RN new grad UNPAID residency program

Hi-

I'm wondering about opinions on an unpaid RN residency. My community college has just started a post-licensure 3 month training program in the local hospitals. There is no stipend and no guarantee of a job at the end- just supervised experience and the possibility of convincing people to hire you at the end. As a result, the local participating hospitals have created a moratorium on hiring new grads who have not gone through their program. The managers get to interview the candidates before selecting them for their unit. The students are responsible for paying for the hospitals background check.

Does this sound legal? Ethical? It sounds to me like the hospitals have the opportunity to get new nurses trained to their units without having to pay for it. For people who can't move out of the area, it's the only option.

Thanks