Bridgepoint Education Penalized Due to Illegal Student Lending Practices
The for-profit college chain deceived students into private loans costing more than advertised
Bridgepoint Education has been penalized by the Consumer Financial Protection Bureau (CFPB) for deceiving its students into taking out private loans costing more than was advertised.
The for-profit college chain must forgive all of its outstanding private student loans and refund all payments that borrowers have already made, as well as pay the Bureau a civil penalty of $8 million. Consumer relief will total more than $23.5 million.
"Bridgepoint deceived its students into taking out loans that cost more than advertised, and so we are ordering full relief of all loans made by the school," said CFPB Director Richard Cordray. "Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space."
Bridgepoint does business as Ashford University and the University of the Rockies. Hundreds of thousands of students have been enrolled at the two colleges over the past several years, most in online courses.
The CFPB order states that Bridgeport offered its students private student loans to help cover tuition costs from 2009 until recently. The agency claims that Bridgeport engaged in deceptive business practices by giving students an incorrect monthly repayment amount. This resulted in its students taking out loans without knowing the actual cost and being obligated to make larger payments than they had been promised by the school. Specifically, the colleges claimed that payments made to its loans could be as little as $25 per month, an unrealistic amount.
The Dodd-Frank Wall Street Reform and Consumer Protection Act gives authority to the CFPB to take action against any institution that violates consumer financial laws. The agency's order requires Bridgeport to do several things:
- Provide consumer relief and refunds in the amount of $23.5 million. It has to refund all payments students made to pay off the loans provided by the school, including principal and interest amount, coming to a total of approximately $5 million. It also must forgive all outstanding debt for these loans, totaling roughly $18.5 million. Those students who are eligible to receive this relief do not have to take any action to receive it.
- Ensure that the cost of college is clear to students by using a mandatory financial aid shopping tool. The school must now require all incoming students, as well as current students who begin different programs, to use a new financial aid disclosure tool when borrowing money for school. The tool will be used to access personalized financial aid offer information, graduation and loan default rate information, potential salaries for graduates of their program, and budgeting for after they graduate. Bridgepoint has to require the students to access the information using this tool before they enroll, and it will be responsible for making an interactive disclosure personalized to each student.
- Cease all illegal practices. The colleges may not make any false, deceptive, or misleading statements about any actual or typical monthly payments required for students taking out one of their private loans.
- Remove any negative loan information from the credit reports of the borrowers. Bridgeport has to remove all negative information regarding outstanding private loans that borrowers owe to the school from their credit reports. It also has to stop reporting private student loan debt information to debt collectors and credit reporting companies except when necessary for removing negative information from a consumer credit report.
- Pay a civil penalty. Finally, it must pay a civil penalty of $8 million to the CFPB's Civil Penalty Fund.
The California Attorney General and the Department of Education assisted the CFPB in conducting its investigation.
Bridgeport is not the only for-profit college to face scrutiny recently. The ITT Technical Institute chain recently announced the closure of almost all of its schools after the Department of Education banned it from enrolling new students using federal financial aid.