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The University of Oklahoma's boot camp financing website lists "shadow lenders" as financing options.

University of Oklahoma boot camp website

A report released last week by the Student Borrower Protection Center shed light on public colleges and universities that have been promoting high-risk loans for short-term programs, but in several respects, the report prompted just as many questions as it offered answers.

Using publicly available data, SBPC showed that some colleges have been encouraging students to take out “shadow debt” -- which it defines as the loans and credit outside the traditional private student loan market -- that is marked by high interest rates and excessive fees, according to the report.

The colleges, along with contractors called online program managers who help facilitate online course offerings, have been advertising lenders like Climb Credit, Ascent Funding, Meritize and PayPal Credit on their websites. They’re most often suggested as financing options for boot camps, or non-degree-granting programs that train students in a variety of topics, like cybersecurity or computer programming.

The majority of instances in which SBPC found the practice to be occurring most blatantly were usually through an OPM, but it wasn’t exclusive to OPMs, according to Seth Frotman, executive director of SBPC.

“It appears that all of these entities have teamed up in a chance to make a quick buck -- from the publicly traded OPMs to the lenders to the schools -- and view the uptick in OPM-driven boot camps as a quick and easy revenue enhancer,” Frotman said.

But the parties cited in the report dispute some of the report’s claims, while leaders in the financial aid landscape are working to find additional information.

On its boot camp website, powered by the OPM Fullstack Academy, the University of Oklahoma lists Climb and Ascent as financing options. In the report, SBPC notes that both private loan providers charge origination fees and high annual percentage rates -- the example loan shown for “the shadow debt company Ascent involves a 5 percent origination fee and an APR that ranges up to 16.98 percent,” the report says.

Ascent’s chief marketing officer, Kim McNealy, said the company was unfamiliar with the term “shadow lender” but disagreed with what it implies.

“The implication in that label is that it would apply to misleading, opaque or confusing business or lending practices,” McNealy said. “Given that, we disagree with the representation of Ascent as a shadow lender.”

McNealy added that Ascent seeks to provide greater transparency and is up-front about the fact that its boot camp loans are consumer loans and not private student loans.

A spokesperson for the University of Oklahoma said that the lenders are not directly connected to the university but are linked to Fullstack, which partners with the institution’s college of continuing education.

“There are many ways to pay for these courses, including scholarships offered by OU Outreach, and the manner of funding is solely the decision of each student,” the spokesperson said. “We encourage each student to fully research their funding options and make the best choice for their particular situation.”

San José State University also partners with Fullstack and had a similar website listing Climb and Ascent as financing options for its boot camps, but the webpage has since been changed. A spokesperson for the university said its contract with Fullstack doesn’t include any financing or payment plan options with any lenders and that the OPM provides instruction, registration and student advising services, while SJSU provides program and student support.

“We did a review of how Fullstack communicates their partnership with lenders, and we are working with them to make clear in our information materials and website that SJSU has no agreement with the lenders and to remove any references that may allude to this,” the spokesperson said. “We do not select any lending agencies for students, and we do not have information regarding if our students participating in the program sought any loans.”

Fullstack president Mogan Subramaniam said the company is “dedicated to transparency and student outcomes,” adding that it was a founding member of the Council on Integrity in Results Reporting, which provides students with an institution's outcomes before they enroll in a program.

Like Ascent, the report also lists some of the terms for Climb, stating that it offers a 14.44 percent APR and a 5 percent origination fee. But the company’s CEO, Angela Ceresnie, said Climb helps students pay for programs with a more affordable option than a high-interest credit card.

“Climb’s interest rates start at 5.99 percent and are generally below the cost of credit cards and have lower monthly payments than many other payment options,” Ceresnie said. “We also offer a zero-percent-interest loan option at many programs.”

Justin Draeger, president of the National Association of Student Financial Aid Administrators, said that though he’s not yet familiar with the loan products for nondegree programs, the terms and conditions of the loans referenced in the report didn’t appear to be surprising.

“I can certainly look at the numbers and say those are not great finance terms and the penalties appear quite stiff,” Draeger said. “But again, that doesn't necessarily surprise me when you're talking about an unsecured loan for a short-term program.”

NASFAA and its ethics commission plan to talk with its member institutions to get greater clarity about the relationship between institutions and loan providers, the types of disclosures that are provided to students about the loans, and the overall marketplace for private loans that help students pay for boot camps.

“Some of the things we read in the report are obviously disconcerting, and we need to dig in and just learn a little bit more about what they are and how schools are using them,” Draeger said.

SBPC called on the Department of Education to investigate the institutions and the OPMs because they “are guiding students toward risky forms of debt without offering those borrowers or policy makers the full scope of information that these firms are required to under the law.”

“Unfortunately, we've seen how the prior leadership of the Department of Education, going back years, has failed to enforce the critical consumer protections that were put in place to protect borrowers in the face of a national scandal,” Frotman said. “Hopefully, what this report does is spur them to take action to enforce the protections on their books and hold schools accountable for some really disturbing practices, in terms of driving borrowers at public institutions into shadow debt.”

A spokesperson for the department didn’t have any information on whether it plans to investigate.

“Colleges that endorse private loan products are required to advocate for their students’ best interests, including publicly documenting why they endorse a particular private loan, and commit to a code of conduct that prohibits revenue sharing,” the spokesperson said. “We are committed to making higher education more accessible and affordable and supporting good practices that protect loan borrowers so students don’t graduate under mountains of debt.”

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