Ms. Clarke recalls that college employees instructed her on how to take out a loan directly from the school during the enrollment process. Colleges sometimes encourage students to take out loans without the students realizing what they are doing.

“It really helps to think of this as an important part of the marketing process as much as it is a student loan,” said Mike Pierce, director of policy and legal counsel at the Student Borrower Protection Center, a group of nonprofit defense focused on student debt. .

Unlike Ms. Clarke’s federal loans, which only started earning interest after she left school, her Lincoln Tech loan started requiring payments when her classes began, and interest accrued while she was in school. ‘she was still in school. The directors of Lincoln Tech have projected an attitude of “we’re going to get our money back and we’re going to put them in debt and they’re going to have to pay us back,” Ms. Clarke said. “I just feel like they’re a money pit.”

Peter Tahinos, senior vice president of marketing for Lincoln Educational Services, said in an email he couldn’t comment on students individually, but added that employees “provide advice on the best options for them to fund. their studies”. Lincoln charges 7% interest on his loans. Students can choose to start payments immediately, with interest accruing immediately, or after leaving school.

Some colleges are increasing the burden by charging high interest rates. Unlike federal loans, which currently have interest rates of 2.75 percent for undergraduate borrowers, loans directly from schools can far exceed that. A 2020 report from the Student Borrower Protection Center found interest rates as high as 19% for loans offered by some schools.

The review of this practice remains weak at both state and federal levels. A survey of 75 agencies in all 50 states – including higher education oversight agencies, attorneys general, and finance or banking departments – by The Hechinger Report, a nonprofit news organization on education, found that few places track information on loans offered by schools. In fact, in the vast majority of states, higher education authorizers do not require colleges to report plans for these programs.

Universal Technical Institute, a public broadcaster with 12 campuses in eight states, told its investors in its 2020 annual report that “changes in laws or public policy could negatively impact the viability of our proprietary lending program and cause us to delay or suspend the program. . “

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