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How the Explosion of the For-Profit Career Colleges Are Swindling Students and Draining the Country's Coffers

Thanks to Bush-era policies, schools have figured out how to work the federal student aid system while at the same time selling counterfeit dreams to low-income students.

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Even though a settlement was reached with the United States Government, Alta Colleges, Inc. is hardly out of hot water. The law firm of James, Hoyer, Newcomer, Smiljanich, and Yanchunis out of Florida is now representing four former students of Westside College, one of Alta's campuses in Denver, in a demand for a class-action arbitration suit against Alta Colleges, Inc., as well as their multi-faceted subsidiaries, of which there are many. You can go to the brief filed by the law firm representing the students and see the attached exhibit of the corporate organizational chart that is Alta Colleges, Inc.

The diagram included with the brief looks like an organizational chart straight out of the criminal division of the Department of Justice, or an episode of the HBO special, the Wire. On September 21, 2009 the law firm reported on their website that an arbitrator had been finally appointed to hear the suit.

Allegations against Alta Colleges, Inc.

According to the class action binding arbitration suit filed by the law firm on behalf of the four claimants against Alta Colleges, Inc. and their subsidiaries:

There's two main parts to this suit. The first is for "deceptive and unfair trade practices" which is the legal way of saying "they lied to and misled students." The main issues we address are failure to properly disclose costs, misrepresentation of accreditation status, misrepresentation of transferability of credits, misrepresentation of job placement opportunities, and misrepresentation of sales people as admissions representatives. The second part is about a specific program at Westwood College called "the Apex loan program." This is a loan that is created by the school if there is a balance between the traditional federal and private student loans and the cost of the college. Any amount remaining unpaid at the end of school is loaned to the student so the student account is zeroed out. The balance is moved to an Apex loan that carries an 18 per cent interest rate for the life of the loan.

The accusations set forth in the class action suit allege that Westwood College aggressively pursued the enrollment of all potential students without any consideration for the means used to recruit them. The suit alleges that the college marketed programs to academically unqualified students, urged them to take the maximum in loans and grants, gave them an inadequate education that was not regionally transferable and then sent them packing on to low paying jobs, or no jobs at all, where they would be shackled with thousands of dollars in student loans and private and federal debt.

This is not unusual, according to a report released in August of 2009 by the inspector general for the U.S. Department of Education, it is estimated that as many as 40 per cent of graduates from for-profit career schools default on student loans, compared with 12 per cent for college students overall.

The suit continues on, alleging that 'Admissions Representatives' employed by Alta College's Westside Campus, regularly and deliberately failed to disclose relevant material information necessary for the students' to make informed decisions. How did they do this? Simple: by failing to disclose to students the accreditation status of the college, the difference between regional and national certification, the costs and fees of attendance, the private 'Apex Loan' and the academic qualifications of the 'Admissions Representatives'.

The lawsuit specifically alleges (1) a violation of the Colorado Uniform Consumer Credit Code against loaning money to students and (2) directly alleges that Alta College and its subsidiaries also violated C.R.S. Section 6-1-105(1) (g) of the Colorado Consumer Protection Act by representing that the national accreditation granted to Westwood College was equal or greater to regional accreditation and by misrepresenting or omitting the true value of credits obtained at a nationally-accredited institution, as judged by the transferability of the credits to a regionally-accredited institution.

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