For-profit colleges face more scrutiny in new report

Enrollment at for-profit colleges has climbed to 1.8 million in recent years.
Enrollment at for-profit colleges has climbed to 1.8 million in recent years.

A government report released Aug. 4 details “fraudulent” practices among recruiters for some for-profit colleges, and public criticism of the popular institutions has mounted as recent statistics show that at least one for-profit university received $1 billion in federal Pell Grants during the 2009-10 academic year.

Investigators from the Government Accountability Office (GAO) posed as college students and found that four out of 15 institutions they examined “encouraged fraudulent practices” to secure federal student loans, and representatives from all 15 colleges “made deceptive or otherwise questionable statements” to the undercover students, according to a report published on the GAO’s web site.

The extensive report is the latest in a string of negative publicity for for-profit schools, which include industry giants such as the University of Phoenix, Kaplan University, and DeVry University.

Manny Rivera, a University of Phoenix spokesman, said the school takes the GAO report “very seriously” and has launched an internal investigation after reading the report’s findings.

“We have strict policies in place to protect students during the enrollment process and throughout their tenure with the university, and when we discover any violation of this policy, we take immediate and decisive disciplinary action up to, and including, termination of the employees involved,” Rivera said.

Responding to consistent complaints about these colleges’ tactics, the U.S. Education Department (ED) unveiled regulations that would cut off federal aid to for-profit college programs–including many of the nation’s largest online schools–if too many of their students default on loans or don’t earn enough after graduation to repay them.

ED statistics show that these schools’ aggressive and misleading recruiting practices have helped institutions bring in hundreds of millions or even billions of dollars in federally-subsidized student aid, including Pell Grants.

The University of Phoenix, with more than 200 locations and 476,000 students nationwide, took in slightly more than $1 billion in Pell Grants during the 2009-10 school year, according to ED statistics. Kaplan University, a school with 66,000 students, received $211 million in Pell Grants, and DeVry received $207 million. Ashford University took in $162 million in Pell Grants last academic year.

For-profit college enrollment has grown from 365,000 to more than 1.8 million in recent years, according to the GAO report. The industry received $20 billion in federal student loans last year, including $4 billion from the Pell Grant program.

Four of the GAO investigators who went undercover and applied to for-profit schools were encouraged by college personnel “to falsify their financial aid forms to qualify for federal aid,” according to the report. In one case, a college recruiter encouraged the undercover applicant to hide $250,000 in savings so he would be eligible for federal student aid.

In an undercover video posted alongside the GAO report, a recruiter in Texas tells a pretend applicant that the government doesn’t “need to know how much cash you have” after the applicant said he received a $250,000 inheritance from a deceased aunt.

The GAO video also catches a California recruiter for a for-profit school urging an applicant to increase the number of dependents in his household so he can qualify for Pell Grants.

Another video clip shows a Washington, D.C. for-profit admissions official tell an undercover student applicant that he could make $600-$1,000 a day as a barber. The GAO report points out that nine in 10 barbers in Washington, D.C. make less than $19,000 annually, according to the Bureau of Labor Statistics.

The GAO report also details for-profit personnel’s aggressive methods in pursuing potential students. The undercover GAO employees “received numerous, repetitive calls from for-profit colleges attempting to recruit the students when they registered with web sites designed to link for-profit colleges with prospective students,” the report said.

“Once registered, GAO’s prospective students began receiving calls within [five] minutes,” with one undercover prospective student receiving 180 phone calls in one month. Some colleges called as late as 11 p.m., according to the GAO.

The investigators also found that for-profit academic programs were pricier than comparable programs at nearby community colleges.

Officials in the for-profit college industry said institutions should enforce strict recruiting policies, emphasizing that not every for-profit school was investigated by GAO workers.

“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,” said Harris Miller, president of the Career College Association (CCA), an organization that represents for-profit colleges. Miller added that for-profit institutions should have “zero tolerance for bad behavior” among recruiters.

The CCA announced Aug. 4 that the organization’s response to the GAO’s findings would include development of a “sector-wide mystery shopping program to assess the state of practice in recruitment, admissions, financial advising, and other critical compliance areas,” and an expansion of an existing “compliance training program, including an increased focus on compliance from the top down in the organization.”

For-profit institutions deflected criticism last year when Apollo Group Inc.–the University of Phoenix’s parent company–agreed to a $78.5 million settlement after a six-year court battle that started when former university employees filed a lawsuit claiming recruiters were paid based on the number of students they enrolled, a practice that violates federal law.

Apollo Group denied the former plaintiffs’ allegations, dismissing them as disgruntled former employees and claiming the school’s recruiting practices were within federal guidelines.

Arthur Keiser, chancellor of Keiser University, a family-owned chain of 13 campuses across Florida, said many public four-year schools pay recruiters when they enroll international students–a practice not often brought to public attention.

“Incentive-based compensation has been used everywhere,” he said in an interview with eCampus News last December. “And people just don’t understand the circumstances.”

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