Giving students their day in court

May 1 is an important date for our nation’s high school seniors and colleges; it is the National College Decision Day, the deadline for students to make a deposit and reserve a spot at the college they plan to attend (if May 1 is a Sunday, like it was in 2016, College Decision Day falls on the following business day).  While many institutions, including community colleges, accept deposits after May 1, the date still serves as an important landmark in a student’s senior year of high school.

This year, May 1 also marked the start of a potential new beginning for many students currently or previously enrolled in college.  Both the U.S. Department of Education (ED) and the Consumer Financial Protection Bureau (CFPB) proposed rules that will help insure students receive the education they deserve and protect their Constitutionally-enshrined legal rights, if they were misled by a college or university.  It will also protect you, the American taxpayer, who help millions of students attend college through our nation’s federal financial aid programs.  By helping to ensure these students attend a college that prepares them to successfully enter the workforce, the rules enable students to attain gainful employment and repay their federal student loans – loans for which the American public is otherwise on the hook. 

{mosads}Prior to these rules being issued, unscrupulous colleges inserted into their enrollment agreements language that would require a student resolve her grievances with the college through arbitration, rather than through the courts with an impartial judge and jury.  These colleges, which are often owned by massive corporations, are able to hire private arbitration firms of their choosing to decide the dispute; students have little opportunity to present evidence or to appeal an adverse outcome; an arbitrator’s decision is often final.  The process was highly unfair and severely restricted students’ abilities to seek restitution when these colleges break the law.  It is also a process to which not one of our association’s members requires students to agree. 

Over the past several years, state, federal, media and other investigations have uncovered scores of examples of for-profit colleges deceiving prospective students about graduation, job placement, and loan default rates, as well as the ability to transfer credits to another institution or to sit for exams required for certain professions.  Most shamelessly, these colleges target homeless students, those who are the first in their family to attend college, minority and/or low-income students, as well as servicemembers and veterans – including those suffering from brain injuries they received while serving our country.  

Students also unwittingly encounter these forced arbitration agreements when they take out private student loans in order to pay for tuition. Although, state and federal student aid programs tend to have better consumer protections and do not include forced arbitration clauses, tuition and fees at for-profit colleges can exceed available state and federal aid, driving students to the private loan market. Still other students are lured to these unscrupulous institutions after having exhausted their eligibility for state and federal aid, requiring them to obtain private financing. Taking out private student loans bears considerable risk for consumers. For example, a report by Public Citizen found that some lenders have high interest rates and penalties, in violation of various state consumer protection laws.  Other investigations, including a comprehensive 2012 Senate HELP Committee report, have found that some recruiters at for-profit colleges misled students about the type of student aid they will receive (grants versus loans) and whether they would have to pay it back.  The Senate report found this was particularly common when these colleges targeted servicemembers and veterans.

The students that were aggrieved in these examples of misconduct had no meaningful recourse.  Hidden deep in their enrollment agreements, in difficult to understand language was the forced arbitration clause.  In many cases, these students had no idea what they were signing; they were blinded by the college recruiters’ promises of a better life for them and their families and they are often encouraged to sign the enrollment contract without adequately reviewing it.

The Obama Administration and the CFPB have finally had enough.  Working separately but reaching similar conclusions, ED and the CFPB found that these clauses help no one but the large corporations that insist on them.  When the final rules are issued later this year, students and taxpayers can be assured that starting in the 2017-2018 school year, forced arbitration clauses will be limited in their reach when used in an institution’s enrollment agreement and will be curtailed in private student loan contracts.  These rules are long overdue and we should thank the Administration and CFPB for their commitment to being good stewards of our tax dollars.

Michael Rose is associate director for government relations for the  National Association for College Admission Counseling.