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For-Profit Colleges Encouraged Fraud And Used Deceptive Marketing, Watchdog Says

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We’ve been following allegations of enrollment abuses and bogus marketing schemes at for-profit schools for some time now, and a report released by the Government Accountability Office this week further highlights some of the questionable recruiting tactics of several for-profit colleges across the country.

Undercover investigators posing as prospective students found that at four of 15 for-profit colleges, they “were encouraged by college personnel to falsify their financial aid forms to qualify for federal aid.”

From the report:

A financial aid officer at a privately owned college in Texas told our undercover applicant not to report $250,000 in savings, stating that it was not the government’s business how much money the undercover applicant had in a bank account.

… An admissions representative at another college told our undercover applicant that changing the FAFSA to indicate that he supported three dependents instead of being a single-person household might drop his income enough to qualify for a Pell Grant.

All 15 schools made “deceptive or otherwise questionable statements” to the undercover applicants. The schools aren’t identified, but they’re located in six states and Washington, D.C., and were among those “that the Department of Education reported received 89 percent or more of their revenue from federal student aid.” (Read the full report in our document viewer.)

The deceptive statements ranged from students’ potential salaries after graduation to the schools' accreditation to the duration or costs of the program, according to the report. Two of the GAO’s fictitious prospective students each received around 180 phone calls from for-profit recruiters within a month of filling out forms on websites that claim to match prospective students with colleges offering relevant programs. Our ProPublica Reporting Network volunteers reported having similar experiences on such websites.

An earlier GAO report [PDF] found that students at for-profit colleges were more likely to default on their federal student loans than students at public or private nonprofit schools. These defaults leave the government and taxpayers to take care of the costs and “assume nearly all the risk,” the latest report explained.

It seems the hedge funds that have been betting against the for-profit higher-education industry have just been given another point bolstering their criticism of the industry’s ills. Barron’s pointed out Tuesday that since news of the report first leaked, for-profit college shares have taken a tumble.

Update: The report's findings also disturbed some within the for-profit industry. In a statement, the Career College Association--which represents for-profit schools--called the report "deeply troubling" and announced it would expand its efforts to address these problems. 

"Even if the problems cited in the GAO report are limited to a few individuals at a few institutions, we can have zero tolerance for bad behavior," Harris Miller, the group's president, said in the statement. "We are moving as one community to address the issues raised in the GAO report.  We will continue to add to this ‘zero tolerance’ program until all such doubts about our sector are removed."

Having worked for several years as a teacher at one of these for-profit colleges, I can attest to the practice of fraud and the unfortunate preying upon the students who enroll.  Disgusted at the lies these students were told—not just in tv commercials but also by sales representers (oops! I mean admissions counselors), I became subversive and gave students assignments that required their investigating their chosen vocation and interviewing potential employers. Too many students thought that becoming a medical assistant was a first step to becoming a doctor and that salaries were on average 50k!  Or that pharmacy techs got $25 hourly. One student found out that most pharmacy techs were trained internally, there was no need to pay for a $25000 2 year training program! 

But they don’t care if these students graduate. We weren’t allowed to flunk students for fear they would drop out and their financial aid stream would be lost. More than once, I discovered illiterate students in my class and when confronting admissions would be told that they scored highly on entrance exams. Even though I flunked an illiterate student and urged her to seek tutoring for her reading, I ran into her the next semester and found out she had been enrolled in medical terminology! 

These students, many low income, are just grateful to be in college and don’t think ahead to the day when the bills for those loans will be due.  No diploma, but you still owe $25000.  Stories of potential employers who send the schools copies of badly written resumes and cover letters in astonishment. 

This symbolizes even more the victimization of people by corporations whose goal is simply to make money and put people in debt. Defenders will say it’s the person’s responsibility to read and investigate before signing contracts but we are duped by believing we have impartial expertise whose knowledge can be trusted. 

This has been going on for years and years—and a study comes along now?  Evidence like this could have been collected ages ago.

I emailed this article to my daughters who either are going back to college or their daughters are headed for college.

How can their education mean anything if the colleges they go to use fraud?

Make sure you investigate the colleges in which you are enrolling. Many of these for profit colleges bank a lot of complaints with the BBB and the state attorneys’ offices.

These for profit colleges are really vocational colleges that purport to provide training for a range of industries—medical assistants, pharmacy techs, dental assistants, computer operators, graphic designers, etc.  If a student is enrolling to get a degree or certificate in a professional program, talk to some potential employers in that field.  Find out from employers whether they hire graduates from that school’s program? Find out what the salary range is. Ask about what they actually require to get a job in the student’s chosen field, what they are looking for when they receive resumes. Never rely on advice only from the school’s admissions or counseling office. 

These schools know how to make students eligible for financial aid and how to get as much aid as possible for the student.  The aid goes directly to the school for the most part.  Once a student exploits this aid for a freshman year, that’s it.  If later the student finds out the school is bogus and wants to apply to a traditional college, the aid is used up and the student’s options are consequently limited.

With for-profit schools, I’d even suggest hiring a lawyer to look over any documents a student is asked to sign.  Students rarely read the documents, too delighted that they are going to college and don’t have to pay…up front.  But as soon as the student stops attending full time, the bills begin to flow…degree or no degree.

Glad to be of help.

It is so sad that blood thirst for money takes precedence over a person’s education, and that for-profit colleges will stoop to any low means to line their pockets and bankrupt students.

People who want to attend college should be encouraged to do their research before attending any for-profit school. If people simply stopped attending them, then perhaps they would just go away. I do wonder how these colleges get accredited and still cheat people so badly.

I am a student, and for me, a for-profit college just didn’t sound right. Yes, they market themselves well on paper and in advertisements, but my gut instinct was not to attend one. I’m really glad that I am at a traditional college where everything is on the level, and I don’t have to worry about having a worthless degree, or no degree at all, and still be on the hook for financial aid repayment.

When “for-profit” enters the educational system, there are all sorts of ways to take advantage of the customer.

There are so many excellent programs available in our Community Colleges (called Junior Colleges in CA) and they do not cost and arm and a leg to attend and earn a two yr. certificate.

Erich Riesenberg

Aug. 6, 2010, 1:13 p.m.

Unfortunately this is not a for profit versus non profit situation.

Here in Iowa the non profit state loan association has had its scandal as have others.

Trust on one, ever.

Yes, community colleges are excellent places to get both a liberal arts education and vocational training.  In fact, many companies partner with cc’s to develop training programs in areas where workers with specific skill sets are needed. 

Why do so many then choose for-profit over their local community colleges?  The answer is—for profits will take anybody; why you don’t even have to speak English!  You’ll always get in and you’ll always get money. A reward is offered no matter what—attend this school and in 2 years you’ll have a job as a well paid pharmacy technician.  Yes, yes, the experience will help you become a pharmacist down the road.

I’m not saying all for-profits are scams, but it is easy to find out which ones are suspect.

Students need to keep in mind—an education is work.  You must know how to read and write and speak intelligently about your craft.  It will do you no good to get a degree when you can’t write or parse a simple sentence or answer a question about your field.  There is no shortcut—intelligence is always a job requirement.

I agree! There is an excellent community college here too, and seven state universities in my state that provide excellent education without ripping students off and profiting from their misfortune. Greed runs the for-profit schools.

There are definitely a lot of great points here about awareness… awareness is key in making any big life changing decision, including choosing a college to attend to further your career… However, as one person said, an education is work no matter if you attend a for profit or a non profit institution, and that work starts with the student…. just like for profit schools, there are many students who drop out or fail out of non profit schools don’t obtain a degree and still have federal loan debt that needs to be repaid, this happens every day and every school…. the other side of this is who’s working when they leave school - look at the placement rates for non-profit degree programs, look at the ratio of income post grad for non profit degree students versus student loan debt… the issues are rampant in all areas of education, the student gets what they put in to it…. one issue here is that non profit schools services a much wider demographic of students so the percentage of students that drop out, fail out, or do not find work in their field of study is harder to pinpoint - for profit schools generally focus on a narrower scope of professions and thus a smaller student demographic making it easier to scrutinize, but i challenge people to really dig into this data:  the reality is a dental assistant is only going to average about 30 - 35k a year (bureau of labor statistics for northeast region) this is a median number whether they attend a for profit or non profit school for this training - but the difference is for profit schools have a more immediate urgency to work with their students to retain them during the program and place them afterward and its because their accreditation (which allows them to provide federal funding in the first place) will be revoked if they do not maintain 75% retention and placement after graduation and those numbers are significantly hire than non profit schools…. this means students gets more one on one attention to ensure they get into the workforce and start contributing tax dollars back into the system, and keep in mind the reason for profit schools are seeing such a hike in enrollments is in direct correlation with the unemployment rates, people need jobs! and people cant wait 2- 4 years to get a degree at a non-profit school while collecting unemployment which is paid for by tax payer dollars - when they can go to a for profit school and finish in 9 months and have someone who has an incentive to help them get back in the workplace and ensure they start contributing back into the federal system to ease the burden on other employed tax payers by reducing the unemployment rate win win!!!

i think the most important thing being missed here is that people are quick to judge for profit schools because their revenue comes from tax payer dollars… however there are a few things to consider here before immediately jumping on this investigation (which is a very narrow investigation at this point as its findings consist of 15 schools in a national industry consisiting of thousands and thousands of schools).... not all schools use unethical business practices and thats a fact so before jumping on the witch hunt bandwagon solely because for profit schools generate revenue from tax dollars consider the regulations imposed upon them, they have to maintain significantly higher rentention and placement rates than non profit schools, and remember this…. state schools and community colleges do offer degrees and certificates as a reduced rate than for profit schools ... however the students attending still use federal funding to attend AND the REASON the tuition is so much less is because the schools ALREADY recieve tax payer dollars in the form of grants and subsidies to run the institution soooo we’re actually paying more money for every student that goes to a state school than for students who go to for profit schools because they student qualifies for the same federal aid no matter where they go to school… but at a for profit school they need to pay the difference themselves, but at a state school the tax payers pay that for them too and thats the part people tend to forget

additionally the study pointed out for profit schools generate up to 89% of their revenue from federal funding… but it fails to mention that the government mandated for profit schools may receive up to 90% revenue in federal funding…. ? they should really change that if they feed its too much….

in terms of unscrupulous business practices that is always going to occur, and its great that efforts are made to keep it at a minimum…. but that doesn’t mean it should disallow good business to provide good necessary services to people who want and need them…. people need to dig more into facts before making such harsh statements

I have a dear friend who is enrolled at the University of Phoenix and has attended for the past year and a half. She is two classes left until she completes her associates degree in criminal justice. Unfortunately she made the mistake of telling them that she would like to transfer to a different university (traditional) so that she could pursue a more specialized degree. Suddenly she is having difficulties having her Fafsa approved. They have requested that she fax them copies of her birth certificate and marriage license. She has sent these several times, but there are always additional forms. The deadline for completion is on Tuesday September 14th.

Essentially if she is “not approved” with Fafsa then she will be on the hook for $5,000 in student loans for the classes that she is about to complete and classes that she is scheduled to take.

She has often called me and my husband to help her with her mathematics courses (her weakest subject). First was basic algebra, second was geometry, and the third class she was told that she “had to take” was linear algebra. For those unfamiliar, this class is a junior level mathematics class that is taken after calculus 1, 2, and 3 and involves highly complex mathematics. There was no earthly way for her to take this class after geometry and understand this. She kept posting to her class board and was eventually told to pay for someone to do her class work. Apparently that is how the majority of this class was passing.

From what I have seen University of Phoenix is a fraudulent, unscrupulous, scam that is designed to steal as much money as possible from students. The “classes” they take are merely shells of what you get at a real university. The students have to teach themselves, often get poorly educated professors, and leave with no real knowledge.

If I were a hiring manager, I WOULD NOT hire a UOP graduate. You would be better off with a high school graduate with experience than a person with a fake diploma.

Why is this company allowed to ruin the lives of thousands of students with ruinous debt (20k for an associates degree!) and worthless degrees while fleecing the American Tax Payer of the funds for the Federally Guaranteed Student Loans that will inevitably go into default?

I wonder why so much responsibility and fault is placed on the buyer instead of the seller in these transactions?  These past 2 years, we’ve seen corporations blame homeowners in foreclosure for not doing more research, blame those in debt for having bank accounts that penalize with outrageous overdraft fees, blame credit card users for using credit cards in which the rules change almost daily to their benefit.  Now we are blaming young students, desperate workers for making wrong choices in the educational system. 

It’s pretty hard to choose the right thing when the experts doling out the information lie.  And that is what’s been going on for many years now—lying to people and taking their money.

Fraud has become acceptable it seems.  Try lodging a complaint about any of these things—nothing will happen.  No one will go after these thieves, and if they do, it’s a process that takes years and years.  It’s shameful.

I was deceived by one of these for-profit colleges in 1991. I have defaulted on my loan and have been trying to get the Dept. of Education to hold the school accountable for almost 20 years now. The school lied to the Dept. of Education and said I transferred to another school when in reality I was forced to drop out when my loans were revoked because of the school’s fraudulent recruiting and financial aid practices. I ask you: How exactly does a student transfer from a NON-ACCREDITED school? Answer: It is impossible to transfer non-existent credits. The Department of Education should have caught this lie. They did not. This school has changed names three or four times. However, they are still the same school. They just want to make it look like they are no longer the same when they sully their reputation each time. Tampa College became Metropolitan University became something else became what is now called Everest. They have students sign over their student loan checks directly over to them. They tell candidates they do not need a GED and then allow them to attend until loans are revoked because students don’t have a GED - or at least that is what they tell them - and then demand upwards of $700 a month - at least that’s what it was 20 years ago - to stay in school, which obviously the low-income student does not have, forcing the student to drop out. With no education, the student has no choice but to default on loans which the student cannot even make the minimum payment on, after the period of forbearance has expired. They tell the Dept. of Education it is the student’s decision to leave. No, the student is FORCED to leave, shattering dreams of a better future and effectively destroying any future chances at higher education as interest turns a $3000 loan into a $10K loan and collections will not accept any reasonable attempts at payment, instead demanding outrageous monthly payments that an individual with no education and therefore no good paying job could ever dream of making. You just get farther and farther in the whole. It ruins your entire life. And the school and the recruiters who did this to you couldn’t care less. I have tried to kill myself because I have no future. Do you think Tampa College et al cares? Of course not. Incredible that they can sleep at night. These are not human beings. These are soulless bloodsucking automatons who only care about one thing: money. If there is a Hell, may they burn in it.

To Anne

I’m so sorry about your situation and I would love to chat with you and hopefully make you feel better I can’t imagine how you feel. I went to one of those colleges and worked there while doing my internship. I found out things that would haunt anyone with a soul. BUT YOU WONT FIND ONE…...The people who run these types of schools are truly evil.

What is even worse is when these schools prey on community college students.  Here is a blog where students can get information about local public schools.  Right in the middle is what looks like an application to receive more information about the community college.  Instead its a way for companies like Art Institute and Devry to poach low income students.  What is worse are the marketing companies like Campus Explorer who make these faustian deals to go after these young men and women.  They don’t just stop there.  If you google community colleges you see them in the organic search results partnered with Google again trying to prey on would be community college students.

Source:  www.communitycollegereview.com/school_overview/106   

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For-Profit Schools

For-profit colleges are under fire for their recruiting practices, and the graduation and loan default rates of their students.

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