ATLANTA — A Channel 2 Consumer Investigation found taxpayers could be in the hook for thousands of Georgia students who defaulted on millions of dollars in student loans.
Reporter Jim Strickland looked at for-profit colleges. They are schools and educational institutions that are run by private, profit-seeking companies or organizations. Strickland found reports from the U.S. Department of Education that show students who attend for-profit schools, such as Kaplan University and American Intercontinental University, make up 11 percent of students in higher education, but they make up 43 percent of the default rate on federal student loans.
VIDEO: Costly Degrees: Admissions Advisor Speaks Out About For-Profit Schools
Being unemployed and unable to pay back her student loans wasn't Hope Bishop's plan for the future. The Hahira single mother graduated from Kaplan University with a paralegal degree and started working at a law firm.
"The managing attorney complained every day," she said. "He said that I wasn't prepared, that I wasn't capable of doing the job."
Bishop got good grades and showed Strickland her certificates for the dean's list and president's list over several semesters at Kaplan. Strickland asked her why a great academic portfolio didn't translate into a prepared worker ready for a legal office.
"I wish I knew," she said.
Bishop now is saddled with a student loan debt of $28,482.42. She said she can't afford to make the payments.
Critics claim for-profit schools enroll students who qualify for loans, but who are unqualified to enroll elsewhere.
Atlanta attorney Joe Wargo has studied the industry for three years.
"The model is to get people in, put butts in seats, because you've already gotten the government, the federal funds," he said.
WATCH: GAO Undercover Video LINK: Dept. Of Education New Student Aid Rules LINK: Loan Default Rate Comparison
An undercover investigation by the Government Accounting Office sent people into several schools posing as students. They said they found deceptive enrollment practices at 15 for-profit colleges. The government did not reveal the names of the schools.
Video from the GAO sting shows one representative teaching a student to lie about his finances in order to get more federal aid. Another told a student that students loans aren't like car loans, and that no one would come after her if she didn't pay.
The U.S. Department of Education is working on new regulations to force for-profit schools to cut down on the number of students defaulting on their loans, but they won't be in place until 2012.
Meanwhile, Wargo is trying to recover about $500 million in student loans for the federal government. He's the attorney in a lawsuit against the Atlanta campus of American Intercontinental University.
Channel 2 Action News Investigates
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Affidavits in the case from former AIU employees claimed the college set enrollment goals that felt more like quotas. They said the school tracked daily enrollment and had performance contests for prizes such as televisions and meals.
"We have admissions advisers saying that they know that students were allowed in that didn't even have a third-grade capability," Wargo said.
Jeff Leshay is a spokesman for Career Education Corporation, which owns AIU. He sent Channel 2 a statement. It reads: "We intend to vigorously defend against this lawsuit. It is important to note that the government declined to intervene in this case, and we believe that decision was made with good reason. The case is still in the early stages, so there should be no rush to judgment."
Regarding the GAO report Leshay said:
"Our schools were not the focus of the GAO report, but the investigation served as a reminder to our entire sector of the importance of consistently providing quality education services with the highest levels of integrity. We are proud of the strict standards of conduct and compliance AIU has in place and of the training provided to ensure those standards are met. The growth and success of our institutions can and will only happen when students complete quality programs and attain jobs in their chosen fields."