BALTIMORE – Janice Peete-Bey didn't stay long at the Baltimore trade school where she enrolled 25 years ago, leaving after the class seemed useless. But the student loan debt from her non-education haunts her to this day.
Her wages have been garnisheed, her tax refunds seized. Those payments total more than $13,500 on a loan that was originally $5,600, according to the Reisterstown, Md., woman's pro bono attorney, thanks to interest and collections fees that mounted for years.
And the school? It closed long ago, and its CEO pleaded guilty to defrauding the government and students by concealing its dropout rate so federal student aid kept flowing.
As debate rages about the country's spiraling levels of student debt, some advocates want more focus on making sure people don't get suckered into bad educational deals – and on helping those who have already been scammed. The debt is a hole some might never dig out of, they say.
"The idea that the government will extend you a subsidized loan to get educated is great in theory," said Jane Greengold Stevens, director of the special litigation unit at the New York Legal Assistance Group, which recently filed a lawsuit involving students of a closed school. But for those wrongfully saddled with debt, "it's a nightmare."
"People who went to these schools in order to better themselves so they could get a job and didn't get decent training ... are not in a good position to pay off these loans," she said.
Robyn C. Smith, an attorney who works with the National Consumer Law Center, estimates that "thousands and thousands" of former students fall in that category.
The U.S. Department of Education proposed rules last month that target career colleges, an industry buffeted by criticism and lawsuits.
The proposal would apply to most coursework at for-profit colleges, plus the certificate programs at public and nonprofit institutions. It sets a cap for those schools on the rate at which former students default on their loans and on how much loan payments can take from typical graduates' projected earnings.
Colleges that fall short no longer would be eligible to receive students' federal aid, the predominant source of revenue for most for-profit institutions.
For-profit colleges account for 13 percent of the higher-education student population but nearly half of all loan defaults, the Department of Education said when announcing the proposal. It said some programs "produced graduates who on average earned less than high school dropouts."
The industry, which persuaded a federal judge to toss out a similar regulation in 2012, calls the new proposal arbitrary because it doesn't include associate's and bachelor's degree programs at colleges that aren't run for profit.
"Shouldn't we apply this to all institutions?" said Noah Black, a spokesman for the Association of Private Sector Colleges and Universities. "The real issue that we're talking about here is: Do we want to continue to provide access and opportunity for everybody who wants to go to postsecondary education?"
James Rosenbaum, a social policy professor at Northwestern University who researches for-profit colleges, said the best schools do innovative work that should be encouraged: strong career help; consistent schedules across semesters; and guiding students to earn certifications and associate's degrees as they work toward a bachelor's.
The problem for students sorting through their options? The range in quality in the sector is vast, Rosenbaum said.
Smith, who is also a staff attorney at the Legal Aid Foundation of Los Angeles, said the fraud that prompted crackdowns on trade schools in the 1980s and '90s often was blatant – like "enrolling homeless people off the streets." Now, she said, bad schools are accused of being sophisticated, misrepresenting what they offer and requiring students to sign away their right to sue.
She sees the proposed federal rule as a step in the right direction but said it offers no relief to students who have already been taken advantage of.
There's no statute of limitations on student-loan collection. Only in rare cases can the debt be erased in bankruptcy, and it's also hard to qualify for a loan discharge from the Department of Education.
Attending a school whose executives are prosecuted for fraud doesn't, in itself, qualify a former student for a discharge, the agency said.
One of those schools was the PSI Institute, a national chain run by the once-publicly traded Programming & Systems Inc. CEO Irwin Mautner pleaded guilty after a 1996 indictment accused him of defrauding the government and students from 1988 to 1993. He was fined and served eight months in a federal prison.
He did not return a message left at his home in Palm Beach County, Fla. A man who answered Thursday hung up on a reporter seeking comment.
A federal court called PSI's students "vulnerable victims" because they were often poor, out of work and "academically unprepared" – targeted purely for their aid eligibility.
Peete-Bey, now a nursing home medical assistance employee in her mid-40s, said she felt targeted. She was 19, on welfare and pushing her daughter in a stroller near PSI in 1989, she said, when a recruiter for the school started flirting with her.
She enrolled in a computer programming course there because she liked him, she said, but also because she hoped to better herself. But the class didn't seem like an actual class. She recalls no tests.
"Everybody was basically just sitting around," Peete-Bey said. "I don't even remember the instructor being there. It was more of a hangout spot as opposed to a school. ... I knew there was definitely something wrong with this whole scenario."
She said she attended for less than two months, receiving no credits or certifications. What she didn't understand then, she said, was that she was on the hook for a student loan – school officials referred to the federal aid she received as a "grant."
She said she also didn't realize until later that the school kept her on the rolls for four additional months, long enough to receive a second disbursement of money from the loan in her name.
For years, she said, she was unaware of the debt even as it grew. But after Peete-Bey landed steady work, the collection effort kicked into gear. Sometimes her wages were garnished. Five times in the past eight years, her tax refund was seized.
That includes this year's. Peete-Bey discovered Friday that her $4,700 refund had been seized. She said the company told her it was accepting it as payment in full for the loan.
"I'm just trying to stay composed, because I relied on (receiving) that money," she said. "I don't know what I'm going to do."
She said the years of collections on the loan have put her in a tight spot on other bills, including braces and after-school care for her 12-year-old twins.
To cover everything she owes, she said, "I have to constantly ask, 'Can you work with me?'"
Finally, unable to take the stress, she sought help. Civil Justice, a nonprofit legal-assistance organization in Baltimore, took her case.
"Morally, I have an issue with her paying for an education she never received," said Kathleen Hyland, Civil Justice's associate general counsel.
But in a year of trying to help, Hyland has hit a lot of dead ends. The Educational Credit Management Corp., the company handling the loan, has asked for paperwork from 1989 that Peete-Bey believes was never provided to her.
The ECMC said it is required to follow federal regulations governing discharges.
The company declined to comment specifically on Peete-Bey's case, though she was willing to authorize them to do so.
"As a matter of policy, we do not speak publicly about individual borrower accounts," said Geri Gjesdahl, an ECMC spokeswoman, by email.
Hyland said she's pursuing the matter with the Department of Education's student-loan ombudsman. She's hoping for a breakthrough. So is her client. Peete-Bey was in tears Friday over her seized tax refund – for an education she didn't get.
"Why am I paying for something that I don't have?" she asked.
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