The payment platform, in partnership with Synchrony Bank, offers a way to pay tuition at for-profit schools — at terms that are being called “predatory.”
Students at some for-profit career schools could find themselves paying hefty interest charges when using a credit line offered by PayPal, a group of consumer watchdog groups warned this week.
More than 150 small career schools and technical programs, most of which aren’t accredited and are loosely regulated, offer students the option to pay tuition using PayPal Credit, a digital credit line marketed by PayPal Holdings and issued by Synchrony Bank, the groups found.
The line, similar to a credit card but without the plastic, currently has an interest rate of about 24 percent, and is typically promoted with a six month, no-interest period. Borrowers are charged interest retroactively if the entire balance isn’t paid by the end of the promotion, a feature known as “deferred interest,” the groups said in a letter to federal regulators.
PayPal mainly promotes the credit account for shopping online, but also makes it available to schools offering short-term certificate programs that are generally ineligible to offer lower-cost federal student loans, according to the consumer groups. In some examples cited by the groups, a disclosure stating that the card carries no interest “if paid in full in six months” appears prominently, but is hard to find on others.