Congressional Investigation Reveals Deceptive Marketing by U.S. Colleges

A report recently released by the Government Accountability Office (Congress’ investigational arm) found that recruiters at for-profit colleges in the United States lied to entice students to apply and encouraged them to commit fraud to qualify for government-backed financial aid.  The GAO report found that recruiters at all 15 colleges studied misled students about the costs and quality of their programs of study, and recruiters at four out of the 15 schools encouraged fraud on the students’ loan applications.

The GAO sent investigators to pose as prospective students at a cross-section of for-profit colleges in Arizona, California, Florida, Illinois, Pennsylvania, Texas and Washington, D.C.  Representatives from the schools exaggerated the undercover applicants’ potential salary after graduation, and in certain cases urged the would-be students to attempt to hide their savings and lie about the number of members in their household to qualify for financial aid.  In one instance, a beauty school recruiter claimed that barbers earn as much as $250,000 per year.  The Bureau of Labor Statistics said 90 percent of barbers make less than $43,000 annually.

Harris Miller, President and CEO of the Career College Association, an industry group, questioned whether the report was truly representative, noting that there are “more than 200,000 employees in our schools.”  He acknowledged that the report was a “wake-up call” for for-profit schools to be more vigilant in training and following up on the progress of their employees.  Kate Cyrul, spokeswoman for Senator Tom Harkin, was far more troubled by the report.  “The results of this broad-reaching survey of for-profit school recruiting practices leave little question that these practices occur across the industry and are in no way limited to a few rogue recruiters or even schools,” she said.

The False Claims Act may well be the most effective deterrent to such practices going forward.  Last year, Apollo Group, Inc. and Alta Colleges, Inc. settled False Claims Act suits alleging illegal recruiting practices.  Apollo, the largest U.S. education company, agreed to pay $67.5 million to the government and $11 million in attorneys’ fees to settle its suit, while Alta agreed to pay $7 million.  Currently, colleges can be fined up to $25,000 by the government for each recruiting violation, and lose their eligibility for government financial aid if they are proved to have lied about their programs. 

For more information see:  http://www.bloomberg.com/news/2010-08-03/for-profit-colleges-deception-uncovered-by-u-s-investigation-into-aid.html