A report released last week by the Student Borrower Protection Center shed light on public colleges and universities that encourage high-risk lending for short-term programs, but in several ways the report prompted as many questions as it answered. .
Using publicly available data, SBPC showed that some colleges encourage students to take on “shadow debt” – which they define as loans and credits outside the traditional private student loan market – which is characterized by high interest rates and excessive fees, according to The report.
Colleges, along with contractors called online program managers who help facilitate online course offerings, have advertised lenders such as Climb Credit, Ascent Funding, Meritize, and PayPal Credit on their websites. They are most often suggested as funding options for boot camps or non-degree programs that train students in a variety of topics, such as cybersecurity or computer programming.
According to Seth Frotman, executive director of SBPC, the majority of cases in which SBPC found the practice to be blatantly happening were usually through an OPM, but it was not exclusive to OPMs.
“It looks like all of these entities have come together for a chance to make a quick buck – from publicly traded OPMs to lenders to schools – and see the rise of OPM-driven boot camps as income. quick and easy booster, ”said Frotman.
But parties cited in the report dispute some of the report’s claims, as leaders in the financial aid landscape scramble to find additional information.
On its training camp website, powered by OPM Fullstack Academy, the University of Oklahoma lists Climb and Ascent as financing options. In the report, SBPC notes that both private loan providers charge high origination fees and annual percentage rates – the loan example presented for “parallel debt company Ascent involves a 5% origination fee and a APR of up to 16.98%, ”report said.
Ascent’s chief marketing officer, Kim McNealy, said the company was unfamiliar with the term “shadow lender,” but disagreed with what it implies.
“The implication with this label is that it would apply to deceptive, opaque or confusing business or lending practices,” McNealy said. “In light of this, we disagree with Ascent’s portrayal as a shadow lender. “
McNealy added that Ascent seeks to provide greater transparency and is in advance that his boot camp loans are consumer loans, not private student loans.
A spokesperson for the University of Oklahoma said the lenders are not directly linked to the university but are linked to Fullstack, which partners with the institution’s continuing education college.
“There are many ways to pay for these courses, including the scholarships offered by OU Outreach, and the mode of funding is solely the decision of each student,” said the spokesperson. “We encourage each student to fully research their funding options and make the best choice for their particular situation.”
San José State University is also a partner of Fullstack and had a similar site lists Climb and Ascent as funding options for its training camps, but the webpage has since changed. A spokesperson for the university said its contract with Fullstack did not include any funding options or payment plans with any lenders and that the OPM provided instruction, enrollment and counseling services to students. , while SJSU provided program and student support.
“We have reviewed the way Fullstack communicates its partnership with lenders, and we are working with them to make it clear in our disclosure materials and our website that SJSU does not have any agreements with lenders and to remove any references that may allude to it, ”the spokesperson said. “We do not select any student loan agencies and have no information as to whether our students in the program have applied for loans.”
Fullstack President Mogan Subramaniam said the company was “dedicated to transparency and student outcomes,” adding that it was a founding member of the Council on Integrity in Results Reporting, which provides students with results reporting. ” an institution before registering for a program.
Like Ascent, the report also lists some of Climb’s terms, indicating that it offers an APR of 14.44% and an original fee of 5%. But company CEO Angela Ceresnie said Climb helps students pay for programs with a more affordable option than a high-interest credit card.
“Climb’s interest rates start at 5.99% and are generally lower than the cost of credit cards and have lower monthly payments than many other payment options,” Ceresnie said. “We also offer a zero rate loan option in many programs. “
Justin Draeger, president of the National Association of Student Financial Aid Administrators, said that while he is not yet familiar with loan products for non-degree programs, the terms and conditions of the loans referenced in the report did not seem surprising.
“I can definitely look at the numbers and say this is not good financial conditions and the penalties seem pretty steep,” Draeger said. “But again, it doesn’t necessarily surprise me when you talk about an unsecured loan for a short-term program.”
NASFAA and its Ethics Commission plan to engage with its member institutions to gain greater clarity on the relationship between institutions and loan providers, the types of information provided to students about loans, and the overall loan market. services that help students pay for training camps.
“Some of the things we read in the report are obviously baffling, and we need to dig in and learn a little bit more about what they are and how schools are using them,” Draeger said.
The SBPC asked the Ministry of Education to investigate institutions and PMIs, as they “steer students into risky forms of debt without offering these borrowers or policy makers the full breadth of information these companies have. are required by law “.
“Unfortunately, we saw how the previous education ministry leadership years ago failed to enforce critical consumer protections that were put in place to protect borrowers in the face of a scandal. national, ”Frotman said. “I hope this report will inspire them to take action to enforce the protections of their books and to hold schools accountable for some really worrying practices, in terms of the indebtedness of borrowers from public institutions.”
A spokesperson for the ministry had no information about his intention to investigate.
“Colleges that approve private loan products are required to defend the best interests of their students, including publicly documenting why they are approving a particular private loan, and agreeing to abide by a code of conduct that prohibits income sharing.” , said the spokesperson. “We are committed to making higher education more accessible and affordable and to supporting good practices that protect borrowers so that students do not graduate under mountains of debt. “