I've written and railed about rip-off student financial aid schemes here for years.
And based on all the very personal stories I've received, I know many of you are outraged as well - even more so because of your devastating first-hand experiences.
Make no mistake: For-profit education companies are (more often than not) "rip-off traps" that condemn unsuspecting students into indentured servitude to greedy companies' bottom lines.
Well, there may be a White Knight after all.
The Beginning of the End for the Student Rip-Off Trap
His name is Richard Cordray, and he's the Director of the Consumer Financial Protection Bureau (CFPB).
This guy is smart and aggressive and has already smoked out some of Wall Street's biggest scammers - including Fannie Mae, Bank of American, and AIG.
Now he's going after an even bigger scumbag company, filing a civil lawsuit against ITT Educational Services Inc.
In case you never heard of them, ITT Educational is one of the country's largest for-profit educational services companies, providing undergraduate and degree programs through its ITT's Technical Institutes and Daniel Webster College. In addition to its own schools, the company provides educational services to another 150 institutions in 40 states.
Among other allegations, Cordray's suit claims the company offered a zero-interest loan, payable in full at the end of a student's first academic year, assuming most students would never be able to repay it. Facing delinquency, the students were then forced to take out "high-cost private student loans" from the company to rollover unpaid obligations and continue tuition payments.
Cordray said, "ITT kept students in the dark about its lending model that it freely shared with investors. In fact, we found that ITT used its financial aid staff to rush students through an automated application process without affording them a fair opportunity to understand the loan obligations involved. In some cases, students did not even know they had a private student loan until they started getting collection calls."
Most of the loans carry interest rates of 16% over their 10-year duration. Cordray likened the tuition charges to "financing your college education on your credit card."
Not only are students burdened with onerous financial obligations at the ITT schools, those who wanted to transfer to less expensive schools didn't know many of their ITT credits could not be transferred.
Of course, a spokeswoman for ITT said the college was prepared to defend itself against the CFPB allegations and claims.
In addition to the CFPB lawsuit, four state attorneys general said they've launched their own investigations and will take their own action. New Mexico filed suit against ITT's nursing school. Illinois, Kentucky, and Iowa are the other states investigating ITT. It's highly likely other states will follow suit, as in lawsuits.
According to the American Banker, "The CFPB's case was filed in federal court in Indianapolis, near where ITT is based. The lawsuit is seeking restitution for victims, a civil fine and an injunction against the company."
This is just the beginning of states and the CFBP looking into for-profit education companies.
And it just might be the beginning of the end for ITT and some other rip-off for-profits, and who knows, maybe some non-profit schools too.
By the way, there's a way to make some very significant money on this news.
You see, the lawsuits are setting up a picture-perfect trade. One that I believe can bring you a flying fortune - faster than you would ever think. Go here and I'll share all the details.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.