It's obvious that Westwood College can't defend it's own practices so they resort to trying to smear students and anyone else who exposes their lies and empty promises. That's just pathetic. Clean up your act, stop ripping off students and you won't have to be so angry and defensive.
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An Education in Student Loans
College degrees are supposed to last a lifetime, but should tuition loan payments? How some schools got away with charging interest rates of up to 18 percent.
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Graduation day should have been a happy one for Tyrone Bailey. The first in his family of three children to earn anything beyond a high-school diploma, Bailey, 24, received a bachelor's in criminal studies from Westwood College in Torrance, Calif., two years ago. But even while the day's pomp and circumstance played out, his thoughts turned quickly to the tough job market and the $20,000 in loans he borrowed directly from his alma mater that were set to accrue a whopping 18 percent interest rate.
Not long ago, low-interest student loans were as easy to come by as a pass to get out of gym class. But the economic downturn and ensuing credit crunch put an end to that. As relatively cheap, private bank and federally backed loans became harder to come by, some colleges, vocational schools, and online institutions filled the void by lending directly to students like Bailey. Loans from traditional sources like Student Loan Marketing Corp., commonly known as Sallie Mae, fell by more than 50 percent from 2007–08 to 2008–09 after years of rapid growth, according to the College Board. (Article continued below...)
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Since they're largely unregulated and come from many sources, the rise of direct school-to-student loans are hard to estimate on a national level. "It's a new twist that in the proprietary-school sector, schools are making their own loans," says Deanne Loonin, who directs the National Consumer Law Center's Student Loan Borrower Assistance Project. For example, Westwood, which operates 17 campuses nationwide and offers online-degree programs as well, hands out direct loans to about a quarter of its 17,000 students. Like most privately held companies, it isn't required to disclose just how much money it loans out. But it's likely similar to schools like Corinthian Colleges, the Santa Ana, Calif.–based owner of Everest College and WyoTech chains, whose direct-lending division is expected to make $140 million for the school during the current fiscal year. Then there's ITT Educational Services, which, according to SEC filings, generated $52 million from its in-house student-loan program. (ITT didn't respond to NEWSWEEK's request for comment, and neither school makes its interest rates public.) Career Education Corp., which runs campuses under a variety of names (including the Brooks Institute, American InterContinental University, and Sanford-Brown Institutes and Colleges), has expanded an existing program over the last year, says Jeff Leshay, senior vice president for corporate communications. The program now brings in about $34 million annually, still a small percentage of total revenues, which the school projects will be $1.75 billion for the year. That program charges interest rates between federal level and market rate for private loans.
Consumer advocates see nothing wrong with schools that offer to help finance their students' educations. It's rates as much as 10 percent higher than federal student-loan rates that have them worried. Before the recession and credit crunch hit the student-loan market, it wasn't uncommon to see federally backed loans hovering around 3 percent or even lower. For qualified students, 8 percent bank loans are still common. Mark Kantrowitz, publisher of Finaid.org, says it's hard to estimate the average private student-loan rate, but he said most loans are in the low double figures. Eighteen percent, however is near predatory and driven by a pure profit motive, says Loonin. "The [traditional] lenders pulled out for now, and [some] schools were searching for ways to continue to have their students pay the same kinds of tuition," says Loonin.
Students who attend online colleges or vocational schools are often the ones who need the most tuition financing and the ones least able to afford the high interest rates charged by direct school-to-student loan programs. They tend to have worse credit than students at traditional schools and are less likely to convert their diplomas into high-paying jobs. "They're students who probably didn't do well in high school, they probably didn't sit in the front, and they've probably never taken an SAT class," says Gil Rudawsky, a spokesman for Westwood. "Their finances are probably not as stellar, and they probably don't have help from the parents. A lot of times it's the difference between whether a student goes to college or not."
But that empathy didn't always jibe with Westwood's loan program. At least not while it was charging Bailey and other graduates 18 percent interest on their student loans. Bailey is one of four former students who were named as plaintiffs in a class-action lawsuit in May against Westwood's parent company, Denver-based Alta Colleges, alleging that the administration made unrealistic job-placement promises, issued deceptive statements about the school's accreditation, and was not sufficiently clear about the high interest rates the school charged on its direct-loan program.
Westwood's Rudawsky says the suit is "98 percent fiction" and notes that the school requires students max out government loans and grants and private options before turning to the school for financing. Following the controversy, the school has dropped its rate to 10 percent for new and incoming students and to zero for existing students and graduates. Rudawsky maintains that its direct-loan program has suffered from a high rate of defaults and was not a moneymaker for the school.
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