Make sure you catch Marketplace tonight. We're airing the first of two stories on for-profit colleges like the University of Phoenix. These schools make most of their money from taxpayer-backed loans to students. So it's easy to see why the schools might want to sign up as many students as possible. And of course, that leads to problems.
The University of Phoenix was sued by two former employees who claim the school violated a federal ban on giving incentives to counselors for recruiting more students. The suit was filed several years ago but remains unsettled.
Last year, 86% of the University of Phoenix's $3 billion in revenue came from federal loans made to its students. But many of those students can't or don't pay the money back. Many of them don't even graduate. One congressman has said this kind of thing looks "a lot like subprime student loans."
Marketplace and ProPublica teamed up to look into the issue.
In the story that airs tonight, we hear from student Michelle Rambo. When Rambo signed up at the University of Phoenix, she says she was told she qualified for a grant and wouldn't have to pay anything for her education. Reporter Amy Scott tells us what happened later:
She was almost finished with her associate degree when a school counselor called about moving her on to a bachelor's program.
And one of the questions that she asked me completely stopped the whole conversation. She had asked me, so what kind of loan do you have?
Rambo thought she didn't have a loan.
But when she enrolled, she signed what she thought was a form inquiring about federal aid. Turns out it was an application for loans that'll cost her $18,000 when she graduates.
It was scary. It still is scary. I'm still scared. I still don't know what I'm going to do yet.
Tomorrow night's story features a former University of Phoenix employee who explains
some of the high-pressure sales tactics he was told to use:
One of the things we would be told to do is call up a student who was on the fence and say, all right, I've only got one seat left. I need to know right now if you need me to save this for you. Well, that wasn't true.
In the training session, Burke says staff asked the manager what to do if that student showed up for class and there were only six or seven people there.
And the manager said, well you tell them that the class got so full that we had to split it. Scott: So you were basically told to lie? Burke: Yeah. We were told to lie.
Marketplace and ProPublica interviewed five ex-employees and a dozen students, plus the president of the University of Phoenix, among others.
It's highly recommended listening, and of course, if you miss the on-air stories, they'll be available here at Marketplace.org.