Tens of thousands of students were duped by Corinthian Colleges Inc. into taking out costly predatory, and often financially devastating, private student loans to finance their post-secondary education, the Consumer Financial Protection Bureau alleges in a recently filed lawsuit against the large for-profit education company.

An investigation by the CFPB found that since July 2011 Corinthian has lured tens of thousands of students at Heald College, Everest University, and WyoTech to take out private student loans to cover expensive tuition costs by advertising bogus job prospects and career services.

The CFPB alleges in a lawsuit [PDF] that Corinthian then used illegal debt collection tactics to harass students into paying back those loans while still in school.

To protect current and past students of the Corinthian schools, the Bureau is seeking to halt these practices and is requesting the court to grant relief to the students who collectively have taken out more than $569 million in school issued private student loans known as Genesis Loans.

The CFPB seeks full redress of all private student loans made since July 21, 2011, including those that have been paid off.

“For too many students, Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair,” CFPB Director Richard Corday said during a press call Tuesday.

According to the complaint, CCI advertised their education as a gateway to good jobs and better careers for students coming from economically disadvantaged backgrounds, of which many are the first members of their families to attend college.

To entice these students, CCI schools used sham job placement rates to lead students to think that when they graduated they were likely to land good jobs and sufficient salaries to repay their private student loans.

However, the CFPB found that CCI inflated these rates by creating fictitious employers and reporting students as being placed at those fake employers. Additionally, the company allegedly counted a “career” as a job that merely lasted one day, with the promise of a second day.

Other inflation tactics included the company paying employers to temporarily hire graduates long enough for them to be counted among those with a career.

And finally, as reported to Consumerist by former CCI students, the company’s career services were often difficult to get in touch with and available job postings were culled from websites like Craigslist.

Once students were tempted by the promise of long-lasting careers with CCI degrees, they were pressured to take out costly and predatory private loans, known as Genesis Loans, issued by the company.

Tuition and fees for some Corinthian programs were more than five times the cost of similar programs at public colleges. In 2013, the Corinthian tuition and fees for an associate’s degree was $33,000 to $43,000. The tuition and fees for a bachelor’s degree at Corinthian cost $60,000 to $75,000.

According to the CFPB complaint, the school deliberately inflated tuition prices to be higher than federal loan limits so that students would be forced to rely on additional sources of funding.

The CFPB alleges that Corinthian sold its students predatory loans that typically had substantially higher interest rates than federal loans. In July 2011, the Genesis loan interest rate was about 15% with an origination fee of 6%. Meanwhile, the interest rate for federal student loans during that time was about 3% to 7%, with low or no origination fees.

Additionally, the investigation found that the company continued to push the loans even with the knowledge that most students would ultimately default.

In fact, the CFPB reports, more than 60% of Corinthian school students defaulted on their loans within three years, Yet, Everest, Heald, and WyoTech officials did not disclose these high default rates to prospective students taking out Genesis Loans.

Another issue with the Genesis loan program is the requirement for students to make monthly loan payments while attending school.

For most other federal and private student loans, students aren’t required to make repayment until after they have graduated from the institution.

By making students repay their loans while attending classes, CCI was allegedly able to take advantage of their position of power to engage in aggressive debt collection tactics – and that staff received bonuses for successfully collecting payments from students.

The CFPB’s investigation found that efforts to collect payments included shaming students by pulling them out of class. In one case, a financial aid staff member was known as the “Grim Reaper” because the worker routinely pulled students out of class to collect debts.

Everest, Heald and WyoTech also required students to meet with campus presidents to discuss the seriousness of the overdue loans.

When students were unable to repay their debt, CCI would block their access to school computer labs and other resources, putting their educations in jeopardy.

And as a last-ditch effort to collect from graduating students, the Bureau found that financial aid staff threatened that if students did not become current on their loans, they could not participate in gradution or start their externships. Some former students stated that Corinthian schools continue to withhold their certificates because they are unable to make payments on their Genesis loans.

With its action on Tuesday, the CFPB seeks to provide compensation for the tens of thousands of students who took out Genesis loans at CCI-operated schools. The Bureau estimates that from July 2011 to March 2014, students took out approximately 130,000 private student loans to pay for mutation and fees at Everest, Heald and WyoTech colleges, of which the outstanding balance exceeds $596 million.

Students affected by CCI’s allegedly predatory loan program are encouraged by the CFPB to review a special notice regarding today’s enforcement action.

Tuesday’s lawsuit is just the latest in a string of federal and state action taken against fledgling Corinthian Colleges.

Just last month the company announced it was being subpoenaed in a possible criminal investigation.

Earlier this summer, the school reached a deal with the Department of Education to close or sell a number of its campuses. At the time, several current and former students and employees told Consumerist about the misdeeds of the for-profit company.

The company is still under investigation by state and federal entities. The California Attorney General filed a lawsuit against the company in October for its shady dealings.

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