For-profit colleges offering students risky loans to maintain federal financial aid eligibility

The Huffington Post reports:

Many of the large corporations that own for-profit colleges are increasingly issuing their own in-house private loans to students — even though some schools expect more than 50 percent of such loans to go into default, according to a report released this week by the National Consumer Law Center.

Through the eyes of those who run for-profit schools, the risky sideline lending business enables them to satisfy a federal law that requires at least 10 percent of a school’s revenue to come from sources other than federal financial aid. By complying with the 10-percent requirement, schools can then access the lucrative 90 percent of revenue that comes from the federal government.


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