via Project on Predatory Student Lending blog

Mikyeila and her mother have about $150,000 in combined student loan debt from the now-closed, for-profit International Academy of Design and Technology (IADT).

It’s no surprise that being ripped off by a for-profit college impacts more than just the student who attends. A student borrower’s unpayable debts affect their whole family. And there’s a way that parents can bear the debt burden personally: Parent PLUS loans. These are loans that parents can take out on behalf of their child to help them pay for school. They’re often used as a supplement to other federal funding for students who can’t afford to pay for school with just their individual grants and loans. In fact, according to a recent New York Times story, Parent PLUS loans now account for nearly a quarter of new federal borrowing for undergraduates and almost 6% of the total federal student loan debt.

And certain schools take particular advantage of these loans: for-profit colleges.

These schools notoriously use predatory targeting practices to sell their scams to low-income households, relying on federal financial aid dollars to make money. Knowing students often can’t afford to pay for an education themselves, Parent PLUS Loans are another way for these schools to drain as much money out of families and taxpayers as they possibly can.

Just ask Mikyeila and her mother, who combined have about $150,000 in student loan debt from the now-closed, for-profit International Academy of Design and Technology (IADT). IADT was owned by Career Education Corp., which recently became Perdoceo.

“They’d tell us, ‘This is the cost per quarter, fill out your FAFSA, and you’ll be covered’,” said Mikyeila.  “But then, it would change, and they’d consistently say ‘You need more money. If you don’t have any, take out more loans. If you can’t cover schooling costs, we’re going to kick you out, and if you leave and try to come back, your tuition will increase.’ It was nonstop pressure for three years that I wasn’t going to get my degree if I didn’t do XYZ.”

These institutions thrive by making the process intentionally confusing. By drowning students in paperwork and capitalizing on their fear of losing their chance at a degree, for-profit college companies make these students and families willing to do anything they can. For parents, this often means taking on debt themselves.

“[Freddy] is my youngest child, and this was his dream,” said Pam Hewitt. Between her and her son, they have over $248,000 in student loan debt after Freddy attended Full Sail University. “I thought ‘He’s going to go places and I just wanted to support him.’ He’s had this dream since elementary school, and as a parent, you want your child to get their dream. I wanted it for him as badly as he wanted it for himself.”

But when you’re investing your hopes, dreams and financial future into something that turns out to be a scam, it’s devastating – for the entire family.

“I got an 8×11 piece of paper with a logo on it. That’s what my degree is worth,” said Mikyeila. “You never get out from under the debt. I’ve contacted every representative and every congressman in my state. I’ve put in the work to prove it and they still don’t listen. Instead, I get a blanket denial [of my borrower defense application] from the Department of Education that says I’m lacking evidence.”

Debt from for-profit colleges is not just affecting the students themselves. Parent PLUS loans create a devastating impact on families.

“As time goes by, you think, ‘wait a minute they shouldn’t have done that’. We got so caught up in our son’s excitement and the school took advantage of that,” said Pam. “My husband and I are both retired on fixed incomes. We wanted to refinance our house, but we were denied. We sold our condo and are now in between houses, trying to find a place to be. I’m in the process of consolidating some of these loans, but everything feels so out of reach. I feel like I’m always a day late and a dollar short.”

The impact spans generations, affecting everything from starting a family to retirement.

Nicole Edgar Sereno and her mother have combined student loan debt of about $160,000 from Art Institute.

Nicole Edgar Sereno shared what managing her and her mom’s debt from Art Institute has been like: “I’ve been paying [my loans] off since I got a job in 2013, and we’ve been consolidating my mom’s loans. We’ve paid off about 17% of those by using all of our savings, and we’re still at $140,000. My mom can’t buy a house. I’m married now, and I’ve been pushing off having a baby or buying a house because I know it’s just not responsible to do that right now with this debt. And now with the pandemic, there’s another layer of anxiety and unease about not knowing what’s happening.”

“It’s one thing if I have to deal with it myself but you drag everyone down with you when you go to these schools. It’s meant to be a brighter future, so you can take care of yourself, of your parents, and everyone else, but was actually the opposite,” said Mikyeila of her experience with IADT.

Through the federal rule called Borrower Defense to Repayment, students who were scammed by their schools are legally entitled to loan cancellation – and that applies to parents, too. Yet, the Department of Education continues to stall on processing the applications.

When we asked Pam what she’d tell the Department of Education about the impact these loans have had on her family, she knew exactly what she wanted to say:

“[These schools] should be outlawed. I wanted my son to come out of the world better than I was. We love our kids, we want to give them those opportunities. I would do everything for my children if I could give them a better life. And to feel like we were totally swindled by this school and our government is heartbreaking. I’ll never see an end to this loan. People don’t know how this impacts parents. You can’t just stop in the middle of paying it. You start sinking and by the time you realize it’s not turning out like you hoped, there’s no way to stop. What do you do? Who do we turn to? These for-profit schools prey and play on our love for our children. People need to know that this is devastating.”

For more information on how parents of defrauded for-profit college students can file a borrower defense claim, visit our Get Help page.

Filed in: Clinical Spotlight, Legal & Policy Work

Tags: Nicole Edgar Sereno, Predatory Lending and Consumer Protection Clinic, Project on Predatory Lending

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