, especially for relatively poor students of color with limited academic skills. So guess who benefits most from this catastrophe? Answer: the sharks who run so-called proprietary colleges or trade schools. Like the sleazy one that runs incessant and obnoxious infomercials on cable television: American Career College.

These schools do especially well with naïve and needy young people by advertising that they will do all of the paperwork, they will process the loans, and they will guarantee a job upon completion. Can you guess which two of these three promises are true?

But the Government Accounting Office, in a special report following an undercover investigation last year, found that career college officials are doing things like giving out answers to qualifying tests, tampering with test forms, and faking high school diplomas in order to tap into federal aid programs.

The barn-door-wide opening for fraud and abuse is that career colleges must be able to demonstrate that underachieving students have the “ability to benefit” from federal aid programs. The schools will stop at nothing to fudge this.

The loan default rate for career college students is over 23%, compared to 9.5 percent for students attending conventional colleges and universities. And lest anyone imagine that we are talking about small dollars here, the proprietary school industry rakes in one-fifth of all federal loans, grants, and campus-based aid: the tidy sum of $16 billion during the 2007-08 academic year.

Despite the damning performance numbers, don’t expect this racket to be shut down anytime soon: the scam school industry is too well connected politically for that to happen. And, in fact, when the GAO report on their dubious practices came out Wall Street barely blinked—and shares in the proprietary companies moved up smartly.

So yes, Joe and Jane Taxpayer: you should be really pissed off about this. I certainly am. But the people who should be angriest of all are the students, most of them still with no job and now saddled with debt. And let’s not forget that student debt is not like other debt: you can never walk away from it. It’s toxic debt: just what hard-luck kids need, right?

Today’s relevant piece of Holy Writ:

The Lord enters into judgment with the elders and princes of his people:
It is you who have devoured the vineyard; the spoil of the poor is in your houses.
What do you mean by crushing my people, by grinding the face of the poor?
says the Lord GOD of hosts.

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