Not to belabor Kevin's point below, but these are serious allegations against the University of Phoenix (UOP) and its parent company, the Apollo Group. Three former students have begun a class action lawsuit against the company for improper handling of their federal student loans. The students allege that after dropping out early in their first semester, they received collection notices from UOP seeking payment for the exact amount of the federal loans.. In other words, UOP is being charged with paying off the students' federal loans and turning around and demanding payment for the same.
Why would the University of Phoenix voluntarily pay, in cash, the full amount of a student's federal loans in exchange for risky future returns?
That's the question everyone should ask, because it makes no logical sense for a for-profit company to take on the debt of students who are most likely to default. Or perhaps it does, when 77% of your revenues come from federal student loans (as for Apollo), and the federal government has rules about loaning to students at institutions with high default rates.
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