CWN Teams Up With Jesse Jackson to Fight Predatory Student Lending

April 13, 2009

Jesse Jackson Teams Up with Consumer Warning Network

This weekend, the Consumer Warning Network partnered up with the Reverend Jesse Jackson and the Rainbow Push Coalition in Chicago to fight back against predatory student lending.

The Consumer Warning Network’s Nicole Mayer appeared on “UP FRONT with JESSE JACKSON” to spread awareness of the oppressive debt that students are being forced to take on.

Nicole also had the opportunity to engage in quality discussions with Rev. Jackson about what changes need to be made in the student loan industry and how we can work together to make those changes. Rev. Jackson expressed deep concerns with the burden students are forced to carry and implications of discrimination in student lending.  Rev. Jackson specifically discussed the lending practices of student loan giant Sallie Mae.

Read more

Sallie Mae CEO Gets Raise Despite Record Losses

April 9, 2009

Remember the outrage when we we all learned that A.I.G., a recipient of huge federal bailout dollars, was handing out bonuses to executives who had been in charge of financial operations that lost buckets of money? Well Sallie Mae, the nation’s largest private student loan lender, apparently likes what it saw.

Despite losing $213 million in 2008, Sallie Mae’s CEO Albert L. Lord got a multimillion dollar raise as his reward. He received $4.7 million in total compensation for 2008, a raise of $3 million over his 2007 compensation.  Overall, Lord’s collected almost a quarter billion dollars from selling loans to struggling college students during his time at Sallie Mae.

His pay raise became public three months after Lord told managers in a January 26, 2009 memo published by the Washington Post that he was cutting the bonus pool and that no one earning more than $50,000 in base salary will receive a merit increase in 2009. Lord didn’t receive a bonus.

“Our philosophy at Sallie Mae has been to tie compensation to the financial success of the company,” Lord wrote. “We generally pay for results and effort. We reported disappointing full-year earnings last week. Certainly factors well outside our control drove good numbers down and bad numbers up, nonetheless, we are responsible to our shareholders for the bottom line — and they have endured much pain this year.”

Lord added: “The best thing we can say about 2008 is it is behind us.”

Was Lord’s pay for “a job well done?”  How was it tied to performance?

In October, Sallie Mae sold $1 billion in student loans back to the U.S. Department of Education as part of a student loan bailout program called the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA).

Now, Sallie Mae’s fighting to win a loan servicing contract from the U.S. Department of Education that will pay an estimated $200 million a year in fees.

What’s next? TARP money and another raise?

Senator Nelson Demands Feds Fix Chinese Drywall Problem

April 8, 2009

By Jonathan Cohen:

Senator Bill Nelson (FL-D) is demanding that the U.S. Consumer Product Safety Commission (CPSC) do its job and address the defective Chinese drywall plaguing Florida citizens.  To date, the CPSC and Chairperson Nancy Nord have completely failed to do anything about this problem, said Nelson during a Tuesday visit to Bradenton area homes containing Chinese drywall. Read more

Running From Pressure: Sallie Mae Moves Jobs To U.S. After Questions About Student Safety, Contracts

April 6, 2009

By Jim Ross:

Sallie Mae announced it would stop shipping student loan jobs to offshore processing centers just days after the Consumer Warning Network reported that the student lender serviced loans subsidized by American taxpayers in India and the Philippines.

Sallie Mae’s sudden change of heart about offshore outsourcing came as it battles for a federal contract it was unlikely to win if it continued processing student loans offshore.  The contract is worth at least $200 million a year.

Read more

The Trade School Trap: What You Should Know to Avoid Getting Caught

April 6, 2009

By Jillian Estes:

If you think it’s getting too expensive to go to Harvard or Yale, just wait until you hear about trade schools. It’s hard to imagine a fair comparison of elite Ivy League powerhouses with non-traditional, often web-based institutions, but when it comes to cost, it’s a close competition.

The premier universities cost about $30,000 per year, but the expense is justifiable. These schools are universally recognized as the gold standard, and they regularly produce presidents and politicians, Nobel and Pulitzer Prize winners, leading scientists and scholars.

It’s even easier to accept the $10,000 per year price-tag for the country’s top public universities. But what about $70,000 for a three-year fashion marketing degree from American InterContinental University? Or $65,000 for a three-year criminal justice online degree from Kaplan University? Or most frightening, High Tech Institute, which refuses to disclose the total cost of attendance until the student signs an enrollment contract?

Never heard of those schools? Neither have employers. And the cost is just the tip of the iceberg.

Schools Preying on Students

In today’s stumbling economy, many uneducated and under-educated workers are flocking back to college to bolster their positions in the workforce. Traditional community colleges have reported enrollment increases up to 26% in the past six months, a sure sign of a fast-growing trend. But where there is need and urgency, there are predators.

High-cost, low-return trade schools have made an art of preying on down-on-their-luck students by selling them a bill of goods neatly packaged in the students’ hopes and dreams. A former trade school admissions representative, who asked not to be identified for fear of backlash from his ex-employer, explained that potential students who are desperate for change are the ideal targets.

This representative says he was trained to seek out details about a student’s “pathetic life” and then use that as “ammunition to load the gun to shoot down any objections” the student might have about signing up for a high-cost school.

Trade Schools Popular & Profitable

Unfortunately, the for-profit schools are startlingly successful in this sales pitch. In the past year, trade schools have rapidly increased in popularity and profitability.

Career Education Corporation, or CEC, is one of the largest trade-school parent companies.  It operates 86 worldwide campuses under 25 different names. Stock prices for CEC (symbol: CECO), a company fresh on the heels of a nationwide settlement for deceptive practices, hit a 52-week high in February.  It’s currently trading nearly 40% higher than three months ago.

Another trade school giant, ITT Technical Institute (symbol: ESI), is also trading near its 52-week high and has seen a 35% increase in the past three months. The correlation is clear: the deeper the economy sinks, the higher the trade schools are flying.

Crippling Payments

As stock prices soar, so do the interest rates that a student will be forced into in order to finance the trade school education.  Student loan lenders want a piece of the trade school pie, so they offer to “help” students by making financing available through special loan programs.

Sallie Mae, the student lending giant, leads the pack with their Career Training Loan.  Recognizing the astronomic cost of attending trade schools, Sallie Mae has no limit on the amount of money that one student can borrow under this loan program.  But there seems to be no limit on the interest rates either.

The standard Career Training Loan interest rate is currently as high as a whopping 15.24% (LIBOR + 13.5%) with a monthly variable rate, meaning the rate will increase as federal loan rates increase.  A 15-year repayment of a $70,000 loan would require $990 per month payments and a total amount of over $175,000.00 paid right into Sallie Mae’s pocket!  FinAid, a leading consumer debt calculator, says that payments like that would require an annual salary of $118,000.00.  With most trade school job opportunities in the $30,000 range, that’s a risky gamble to take.

The Confusing Accreditation Game

While any college, even trade schools, might meet a student’s immediate needs, the devastating impact of a trade school decision is most notable when students finish their educations. Students who attended traditional, regionally-accredited programs enter the workforce with a leg up. Students who attended non-traditional, nationally-accredited programs are simply stuck in the mud with massive debt and a virtually valueless degree.

The value of proper accreditation is one of the most closely guarded secrets of the trade school industry. The terminology is confusing, and trade schools capitalize on this to further their own interests.

Regional accreditation is actually the preferred level of accreditation, while national accreditation is widely viewed as substandard. Although there is no guarantee of credit recognition even among regionally-accredited schools, the industry standard is that regionally-accredited schools simply will not accept or recognize credits from a nationally-accredited institution.

Rich Douglas, a distance learning expert, researched whether credits from a particular national accrediting agency, DETC, were transferable to seven other colleges.  He “was surprised that the response was so uncontroversial: almost unanimously, they do not.”

Worthless Degrees

The consequences of national accreditation or no accreditation can be drastic.  If a student has to move to another school or wants to seek a higher degree, the nationally-accredited school’s credits generally aren’t worth the paper they are printed on.  Unfortunately, this is an all-too-common scenario.  Most trade schools have retention rates of less than 40%, leaving students who want out with no options and a mountain of debt.

Additionally, the accreditation difference is critical for students who returned to school simply to seek higher standing with employers. Degrees from nationally-accredited schools may not even be recognized as legitimate education.

One student spent more than $60,000 and three years obtaining a criminal justice degree from a brick-and-mortar trade school in California, only to be rejected by every local, state and national law enforcement agency to which he applied. With tremendous disappointment evident in his voice, he explained that, “They told me it didn’t count. I needed to go back and get a degree from a real school.”   This student is in the process of seeking legal action against his school, so his name cannot be used at this time.

Avoiding devastating disasters like that one is like attempting to navigate a minefield in the trade school world.  The pursuit of higher education can open infinite doors if you’re on the right path. But making a wrong turn and chasing a dream into the trade school trap can lead to lifelong financial ruin and personal despair.

Why Won’t My Mortgage Company Help?

April 2, 2009

By Angie Moreschi:

With President Obama’s recently released Housing Rescue Plan, the pressure is on to stop the foreclosure crisis, but making that happen will require the cooperation of lenders, and Consumer Warning Network has learned that’s easier said than done.  We followed a Florida family trying to save their home, and it left us asking — “If they can’t get a loan modification, who can?”  Click the video above to see Angie Moreschi’s report or click read more below.

Read more

« Previous Page