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.

Log in to post154 Comments


I am the first to get my degree in my family. I am 38 years old and a single parent to 3 young children. When my kids were sleeping at night, I was online educating myself in order to provide a better life for myself. Thank goodness for University of Phoenix. I couldn't have done it without them. Yes I have loans, I knew it going in, but I also have a professional level job and have been promoted and see myself continuing on in my career. I also plan to get my MBA from UOP. My life is better because of University of Phoenix.

I attended the local community college where I grew up. I received almost no assistance in financial or academic counseling. It took me four years to earn a two year associates degree while working 60 hours a week supporting myself. I wasted a considerable amount of money, time and effort because that institution, and others like it, are not equipped or interested in helping students in my situation. Upon enrolling at the University of Phoenix, I was amazed at the modality and method of education that was tailored to helping me balance my education and my career.
Course instruction came from professional fields. These instructors not only succeeded in their field, but also in their education. Each of these instructors had no less than a Masters degree and had plenty of "corn in the crib."
My traditional not-for-profit experience provided instructors in ivory towers who determined what I did or did not need to know. My University of Phoenix experience was much different. These instructors encouraged me to push the educational boundaries and learn beyond the case study. They also had real world experiences with major employers like Hallmark, H&R Bloch, Sprint and the Federal Government.
I earned my Bachelors degree and then went on to earn my Masters degree. I sit in meetings with people who earned their degrees from traditional universities. I see those same good people give presentations and prepare documents that would not pass high school competencies.
I will put my educaton from the University of Phoenix up against anyone's.

I have been in student and financial services for the past 25 years at private universities and no matter what school I was employed with the majority of the students did not take the time to read thru the financial documents they were given nor did they ask questions. The majority of the students who end up in collections landed there because they took their financial aid funds and then dropped out. Where in this article did anyone ever address the student’s responsibility for reading, understanding and asking questions about their financial responsibilities? I think it is surprising to see this article label private universities in such a bad light. The only difference between a private and public university is that the private university does not get state funding and uses student tuition to run the university. Same on Marketplace for being so one-sided.

If people do not read the loan documents why is this any different than the clowns who signed sub-prime loans?

Further, take one of my classes, and determine for yourself if it meets standards of academic integrity.

Contrary to Nassirian's comments, I have never seen, or heard of, a keyboarding class masquerading as anything at UoP. In fact, I have never heard of a keyboarding class.

I am a proud alum of UOPX and I was not pressured into enrolling. I took responsibility to assure the school's accreditation was up to par and I understood what I was signing upon enrollment. I am thankful for-profit school exist because I cannot attend a traditional university due to my work schedule. I have attended traditional school as well as private-for-profit. There were things I like about both and dislike about both. I will say UOPX delivered a rigor in the classes that I didn't get at the state university. I got my money's worth!

I find it extremely interesting that many of of the posts questioning the credibility of this article and its sources are from people who post their addresses as Phoenix, AZ and surrounding areas. Truthfully, I agree that students should do their homework in applying for schools. They should be aware of forms they are signing, and they should absolutely check to see if the online university is accredited, and if those degrees are respected or even acknowledged in their fields. Sadly, many employers and recruiters consider these degrees of little value, which is unfortunate for the students who spend time and money to pursue them.

Interesting information here. According to the linked "ProPublica" article, it states, "....according to a dozen current and former students and two former recruiters who spoke to ProPublica...." Uhh...the school has over 420,000 students and over 17,000 employees according to the company website....so our journalist are basing these claims off of an extremely small, if not limited population base.... good job Amy Scott and Sharona Coutts....if you were in one of my courses journalism or businesses, your article would fail for lack of validity. And no, I'm not on anyone's defense here.

i have been hearing stories like this about U.O.P. for quite sometime and I personally feel that it is pretty ridiclous. If there is anyway that a student comes to this school and is under the impression that they are getting a "free education" it is through no fault of the University. I am a student and an enrollment counselor as well and I can say that we are held to a strict standad when it comes to giving proper financial advice. Students must select a lender for loans, work the entire cost of school on a financial calculator and apply for federal loans by completing a FAFSA. There is at least 4 places in the application process that students e-sign for the amount of loans that they requested. Not everyone even qualifies for the Pell grant as well so for many students, student loans is the only option. As for the pay scale, I can tell you that it is not solely based on admission. I am held more responsible for student retention. If a student drops out of school within the first 12 weeks, it's just like they were never here. I can say that I have had students that have called and thanked me in tears for helping them achieve thier goals, just like I have had many students put forth zero effort and drop, only to blame the school for not helping them. We live in a society that everyone wants a hand out, and not just a hand up. I am a firm believer that you get what you put in, and I can say that I am getting a real education that will help me long after I leave UOP. I feel that cases like Ms. Rambo are notcommon but may exist. But like the title of the article said"allegations aginst UOP" arte just that, allegations. just remember that when you point a finger at someone you have three more pointing back at you. Do your research and find a program that you can actually attend, pass, as well as afford. And for God's sake stop blaming everyone else for the fact that yop didn't read the loan applications that you signed. Much like the sub-prime mortgage situation, a case of consumer ignorance and lack of personal responsibility.

This blog is bias and does not have the correct information. All enrollment counselors go over and over and over the finance responsilblity that the student has. If any enrollment counselors lies about anything they would be fired on the spot. Maybe you should check your facts before writing something you have no-clue about.

If you think about it, isn't the whole higher education system a scam? I earned an MBA the hard way, with two years of 10 hour days. The vast majority of the benefit is simply having the letters after one's name so that everyone with the same letters can pat each other on the back. The only thing that the alphabet soup of degrees (the "learned" professions excepted)really guarantees is that the recipient is willing to spend a lot of money enduring great suffering. That probably makes us superior widget workers. The University of Phoenix simply exploits the credentialing house of cards, handing out letters like medieval Catholic indulgences.


With Generous Support From...