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Public colleges and universities -- including Virginia Tech, the University of Connecticut and the University of Oklahoma -- are encouraging students to take out high-cost, high-risk loans for non-degree-granting programs, according to findings in a new report.
The investigation conducted by the Student Borrower Protection Center asserts that colleges, along with contractors who help facilitate online course offerings, are promoting shadow lenders to students as a way to finance their courses. When students take on shadow debt -- defined as loans and credit available outside the traditional private student loan market -- they're often faced with high annual percentage rates and "excessive fees," said the report.
SBPC found that some colleges are advertising shadow lenders like Climb Credit and Ascent on their websites as financing options, most often for online courses that don't lead to a degree.
"Given that the recommendation of a certain lender appears on a university-branded page, borrowers are likely to assume that the school itself is endorsing the product and the company in question," the report said.
The report raises questions about whether the practice is in violation of consumer protection law, since their findings suggest that colleges, contractors and lenders aren't being fully transparent about their agreements. It calls on the Department of Education and the Consumer Financial Protection Bureau to further investigate and hold the institutions and contractors accountable.
