Most student-loan fraud claims involve for-profits colleges

A new report by The Century Foundation based on analysis of data from the Department of Education shows that students who attended for-profit colleges filed more than 98 percent of the requests for student loan forgiveness alleging fraud by their schools.The study is based on nearly 100,000 applications for loan forgiveness based on "borrower defense" — that is, claims that the students have been defrauded or misled by federally approved colleges and universities — received by the Department over the past two decades.

The Century Foundation received the data through a Freedom of Information Act request.

The Foundation summarized the key finding:

  • Out of the total of 98,868 complaints reviewed by TCF, for-profit colleges generated more than 98.6 percent of them (97,506 complaints).  Of these complaints nonprofit colleges generated 0.79 percent (789 complaints) and public colleges generated 0.57 percent (559 complaints).
  • Approximately three-fourths of all claims (76.2 percent) were against schools owned by one for-profit entity, the now-closed Corinthian Colleges (75,343 claims). Removing Corinthian from the analysis, the vast majority of claims, over 94 percent, were still against for-profit colleges (22,160 of the 23,525 non-Corinthian claims).
  • Claims are concentrated around fifty-two entities—forty-seven for-profit companies and five nonprofit institutions—that have each generated twenty or more borrower defense claims. Of these five nonprofits, three converted from for-profit ownership.
  • The backlog of fraud complaints—currently numbering 87,000 not yet reviewed—is increasing, with the number of new claims submitted per month averaging approximately 8,000 since mid-August.

Notably, although for-profit colleges generate 99 of every 100 complaints of student fraud, these schools number far fewer, and enroll far fewer students, than nonprofit and public schools do. 

The Century Foundation's report is available here.

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