May 6, 2014

Suze Orman Warns Against Private Student Loans, Yet Teaches at University of Phoenix

Last year I reported that Suze Orman had been hired by the University of Phoenix to teach an online personal finance course and had appeared at a Capitol Hill event where she promoted the school, which is the largest for-profit college in the country.  It was difficult to understand how a woman who proclaims herself “undeniably America’s most recognized expert on personal finance” could accept such a role when, for many people, enrolling at a for-profit college can be the worst financial decision they make in their entire lives.  While some graduates of the University of Phoenix and other for-profit colleges have succeeded in building strong careers, many students fare poorly, as many of the big for-profit schools, including Phoenix, have sky-high prices, low actual spending on student instruction, high dropout rates, and weak job placement records. The result is that often former students end up with overwhelming debt; for-profit colleges have 13 percent of U.S. college students, but an astonishing 47 percent of student loan defaults. Most of the biggest for-profit schools, including Phoenix, are now under investigation by federal and state law enforcement agencies for abusing students. 

Now, ace student advocate Mike DiGiacomo, whose new petition to hold for-profit schools accountable has already surpassed 100,000 signatures, has alerted me to a piece of video that highlights Orman’s hypocrisy. In the clip, you can see Orman, in an episode of “Oprah’s Money Class” from February 2012, state emphatically, “Private student loans should be avoided at all costs.”  

This is very good advice. Private student loans, in contrast to federal direct loans, have high interest rates and origination fees and are not subject to most loan forgiveness programs. They quickly bury students in an avalanche of debt.

Yet the University of Phoenix routinely channels its students into private student loans.

The school’s website does “recommend” that “private loans only be considered after applying for federal financial aid,” but it then quickly gets down to business and directs students to a private company’s website, Student Lending Analytics, that compares private loan providers and offers links to lender websites.

University of Phoenix students often have little choice but to sign up for private loans, as they likely discover when they speak with one of the school’s financial aid counselors. Tuition for an Associate’s degree in Business at the University of Phoenix Online is $24,500, while the same degree costs $4,087 at Phoenix College in the Maricopa Community College system in Arizona. A Bachelor’s in Business at the University of Phoenix costs $74,575, while the University of Arizona charges $44,200 for the same degree. Federal loans and grants don’t come close to covering Phoenix’s high prices, and like other big for-profits, the University of Phoenix does not normally provide anything like the level of in-house scholarship funding to lower-income students that many non-profit and state colleges offer. So many students who attend the University of Phoenix see no option but to take out these private loans.

Yet by December 2011, Orman was already singling out the University of Phoenix in USA Today for praise, saying that the school “makes all its students go through a free and mandatory three-week orientation course to make sure they understand the full costs of college before they sign on the dotted line.” And by last year she had joined the faculty, and she appeared at an event in the halls of Congress just as the University of Phoenix and other for-profit schools were lobbying for congressional support to fend off the Obama Administration’s “gainful employment” rule, which would hold career training programs accountable precisely for leaving students with insurmountable debt. Perhaps some Members of Congress, inclined to worry about the value and conduct of for-profit colleges, were reassured by Orman’s celebrity endorsement of the University of Phoenix, just as potential students might be.

Orman can be seen on the University of Phoenix website, firmly warning students against overborrowing, seemingly oblivious to the fact that 26 percent of the students at the school default on even their low-interest federal loans within three years of leaving.

I don’t know how much the University of Phoenix is paying Suze Orman. But it appears that Orman is committed to improving your bottom line, unless doing so interferes with improving her bottom line.

This article also appears on Huffington Post