The subprime student loan racket: with help from Washington, the for-profit college industry is loading up millions of low-income students with debt they'll never pay off.

• Author: Burd, Stephen

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At the age of forty-three, Martine Leveque decided it was time to start over. For several years, she had worked in the movie business, writing subtitles in Italian and French for English-language films, but her employer moved overseas. She then tried her hand at sales, but each time the economy dipped sales tumbled, along with her income, and as a single mother with a teenage son, she wanted a job that offered more security. She decided to pursue a career in nursing, a high-demand field where she could also do some good.

While researching her options online, Leveque stumbled on the Web site for Everest College, part of the Corinthian Colleges chain, which pictured students in lab coats and scrubs probing a replica of a human heart and a string of glowing testimonials from graduates. "Now I know exactly where I am going. And now I'm making very good money," enthused a former student named Anjali B. The school, near Leveque's home in Alhambra, California, offered a Licensed Vocational Nursing program that would take her just one year to complete. When Leveque contacted the admissions office, she was told she would receive hands-on training from experienced nurses in state-of-the-art labs with the most modern equipment--including a recently purchased $30,000 mannequin that could simulate the birthing process. She also says recruiters told her that she would be able to do rotations at the University of California, Los Angeles Medical Center, one of the nation's best hospitals.

Leveque was intrigued, though she was initially put off by the $29,000 tuition. But the school's recruiters assured her there was nothing to be concerned about: Everest had an exceptional track record of helping students find employment--they claimed the typical Everest College LVN graduates landed a job paying between $28 and $35 an hour straight out of school. And the school would arrange a financial aid package to cover her costs.

In the end, Leveque decided to enroll. The day she came in to fill out her paperwork, she says, the recruiters rushed her through the process and discouraged her from taking the forms home to look over. They told her that she would be taking out private loans in addition to federal loans that are traditionally used to pay educational expenses, but did not explain what the terms of those loans would be. "They just kept telling me that 'we're with you,' and that they would try to get me the maximum amount of federal loans allowed," she says. Only later did she learn that those private loans-which made up two-thirds of her "financial aid" package-carried double-digit interest rates and other onerous terms.

To make matters worse, the program did not come close to delivering on the promises that had been made. The instructors had little recent medical experience. Instead of really teaching, she says, they usually just read textbooks aloud in class and sometimes offered students the answers on tests ahead of time. On the rare occasions when Leveque and her class were given time in the lab, she found that the equipment was broken down and shoddy--except for the expensive new mannequin, which no one knew how to use. Instead of the promised rotations at UCLA Medical Center, her clinical training consisted of helping pass out pills at a nursing home. (A spokeswoman for Corinthian Colleges denied many of Leveque's allegations, insisting that the company does not condone cheating, that all LVN instructors at Everest College have "at least the minimum qualifications" set by the California Board of Vocational Nursing, and that UCLA Medical Center "is not and has never been" one of the school's official clinical training sites.)

Since graduating in 2008, Leveque has been unable to find a nursing job, perhaps because she never learned how to perform basic tasks such as giving shots. Instead, she works as an occasional home health care aid earning at the most $1,200 a month--not enough to pay her rent on the cramped apartment she shares with her sister and son or keep gas in her car, much less pay off her student loans. As a result, her loan balance has ballooned to $40,000, and she has no idea how she will ever pay it off. "My credit is ruined," Leveque says. "I made one mistake, and I will be paying for it for the rest of my life."

Leveque's story is far from unique. Each year, more than two million Americans enroll in for-profit colleges, also known as proprietary schools, and their popularity has only grown since the financial crisis. While traditional four-year colleges are struggling with dwindling student bodies and budget gaps, proprietary schools are reporting record enrollments as the newly unemployed try to retool their skills so they can wade back into the job market. Some of the largest for-profit chains say their numbers have doubled over the last year.

The students who are flocking to these schools are mostly poor and working class, and they rely heavily on student loans to cover tuition. According to a College Board analysis of Department of Education data, 60 percent of bachelor's degree recipients at for-profit colleges graduate with $30,000 or more in student loans--one and a half times the percentage of those at traditional private colleges and three times more than those at four-year public colleges and universities. Similarly, those who earn two-year degrees from proprietary schools rack up nearly three times as much debt as those at community colleges, which serve a similar student population. Proprietary school students are also much more likely to take...