U.S. Government Sting Nets 15 For-Profit Colleges

by Mary Beth Marklein

A government inquiry of 15 for-profit colleges found four cases in which campus officials encouraged applicants to commit fraud and examples at every school of officials lying about or misrepresenting their programs.

Those and other findings are to be presented Wednesday at a Senate committee hearing examining the for-profit higher education industry. The Education Department recently proposed rules to tighten regulation of for-profit colleges, which last year received more than $24 billion in federal loans and grants.

The Government Accountability Office report is based on a three-month effort in which investigators posing as prospective students applied for admission at for-profit colleges in Arizona, California, Florida, Illinois, Pennsylvania, Texas and Washington, D.C.

“In some instances, undercover applicants were provided accurate and helpful information by college personnel, such as not to borrow more money than necessary,” the report says. But the details focus on fraud and “deceptive and otherwise questionable sales and marketing practices.” Examples:

• An applicant to a certificate program in California was encouraged to add more dependents in the Free Application for Federal Student Aid, or FAFSA, in order to qualify for Pell Grants.
• College representatives in Florida, Pennsylvania and Texas suggested undercover applicants not report $250,000 in savings on the FAFSA.
• One investigator received more than 180 phone calls in a month after registering on a website that links students to for-profit colleges.
• A representative at a college in Florida told an applicant that the school was accredited by the same organization that accredits Harvard and the University of Florida, which was not true.
• Representatives from 13 colleges provided inaccurate or incomplete information about graduation rates, guaranteed applicants jobs upon graduation or exaggerated likely earnings.
• Fourteen colleges had programs that cost more than comparable offerings at the nearest public college.
• Six colleges told applicants they could not get information on aid eligibility until they completed enrollment forms agreeing to become a student and paid a small application fee.
• At two colleges, applicants were allowed 20 minutes to complete a 12-minute test or took the test twice to get a higher score.

Gregory Kutz, of the GAO, led the investigation into a variety of programs, whose total tuitions ranged from $11,500 at a cosmetology certificate program in Washington, D.C., to $65,338 for a bachelor’s degree in construction management in Texas.

Kutz called the four cases of fraud “alarming” and said the similarity of “scripts” at the 15 institutions investigated suggests that these are consistent practices and that admissions personnel are probably trained. Kutz has contacted Education Department officials.

Senator Lamar Alexander argued for better enforcement and self-policing of the industry with help from accreditors, while Wyoming Senator Mike Enzi urged all sectors be examined.

“In focusing only on for-profits, we are not being objective, and we are ignoring the bigger picture of what is happening across all of higher education. … The for-profit sector should not be examined in a vacuum,” Enzi said.

However, Minnesota Senator Al Franken defended scrutiny of for-profits.

“We’re studying these for-profit institutions for a reason … because the numbers are so outlandish, and if we are truly talking about saving money … we ought to be going after the low hanging fruit and that’s what this appears to be. Fifteen out of 15 — I think we’ve located a place where there are (a lot) of bad actors,” Franken said.

The hearing held in early August, which included undercover video footage of for-profit college recruiters, is the second in a series examining the for-profit higher-education industry.

Representatives of the for-profit industry described the report as “deeply troubling” and vowed to take immediate steps to fix 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,” says Harris Miller, CEO of the Career College Association, which represents more than 1,800 members.

Daniel Bennett, author of a report on for-profit higher education being released Wednesday by the non-profit Center for College Affordability and Productivity, says the findings are not a sign of “widespread abuse.”

“I’m not saying there aren’t bad players, (but investigators) should also be looking at what is positive in this sphere, what schools are doing to cut costs and make things more efficient.”

A GAO report published last year urged the Education Department to step up its oversight of proprietary schools to ensure that only eligible students receive federal aid.

Originally published in USA Today, August 2010. Reprinted here with permission.