According to the U.S. Federal Reserve, U.S. consumers are burdened by more than $1.3 trillion in student loan debt. What's more, the number of students who are taking out federal student loans and amassing significant and often crushing amounts of student loan debt continues to increase as the costs of obtaining a college degree continue to skyrocket.
For colleges, the number of students that are receiving financial aid and the amount of aid they receive is directly tied to funding. In essence, the more students who are receiving aid and the higher the amounts of that aid, the more money the college receives from the government in the form of federal student loans.
From the government's standpoint, federal student loans are meant to help students obtain the education and training they need to secure employment within their respective fields of study and better their lives. Unfortunately, there are increasing reports about for-profit colleges that are using deceptive practices to encourage students to enroll and take out significant amounts of student loans.
The former dean at one ITT Tech campus recently filed a whistleblower lawsuit in which he claims that ITT administrators encouraged and rewarded deceptive recruitment practices that sought to defraud the U.S. government and that were in violation of the false claims act. Among the accusations included in the lawsuit are that college recruiters made false promises to students with regard to the types of jobs they would be able to secure and also actively sought to recruit and encourage students who were disadvantaged to enroll and apply for financial aid.
When a whistleblower files a false claims lawsuit that involves the defrauding of the U.S. government, the government may choose whether or not to join the lawsuit. In the case against ITT Tech, the government declined to join the suit. The former dean and whistleblower, however, may still choose to pursue legal action and remedy under the false claims act.
Source: MarketWatch, "Whistleblower suit against for-profit college charges schemes against students," Jillian Berman, Jan. 21, 2016