Recently a trade college in Indiana found itself the subject of a law suit for their alleged use of predatory student loans and unethical tactics used in order to ensure repayment of the loans. The Indiana based school boast some of the highest tuition rates in the country in the private for profit education industry. Tuition to obtain an associate’s degree could cost as much as $44,000 while bachelor’s programs could reach as high as $88,000. With tuition rates so high, absent a significant scholarship many students were required to rely on both Federal and private loans to fund their education.
The bulk of the tuition payments for students who chose to attend this school would need to be financed by Federal loans; however these Federal loans often failed to cover the full cost of the student’s education. This left the students in a situation which has been referred to as a “tuition gap,” which essentially means students are left with a tuition balance after thy have exhausted their student loans for that year. With this in mind the Indiana school offered a zero interest loan called a “temporary credit” which typically had to be paid at the end of the first academic year. At which point the school began pushing students to repay the temporary credit through threats of expulsion. At this point student were required to enter into high-cost private loan programs to remain enrolled in the school. Typically students fail to pay these high cost loans eventually resulting in their default. Because of this the Indiana school has been accused of engaging in “high pressure, strong arm recruiting tactics to get consumers to enroll” in their programs and take out student loans to repay them. Currently before the court, the complaint filed against the Indiana school seeks restitution, disgorgement, civil penalties, and injunctive relief.