Legislature passes first-in-the-nation protections for students at for-profit colleges and vocational schools

Wednesday, March 14, 2018

Rep. Gerry Pollet D-46
Bill by Representative Pollet responds to fraudulent claims to entice students into high student loan debt and the Trump administration relaxing federal oversight.

In the just concluded session, the Washington Legislature passed groundbreaking, first-in-the-nation legislation to protect students at for-profit colleges and career schools in Washington from deceptive and fraudulent recruitment claims and from selling high-interest rate student loans.

HB 1439 was developed by Representative Gerry Pollet (D-46, vice-chair of the House Higher Education Committee) over the past two years to address how thousands of students have been left saddled with high and unpayable student loan debts from for-profit college and technical schools.

These students often graduate from programs for careers that do not earn enough to pay off their debt, for which job placement rates were far lower than claimed, or where the school or program closed down entirely in Washington.

For the first time in the nation, under HB 1439, a state will bar for-profit colleges from selling their own student loan products or from having a financial interest in getting students deeper into debt.

“Washington’s students deserve protection from deceptive and abusive practices of large for-profit college and vocational school chains,” Pollet said. “For-profit schools will no longer be able to inflate job placement numbers or the likelihood of a student being able to pay off large student loan debts.”

Some national chains of for-profit colleges have been caught engaging in deceptive and harmful business practices. For example:
  • Corinthian (which operated as Everest Colleges in Washington) marketed loans to students with 15% interest rates and 6% loan origination fees, which were required to be paid back while a student was in school. The federal government documented that Corinthian barred students from class if they were 30 days behind payment, and 60% of its students were in default for 3 years.
  • Federal prosecutors and the California Attorney General found that Corinthian marketed to veterans and targeted recruitment of students who had “minimal to nonexistent understanding of basic financial concepts” (US District Court, US Federal Consumer Financial Protection Bureau v. Corinthian Colleges, Everest College)
  • Corinthian charged students $33 – $43,000 for an AA degree, compared with our community colleges which charge under $10,000.
  • An Associated Press investigative report found that Zenith, which bought Everest Colleges from Corinthian, kept airing the same deceptive ads which had been cited in state and federal lawsuits against Corinthian

Under HB 1439, schools will be barred from selling student loans in which the school has a financial self-interest, as Corinthian did. The bill also mandates that all marketing materials citing job placement rates, average pay or loan default rates need to reflect the same rates calculated for the state and federal governments. The bill bans use of military logos in those materials as well.

The final bill includes a tuition recovery fund for degree-granting institutions and career schools such as cosmetology schools, in the event of the closure of the school.

The bill also continues a two-year collaborative process led by the William D. Ruckelshaus Center to continue to review how the for-profit educational sector is regulated by various state agencies and to issue additional consensus recommendations on aligning the overlapping jurisdictions of three agencies. The elements of the bill were all agreed to in that process with participation by the Northwest Career Colleges Federation.

“Many honest for-profit career schools and colleges are harmed by competitors who use these deceptive practices,” said Pollet. “It’s only fair to provide the honest schools with a level playing field.”
“It’s unconscionable that some of these schools led students into massive student loan debts with no realistic chance of paying off the loans,” continued Pollet. 
“Other Washington state students found themselves having paid for years of school with huge loans only to find that schools had misrepresented that their credits would transfer when the schools closed. It is up to us to protect student consumers here in Washington because the federal government is clearly not going to under the new administration.”

Rep. Gerry Pollet, D-Seattle (46th Legislative District), represents part of King County and the city of Seattle including Lake Forest Park, Kenmore and Lake City.


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