Latest posts by Julie B (see all)
- Students Awarded $2.3 Million From For-Profit Schools - March 24, 2016
- Listen to Rapper Dee Rap About Sallie Mae Loans - March 24, 2016
- University Of Phoenix are still being watched, despite probation lift - March 6, 2016
In one of the saddest examples of unwitting students being left with high student loan debt and no real hope of landing a job to help pay it off, a truck driving school operating in the Midwest was sued for fraudulent activity that led to a default rate of some 93% of its students. Five Star Truck Driving School, which was one of many schools run by a parent company called the Franklin Schools, worked in collaboration with a private lender, Student Finance Corp. (SFC), to issue high-interest loans to students in exchange for a driving program that was too short to provide adequate training and which employed faulty equipment and unlicensed instructors. On top of that, the companies quietly arranged for the payment of loans that were in default in order to hide the fact that their default rates were so high and fool investors into continuing to securitize their loans.
Five Star and SFC were accused of enrolling students that they knew to be inappropriate candidates for driving jobs and then arranging for them to pass their CDL tests by employing one of their graduates to be the tester. As they were supposed to be preparing their students to earn licenses that would enable them to work as a chauffeur or to drive a semi-trailer, Five Star should have alerted prospective students to the fact that a poor past driving record could preclude them from being able to find a job as a driver. Instead, the company advertised that graduates of their program could expect lifetime job placement assistance and led students to believe that their future employers would be willing to pay them back for the cost of their training. Once a student had secured their loan, the school conducted its own check of their driving record and if it was determined that they would not be able to find a trucking job because of it, the student would be required to sign a waiver releasing the company from its job placement obligations. Students who refused to sign were told that if they didn’t agree to the waiver, they would have to leave the school and would be responsible for the full cost of tuition and the interest on their loan, totally about $17,500 for the two-week course.
Once the state of Ohio learned about the fraudulent testing practices, the licenses of around 200 Five Star students were revoked and they were made to pay for and pass a retest, which many of them could not do, due to the shoddy training that the school had provided. While some of the investors who had been defrauded into securitizing the loans that Five Star and SFC arranged were able to sue and get back a portion of the money that they lost, the vast majority of the students were forced to default on their loans and face collection agencies as a result. This entire scam and the tragic outcome for the students involved is a perfect illustration of a student loan system that is too easily corruptible and with nowhere near the protection for consumers that are absolute necessities.