Allegations against U of Phoenix persist

A University of Phoenix sign.

Katherine Clark with her boyfriend Daniel Ray and their dog Cadence.

Michele Rambo, 23, of Grand Prairie, Texas.


Kai Ryssdal: While most businesses are still trying to find their way out of the recession, for-profit higher education is doing quite fine, thanks very much. Enrollments are up 20 percent, profits are up as well. But that doesn't mean there aren't any problems.

The biggest for-profit schools get most of their revenue from federal student loans. The billions of dollars their customers borrow to pay tuition. The University of Phoenix is the biggest for-profit school out there, probably the best known as well.

A few years ago, it paid the government $10 million over accusations about its high-pressure recruiting tactics. Now it's put aside another $80 million to settle a lawsuit about the same thing.

And a joint Marketplace ProPublica investigation shows some for-profit schools are still abusing the system. Sharona Coutts and Amy Scott reported our two-part series. Here's Amy:

AMY SCOTT: You've seen the ads on mass transit, Facebook and TV, promising job retraining, online classes, flexible schedules.

UNIVERSITY OF PHOENIX AD: I was the first in my family to graduate from college. But I won't be the last.

Hundreds of thousands of Americans have been drawn to for-profit colleges like the University of Phoenix.


Phoenix isn't the only school that profits from the stream of federal student aid. But it's the single biggest recipient. Last fiscal year, 86 percent of its revenue came from the federal government. That's more than $3 billion. But who's benefiting from all that money?

MICHELE RAMBO: My name is Michele Rambo, and I live in Grand Prairie, Texas.

Rambo signed up at the University of Phoenix in Dallas a few years ago.

RAMBO: I did tell them that I was pregnant and they were like, oh, well that just solves everything, you know, you qualify for a grant, you're covered. And I'm like, so I don't have to pay anything? And they told me no.

Classes went well. She got good grades. She was almost finished with her associate degree when a school counselor called about moving her on to a bachelor's program.

RAMBO: 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.

RAMBO: It was scary. It still is scary. I'm still scared. I still don't even know what I'm going to do yet.

So how could this happen?

It turns out the enrollment counselors at the University of Phoenix get paid in part based on how many students they recruit. The university's negotiating the settlement of a lawsuit that claims employees were pressured to sign people up.

Bill Pepicello is president of the University of Phoenix. He says his school goes out of its way to ensure counselors don't mislead students.

BILL PEPICELLO: We train our financial counselors very carefully to provide an array of options for students, and to try to be as specific as they can as to what the implications of each of those are.

One financial aid expert told us it's not uncommon for students to sign a bunch of paperwork without really understanding the terms of their loans.

Sound familiar?

At a recent hearing, Congressman George Miller of California likened problems in student lending to another recent crisis.

GEORGE MILLER: I'm a little worried that we're developing a process here that looks a lot like sort of subprime student loans. And knowing that these people don't have the capacity to pay it back, knowing that they may not have the ability to benefit from this education, we go ahead and extend them the credit...

What he means by not benefiting, is that many students saddled with debt don't finish their degrees. The for-profit industry says about 60 percent of its students graduate from two-year programs. The University of Phoenix says its rate is less than half that. But whether students drop out or graduate, they still leave school burdened with debt. And it's debt they can't escape.

BARMAK NASSIRIAN: It is very important to understand, student loans are the most collectible obligation in the United States.

Barmak Nassirian is with the American Association of Collegiate Registrars and Admissions Officers.

NASSIRIAN: Students who default on their student loans have their Social Security benefits intercepted, have their tax returns intercepted, have their wages garnished. They are ruined for life.

The Department of Education says more and more students are falling behind on their loans. For-profit schools have a higher default rate than the average.

Harris Miller represents many for-profit schools as CEO of the Career College Association, a lobby group in Washington, D.C. He says defaults are higher at his schools not because they're for-profit, but because they sign up poor people. People who might not otherwise have a shot at college.

HARRIS MILLER: The simple fact is if your institution is willing to accept lower income students, which our institutions are, which community colleges are, which minority serving institutions are, they have higher default rates.

The taxpayer actually makes money from the interest on these loans. But critics of the system say students often lose out. Not only are they deep in debt, they don't always have much to show for it.

I went to see Katherine Clark at her home in Seal Beach, Calif. She signed up for a business management degree at the University of Phoenix. She says the program included courses like "Skills for Lifelong Learning."

KATHERINE CLARK: Like they had worksheets where it was like if you're deserted on an island, and you have a list of things, put them in order of how they would be important to you. And I'm just like are you kidding? What am I ever going to use this for?

Clark didn't qualify for federal student aid. So she paid some of the bill with credit cards. The rest she owes to a private lender, Sallie Mae.

CLARK: In total, I've paid out of my pocket, $3521. And I still owe $600.

Scott: And what did you get in return?

Clark: Absolutely nothing.

The Apollo Group, which owns the University of Phoenix, made just shy of half-a-billion dollars in profit last year. But Barmak Nassirian says no one's keeping a close eye on the quality of the education for-profit schools like Phoenix provide.

NASSIRIAN: In too many instances we see keyboarding skills transcribed as Computer Science 101, we have seen working with Microsoft Windows transcribed as a Theoretical Course in Operating Systems, and the like.

Clark was so disappointed she dropped out after a course and a half. University of Phoenix officials say out of more than 420,000 current students, a few anecdotes don't tell the whole story.

But Marketplace and ProPublica have heard other troubling accounts. Tomorrow you'll hear allegations of some abusive tactics for signing students up.

With Sharona Coutts of ProPublica, I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

Katherine Clark with her boyfriend Daniel Ray and their dog Cadence.

Michele Rambo, 23, of Grand Prairie, Texas.

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You will notice a large volume of defamatory material posted about me by an emotionally disturbed individual who has worked as a diploma mill "professor." please remove it; see the January 2010 article about this in Wired for more information.
George Gollin
University of Illinois

Here is another reason these phony schools should be shuttered—or at least cut off from access to taxpayer dollars via federally subsidized student loans.

“For-Profit Colleges Mislead Students, Report Finds”

Undercover investigators posing as students interested in enrolling at 15 for-profit colleges found that recruiters at four of the colleges encouraged prospective students to lie on their financial aid applications — and all 15 misled potential students about their programs’ cost, quality and duration, or the average salary of graduates, according to a federal report… The report does not identify the colleges involved, but it includes both privately held and publicly traded institutions in Arizona, California, Florida, Illinois, Pennsylvania, Texas and Washington, D.C. According to the report, the colleges in question were chosen because they got nearly 90 percent of their revenues from federal aid, or they were in states that are among the top 10 recipients of Title IV money… In addition to the colleges that encouraged fraud, all the colleges made some deceptive statements. At one certificate program in Washington, for example, the admissions representative told the undercover applicant that barbers could earn $150,000 to $250,000 a year, when the vast majority earn less than $50,000 a year. And at an associate degree program in Florida, the report said, a prospective student was falsely told that the college was accredited by the same organization that accredits Harvard and the University of Florida.


A colleague of mine has been working on a U of P doctoral in education for several years. He has now changed dissertation topics 3 times; each time his "advisors" find a flaw or a reason the project cannot be completed, so he starts over again. And each time he doesn't meet a deadline, they charge him a huge chunk of money to continue. I keep wondering when the light is going to go on in his head about this apparent scam. BTW, he is quite proud of his 3.96 GPA, but never mentions (or sseems to use) any of what he is learning in his current teaching job.

I smell a rat. No wonder why my employer will no longer pay for any degree from any fully online or for profit institution.

But.. he will end up at age 52 with $100,000 indebt and a degree that many consider a joke.

I have serious doubts about this article. I am currently a UOP student, concentrating on my bachelors in elementary education. From day one, I knew exactly what it would cost me to receive my degree. My academic staff have all informed me about the amount of each class, and how much it would come out to. I wasnt stupid. When I applied for financial aid, I recieved letters every month about how much I recieved, how much applied to my classes... and so on. People shouldnt be getting on here telling us not to be a student of UOP... for some people online college like this is all we have. On top of that, education is needed, I for one am willing to pay whatever to reach my dream, and have that career I have always wanted. Education is A MUST in this country. Take it or leave it. You choose.

In my opinion I have been held hostage by the financial dept of the University of Phoenix. After I was laid off from my job last year my financial advisor allowed me to keep some of my financial aid dispersement to pay bills. My advisor apparently noted my above average GPA and gave me the green light to keep the last portion of my financial aid dispersement for one class or roughly 1200.00 dollars. However, my advisor failed to mention that allowing me to do this violates the Universities own rules for financial aid dispersement and payment. In short I was not fully informed and now I am suffering from this indiscretion. I am considering litigation against the University for breach of contract as they have forcefully withdrawn me from my online classes over this dispersement issue.

Rambo and Clark you both are ldiots! who are looking to make a buck off your ignorance. I know for a fact that you cannot recieve Financial Aid without going through an involved process. You don't just sign a piece of paper to get student loans. You have to apply via the web for FA and go through a screening process. Also the assignment that Clark was talking about is an assigment used by many Univerisities to encourage critical thinking. The excercise is meant to be both fun and interesting, while learning how to prioritize things of importance. by the way the answer was a match.

University of Phoenix's education is about the equivalent to a tier 3 or 4 university. They use the same books, resources, and often the same instructors. I have taken several prerequisites there and had a good experience, but I would not get a degree from University of Phoenix. College degrees are watered down as it is and there is some stigma attached to the University of Phoenix.

When I say nepotism is fierce, this usually wins out. There are many who are in leading position and do not have advanced degrees. They were merely given a chance by someone they know and were mentored and supported. You don't need a degree for that.

"Each student has to make the decision if they really want to be competitive in today's market. With a Master's, I will be able to apply and compete for opportunities that non-degree individuals will not."

This is one of the most told lies that keeps universites open. Knowing someone is far more powerful than getting a degree. Nepotism is a fearce competitor to those who are learned and the learned usually lose in most cases. Having any degree guarantees one thing and one thing only. If you don't get a full scholarship or grants you will have debt to pay and getting a degree will not gurantee that you will be able to pay back this debt. America or Americans do not seem to care about scholarship by rewarding those who are scholarly.

I received my Bachelors and will receive my Masters from the University of Phoenix. I tried the traditional methods, but the work environment was too stressful and then driving to school and fighting to get a parking place became too much. The added cost of working from home was worth the investment. The truth is that a degree opens doors that individuals without a degree will not be able to enter. My current position required a BS degree. I took a test and scored in the top three percentile, which is required to get hired. The degree opened in the door; my experience and knowledge helped me to obtain a place for the position. In my opinion, you get out of an education as much effort as you expend.

When I was interested in starting with University of Phoenix, I called and asked for information to review. I received information about fees, financing, and course objectives. I read all the material and made the decision that I would be better off with a degree than without in the changing work environment. The financing section was informative and I asked a lot of questions about student loans. I believe that if one can read it is difficult to be tricked into anything. Currently, I owe $40,000 in student loans for the University of Phoenix and I have many friends that graduated from Stanford University, USC, and other that owe in excess of $75,000 to $200,000 in loans.

Each student has to make the decision if they really want to be competitive in today's market. With a Master's, I will be able to apply and compete for opportunities that non-degree individuals will not.

I am glad the opportunity was there for me to achieve my personal and professional goals.


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