Monday, March 15, 2010

Lured Into Trade School and Debt - A Recurring Story


Many years ago, I taught at a trade school and found that the teachers were as passionate about their craft as any teachers I have met. However, I also found that the administration had pressure to recruit students in a way that public institutions do not. I have taught classes at all levels of higher education - from graduate schools, to four year universities, to community colleges. While there must be some proprietary schools with time-tested success, simply put - our two-year colleges (which face budget cuts) are the ticket for people to obtain specific job training, and avoid the massive debts discussed in this New York Times article (March 13, 2010) - In Hard Times, Lured Into Trade School and Debt.

It would be unfair to make a sweeping allegation against all trade schools. However, there are many schools which still employ the practices referenced in the article. As a way to help students and attorneys, I wrote a 50+ page book chapter on how a student can confront a trade school in court, if that student believes s/he is the victim of unscrupulous practices.

My piece, written in the mid-1990's, "Liability of Private Trade School To Student" is not available online - you need to visit a law school library or access it from a Lexis or Westlaw database (Cite: 22 Am. Jur. Proof of Facts 3d 411).

The NY Times article makes it crystal clear that fifteen-plus years after my article, abuses in the trade school sector are the same or worse in 2010. (even after legislation was passed, e.g., barring incentives for admissions representatives based on the number of students they enroll)

Here is the Introduction to Liability of Private Trade School To Student (much of which is excerpted from the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs (United States Senate, May 1991)

In the state of Texas, a truck-driving school arranged a $5,000 loan for a student who was eventually denied a state operator's license. The reason for denial of the license was that the student was unable to operate a truck's clutch because she only had one foot. Unfortunately, such tales are not unusual in the private education sector. [Footnote]

Today, as the federal government scrutinizes the default rates on loans offered to students at private trade schools, [FN] these schools have created a public perception of greed at the expense of education. Testifying before the U.S. Senate's Permanent Subcommittee on Investigations, one trade school owner recently admitted: "I'm a businessman out to make a profit. Truly, I don't care about the well-being of the students." [FN]

The proprietary school sector [FN] has become a big business due, in part, to the accessibility of financial aid to trade schools and the lack of credible regulatory bodies to police such schools. As one school president stated before the Permanent Subcommittee on Investigations in 1991, "there is no way to escape being a slave to the quarterly report. Quality education and higher earnings are two masters. You can't serve both." [FN] The Subcommittee found that such attitudes are prevalent at many proprietary schools. For example, the former financial aid administrator for one school testified that contests were held whereby sales representatives earned incentive awards for enrolling the largest number of students during a given period. Likewise, receptionists with the largest number of student phone contacts were given time off, and loan counselors received cash, color televisions, or other such awards for the largest number of applicants processed. The former financial aid administrator remarked that he "always felt a little strange that the instructors never had a contest, or that the placement office never was rewarded if they placed a high number of graduates." [FN]

Unfortunately, the prospect of regulating the trade school industry has become bleaker in recent times. For example, in Florida, the state licensing agency for trade schools recently cut its staff from five to three investigators for a total of 550 schools. [FN] As economic times get tougher, many college admissions representatives, earning commissions on each student they enroll, often do not have the student's best interests at heart. As a former school owner, convicted of defrauding a guaranteed student loan program, testified:
In the proprietary school business, what you sell is 'dreams,' and so ninety-nine percent of the sales were made in…poor, black areas…at welfare offices and unemployment lines, and in housing projects. My approach…was that 'if [a prospect] could breath, scribble his name, had a driver's license, and was over eighteen years of age,' he was qualified for [the school's] program. My tactics…, [which] were approved, and even encouraged, by the school's owners included making the down payment for the prospect (the amount of which would be reimbursed to me out of the financial aid proceeds) and…going so far as to accompany the prospect to a pawn shop in order for him to obtain enough money for it. [
FN]

The purpose of this article is two-fold. First, it attempts to briefly educate the general practitioner about the "tricks of the trade" in the proprietary school business, the laws relating to financial aid for students, and the process of enrolling students in trade schools. Second, the article discusses the causes of action that can be filed against trade schools, the defenses to those causes of action, and the elements of proof that are necessary for a plaintiff student to successfully prosecute a civil claim of intentional misrepresentation against a trade school. [
FN]

4 comments:

  1. Do you have any information about places like the University of Phoenix, a university that operates exclusively on-line. I'm not accusing them of anything, but I have often wondered if there is opportunity for abuse with a school having this format. I have heard some teachers at the community college where I work calling this, "buying a degree." Do you know if there is any truth to this?

    ReplyDelete
  2. Paul - the reality is that even two-year colleges are adopting a lot of online classes in the interest of efficiency -- or at least hybrid classes (1/2 meeting in person, 1/2 online)

    Lots depend on the quality of the program, instructor, and school accreditation issues.

    Don't know much about UoP. The one advantage to the online model is getting people to graduate quicker. Whether quality suffers in the interim requires some good research which might've already been done.

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