Student-Loan Probe Widens

January 14, 2014
Wall Street Journal 
student loan news
The Consumer Financial Protection Bureau (CFPB), in cooperation with attorneys general in 32 states, is tightening the screws on sketchy student lending practices at for-profit colleges.

The federal-state crackdown is scrutinizing loans provided through the schools via outside investors, with a particular focus on high interest rates and inadequate disclosure of loan risks. "We've seen instances when some of the for-profit schools are anticipating as much as a 50 percent default rate on loans they make to students," CFPB director Richard Cordray said in a 2012 interview. "They're not telling the students that, but they are disclosing that information to their investors." Also of interest are job-placement claims by the colleges that greatly exaggerate graduates' future income potential.

The watchdog already has notified at least a couple of institutions -- Corinthian Colleges Inc. and ITT Educational Services Inc. -- of possible legal action because of their lending practices, and it may flex its authority even more this year. "I expect in 2014 you'll see action by the CFPB in coordination with states in coming months," predicted Kentucky AG Jack Conway, who chairs the coalition of state AGs, in a recent interview.

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