A report released last week by the Student Borrower Protection Center highlighted public colleges and universities that have been promoting high risk loans for short-term programs, but in several ways the report raised as many questions as it offered answers.
Using publicly available data, SBPC showed that some colleges have encouraged students to take on “shadow debts” – defined as loans and borrowings outside the traditional private student loan market – characterized by high interest rates and excessive fees, according to the report.
The colleges have promoted lenders such as Climb Credit, Ascent Funding, Meritize, and PayPal Credit on their websites along with contractors known as online program managers who help deliver online course offerings. They are most commonly suggested as funding options for boot camps or non-graduate programs that train students in a variety of topics such as cybersecurity or computer programming.
The majority of the times SBPC found the practice to be most evident was usually through an OPM, but it wasn’t strictly for OPMs, according to Seth Frotman, executive director of SBPC.
“It seems that all of these companies have come together to make quick cash – from the publicly traded OPMs to the lenders to the schools – and are viewing the surge in OPM-driven bootcamps as a quick and easy sales booster,” said Frotman.
However, the parties cited in the report deny some of the report’s allegations as financial aid leaders work to find additional information.
On their bootcamp website, operated by the OPM Fullstack Academy, the University of Oklahoma lists Climb and Ascent as funding options. In the report, SBPC found that both personal loan providers charge lending fees and high annual percentages – the example loan for “the shadow debt company Ascent includes a lending fee of 5 percent and an APR of up to 16.98 percent”. Report says.
Kim McNealy, Ascent’s chief marketing officer, said the company was unfamiliar with the term “shadow lender” but contradicted what it implies.
“The implication of this label is that it would apply to misleading, opaque, or confusing business or credit practice,” said McNealy. “In light of this, we disagree with Ascent’s portrayal as a shadow lender.”
McNealy added that Ascent is committed to being more transparent and that its bootcamp loans are consumer loans, not private student loans.
A spokesman for the University of Oklahoma said the lenders are not directly affiliated with the university, but rather are affiliated with Fullstack, which works with the institution’s College of Continuing Education.
“There are many ways to pay for these courses, including scholarships offered by OU Outreach, and the type of funding is up to each student,” the spokesman said. “We encourage every student to fully research their funding options and make the best choice for their particular situation.”
San Jose State University also works with Fullstack and had a similar website listing Climb and Ascent as funding options for their bootcamps, but the website has since changed. A university spokesperson said that the contract with Fullstack does not include any financing or payment plan options with lenders and that the OPM offers tuition, registration and counseling services for students, while the SJSU provides program and student support.
“We have reviewed how Fullstack communicates its partnership with lenders and are working with them to clarify in our information materials and on our website that SJSU does not have an agreement with the lenders and to remove any notices that might indicate this”, the spokesman said. “We do not select credit agencies for students and we have no information on whether our students in the program have applied for loans.”
Mogan Subramaniam, President of Fullstack, said the company is “committed to transparency and student outcomes,” adding that it was a founding member of the Council on Integrity in Results Reporting that gave students the results of an institution before enrolling in them Program provides.
Like Ascent, the report also lists some of the terms and conditions for Climb, stating that it offers an APR of 14.44 percent and an origination fee of 5 percent. But the company’s CEO, Angela Ceresnie, said Climb is helping students pay for programs with a cheaper option than a high-yield credit card.
“Climbs interest rates start at 5.99 percent and are generally below the cost of credit cards and have lower monthly payments than many other payment options,” said Ceresnie. “With many programs we also offer a zero percent credit option.”
Justin Draeger, president of the National Association of Student Financial Aid Administrators, said that while he is unfamiliar with the undergraduate loan products, the terms of the loans referenced in the report did not seem surprising.
“I can certainly look at the numbers and say that these are not good financial conditions and the penalties seem pretty harsh,” said Draeger. “But that doesn’t necessarily surprise me when it comes to unsecured credit for a short-term program.”
NASFAA and its ethics committee plan to speak to their member institutions to provide more clarity on the institutional-lender relationship, the types of disclosures students receive about the loans, and the overall market for personal loans that help students pay, to receive training camp.
“Some of the things we read in the report are obviously disturbing, and we need to learn a little more about what they are and how schools use them,” Draeger said.
SBPC called on the Department of Education to investigate the institutions and OPMs because they “lead students into risky forms of debt without providing these borrowers or policy makers with the full range of information these companies are required by law to provide”.
“Unfortunately, we have seen former Education Department leaders fail in years to enforce the critical consumer protection that was put in place to protect borrowers in the face of a national scandal,” Frotman said. “Hopefully this report spurs them on to take action to enforce protection on their books and hold schools accountable for some really worrying practices that are driving public borrowers into shadow debt.”
A ministry spokesman had no information on whether an investigation is planned.
“Colleges that advocate private loan products must advocate the best interests of their students, including public documentation of why they are in favor of a particular private loan, and adhere to a code of conduct that prohibits revenue sharing,” the spokesman said. “We are committed to making higher education more accessible and affordable, and supporting best practices that protect borrowers so students don’t graduate amid mountains of debt.”
source https://collegeeducationnewsllc.com/report-stirs-up-complexities-of-public-colleges-boot-camp-financing/
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