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Shaun Joyce used to sit at his desk at The Art Institute of Charlotte in North Carolina, on edge. That's because a staff member could burst into his classroom at any moment and lead him on the "walk of death."
That was when students would be summoned to the for-profit school's financial aid office and told they'd "run out" of loans, Joyce said. Then the student would be informed that he or she needed to borrow more money immediately, or else leave the school.
"You never knew if you were coming back," Joyce, now 29, said.
On his way to pursuing his bachelor's degree in web design and interactive media at the Art Institute, a former unit of Education Management Corp., which was partially owned by Goldman Sachs at the time, Joyce received such an ultimatum. At one point, there were some 50 Art Institute campuses in operation.
Scared the school would not allow him to complete his degree, he signed up for another loan. But, realizing how unaffordable the school was becoming, he also decided to leave the program after two years instead of the four years he'd planned on.
The tab for his two-year associate's degree is nearly $90,000.
"I switched down to an associate's degree. Why is it this expensive?" he recalled telling the Art Institute staff at the time. "'I'm paying more than what was quoted to me for a bachelor's degree.'"
To make matters worse, Joyce has been unable to find a job in his field to repay that huge debt. During enrollment, Joyce claims that Art Institute employees had promised him they'd find him work, related to his studies, yet when he reached out to the school's career services department, a woman just sent him back job links on Craigslist.
"This school screwed me over," Joyce said.
"There is no current representative of the debtors available to comment," said Jay Jaffe, one of the company's bankruptcy lawyers.
Joyce is now arguing to the Department of Education that it should stop collecting on his federal loans because the school he borrowed them for misled him and engaged in other misconduct. So are some 165,000 other former students, mainly from for-profit schools across the country.
However, these borrowers find themselves in limbo as the Trump administration postpones an Obama-era regulation aimed at canceling the debt of those with troubled degrees.
Critics argue the administration is siding with for-profit schools, of which there are some 7,000 around the country, over the people who've been burned by them. The for-profit school industry generated around $17 billion in revenue in the 2015-2016 academic year, according to Trace Urdan, a financial analyst studying the market. According to student loan expert Mark Kantrowitz, the sector took in around 15 percent of the government's financial aid funding.
"There should be a clear-cut process for accepting, assessing and ruling on former students' complaints that they were defrauded," said Bob Shireman, a former top Education Department official. "This is what the Obama administration tried to establish, and which the Trump administration is refusing to implement."
The Education Department disputes this.
"We are still adjudicating claims and are working to craft a rule that provides relief to students who were genuinely defrauded without denying due process to schools or making taxpayers pay the cost of claims lacking substance," a department spokesman said.
An audit from the end of 2017 seems to undermine the Education Department's claims. The department's Office of Inspector General found that government staff working on these former students' applications for loan discharge had been instructed not to submit any additional claims for approval.
Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities, says the Department of Education needs to take more responsibility.
"These folks need relief desperately," Nassirian said. "Their lives are on hold."
Sick of his sales job, Brandon Schultz decided to finally pursue his dream of becoming a graphic designer in 2008. He enrolled in the Art Institute's online division. "I wanted to get into a field I enjoyed," Schultz, 36, said. "The Art Institute of Pittsburgh, it sounded fancy. "
He was soon disappointed to discover how basic the classes were. "It was just a bunch of beginner lessons on how to use these programs," Schultz said. "I never did any graphic design work."
He says communication with professors was sparse and his time with the school's tutors was strictly limited.
"I could only talk to a tutor for so long until they cut me off," he said. "A lot of them couldn't really speak English."
He was just one class shy of graduating with his associate's degree in graphic design, he said, when he received a troubling call from someone at the Art Institute. He was told he was out of loans.
"I got mad," Schultz said. "I was like, 'What are you talking about? You're telling me at the end of all of this?'"
Desperate, he accepted the loan.
"I think schools like that prey on the fact that a lot of people don't get guidance about going to college," Schultz said. "They just do what they need to do to get their degree."
Schultz went on interviews for graphic design positions, but said he was unprepared for the common job tests these employers assign.
Now he strings together a living through odd jobs, such as painting and landscaping, and says there's no way he can repay the more than $80,000 he owes for his time at the Art Institute. He's filed an application with the government, claiming his federal loans should be discharged, but he hasn't heard back.
"All I can do it wait for the government to give me some type of judgement," Schultz said.
In response to a rash of complaints by students that they'd been defrauded by their schools, the Education Department under President Barack Obama announced a regulation in 2016 that would establish an administrative process for people to have their federal loans canceled if their school turned out to be predatory.
That rule was set to take effect July 2017.
Just a month before that date, however, an industry group of the for-profit college sector, the California Association of Private Postsecondary Schools, filed a lawsuit with the Education Department, arguing the regulation was outside the government's authority. Soon after, the department announced it was postponing certain provisions of the regulation. A few months later, the department announced yet another delay.
Speaking at a conference, Secretary of Education Betsy DeVos said that under the current rule, “all one had to do was raise his or her hands to be entitled to so-called free money.”
Education Management Corp., the Art Institutes' former parent company, was acquired in 2006 by Goldman Sachs, Providence Equity Partners and Leeds Equity Partners.
"Private equity has always loved this kind of business because it throws off a lot of cash," said Urdan, who studies the for-profit school market. "It actually has negative working capital needs in that, like all schools, they charge tuition in advance of providing service."
The investors took the company public in 2009, at which point Goldman Sachs owned more than 40 percent.
Goldman Sachs and Providence Equity Partners both declined to comment, and Leeds Equity Partners did not respond to multiple requests for an interview.
The government has acknowledged some of the problems at The Art Institutes in the past.
In 2012, the Senate conducted an investigation into the for-profit school industry, finding that Education Management Corp. employed almost five times as many recruiters as it did student service staff.
The Senate also found, through internal emails it obtained, that tuition increases were a source of contention on campuses. In one email the Senate reviewed, the group vice president for The Art Institutes-West wrote, “I would recommend we have two enrollment agreements for high school students so that it is not a piss off factor having to tell them tuition is increasing just after they started. "
After one of its tuition hikes, the president of the Illinois Art Institute wrote, “I am really concerned that we will lose many of those students since many of the parents are telling [Student Financial Services] that they feel that they have been deceived. "
The Department of Justice found that Education Management Corp. falsely obtained the $11 billion in federal funding it had received between 2003 and 2011. In 2015, the company agreed to pay $95 million in a settlement with the government to resolve allegations of illegal recruiting, consumer fraud and other violations.
That same year, dozens of attorneys general, including those in Alabama, California and Texas, reached a $100 million settlement with the company, which resulted in some loan forgiveness for thousands of former students in states across the country. (For example, eligible students in New York received an average of around $1,300 in loan relief.)
Still, the federal government continues to collect on the federal loans of thousands of other former Art Institute students, in some cases garnishing their wages and seizing their tax refunds.
None of the requests for debt forgiveness from former Education Management Corp. students, which are up by nearly 60 percent in the last year, have been approved by the federal government, according to Toby Merrill, director of the Harvard Law School's Project on Predatory Student Lending.
In theory, there's been a provision in the law for defrauded students to have their federal loans canceled since the 1990s, she said, however, "the government's willingness to create a process to actually effectuate that right is in serious flux."
The current administration is working to find a process that's fair to both schools and students, Urdan said. The regulation under Obama, he said, was "incredibly loaded against the schools."
"The principal at work in the DeVos department is to say, we want to find a middle ground," he said. "We want to forgive legitimate harm but not create this free-for-all."
Before Kelley McCutchan, a single mother of two at the time, enrolled at the Art Institute of California, Orange County, she explained to an employee there that she couldn't take on any debt because she wouldn't be able to repay it.
"I said I could only do it if it's through scholarships," said McCutchan, who would go on to study culinary arts at the school.
A staffer at the school had good news for her. "He said you won't owe anything," McCutchan said. Then she signed a stack of documents, but, she said, "Nothing said anything about loans."
Then, McCutchan didn't receive her tax refund of $720 this year. She quickly checked her credit report and was shocked to find there was some $30,000 in federal loans in her name that had fallen into default.
She has asked the government to cancel those loans, but is yet to hear back.
Carrie Wofford, president of Veterans Education Success, a nonprofit advocacy group, has said some for-profit schools do not explain to students that they're signing up for loans. She has argued that the "master promissory note," the legal document students sign to agree to repay their loans should instead be titled a "student loan contract," so that people are more likely to understand what they're signing up for.
"There’s no question there are veterans with loans they didn’t want," Wofford said. "A huge number of veterans complained to us about the Art Institute."
Nassirian, the director of federal relations at the American Association of State Colleges and Universities, said cases in which schools have students unwittingly sign up for loans are "point blank fraud."
"Anybody who walks into a program that carries the United States' Department of Education logo has every right to expect the program has been through its due diligence and is not toxic to them," he said.
While former Art Institute students wait on an answer from the government about their student loans, more than 7,000 people have organized online on the Facebook group I Am I, to detail their stories at the schools.
Last year, the Dream Center Foundation, a faith-based nonprofit in Los Angeles, acquired the schools, and it’s already recruiting new students.
"We continue to work through some of the challenges the schools have faced in the past," said Anne Dean, a spokeswoman for the Dream Center. "Our plan is aimed at stabilization and growth."
The Dream Center has already decided to close many of the campuses, raising the question of what will happen to all of those current students — and their federal loans.
Consumer advocacy groups warn the conversion from for-profit to nonprofit status is merely a marketing move.
The Art Institutes' homepage now reads, "Non-profit=even more...Even more affordable. Even more accessible. Even more invested."
However, a Department of Education official said it has not yet approved the schools' nonprofit status, although it's still eligible for federal funding.
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