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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Sorry to tell most of you that Miss Amy has some accurate facts about UOP. I worked for them as an enrollment counselor then promoted up to their corporate education. The pressure on enrollment counselors to enroll a minimum of 7-12 students per month is undue influence. Fact, 60% of Associate Degree seekers drop out-true true.The associate program is terrible. Trying to get a student enrolled in this program is a nightmare for an enrollment counselor because of the staff supporting this point of revenue. Not knowing that you have just signed up for a student loan? Not buying that story at all. UOP does advise, counsel, explain and communicate the obligation to students and potential students that they are getting a student loan. With any financial obligation isn't it up to the consumer to read the fine print and ask questions? Umm the housing market experienced the same issue. One comment about student loans made in another post is also true- the student loan is the most collectible debt in the U.S. Why do you think Obama supports higher education? More loans will artificially stimulate the economy. The students that did post in this forum talking about their positive experiences have some truths to them. Obtaining my undergrad from UOP was a great experience for me at one particular campus that I worked at. They don't all operate the same. AFter accepting a promotion and moving to another state I started my MBA. I am four classes away from my MBA. I am wondering how I will pay the student loan back because my salary definitely does not coincide with that obligation. Most likely I'll be deceased by time those two loans are paid off. Working for UOP I had to take a tremendous pay cut, was promised by enrolling students I would receive from 6-20% pay increase for enrollment. That didn't happen. The management staff threatens employees to fire them for failure to perform. Creates a cut throat environment, pits employees against one another, makes rules for one employee over the other- so bad that I wondered if they knew who John Sperling was. They obviously did not go to the same John Sperling school of business that I attended in another state. The management staff at their San Diego campus is the worst ever. There are law suits being filed by employees. The manager I had told me the model of employee they want: Replace don't Chase! Meaning hire and fire rather than cultivate and nurture good employees. I was told from day one when I started at this campus to "Never trust anyone at this campus." What kind of message does this say to a new employee? All their campuses in San Diego are filled with managers that may not have a degree, get promoted for all the wrong reasons, and basically have their heads up their #@%!! The corporate education leg of that campus is a mess. They have had some 49+ corporate education employees in the past four years. What does that tell you about management of that campus? There are lawsuits being filed, people going out on medical stress leave, people with no degrees getting promoted without degrees that have no clue how to manage. I felt like I was selling electrolux vacum cleaners with the misguided direction from those idiots they called CELM's at the San Diego campus! One the CELM's accompanied me on a business meeting call to a mid size company and I was completely embarrassed and ashamed of that person's lack of integrity and unprofessional antics. That was an excruciating experience. I learned very quickly what an idiot for a CELM that I had. Left me wondering how and why would you promote someone like them? But it happens. Now if you are of the lesbian orientation then you will definitely want to work there. You won't get promoted or move anyplace at that campus unless you swing in that area. From the director down the entire corporate hierarchy it flows this way. They treat one another with disrespect and it flows down to employees too. Employees continue to put up with these behaviors because society needs to work and needs benefits. A call for self-survival- it is expensive to live in S.Cal so you put up with those antics. Yet UOP continues to spend $2mill or so a month on aggressive campaign ads. They purchased their own advertising company a few years ago. Suggest you read investor relations pages under Apollo Group. This actually was a brilliant move because of what company they purchased. The house of cards can only stand so long. As more employees come forward and find the strength to endure a lawsuit to right them for the wrongs committed upon them and to them, the real truth will surface. More forums like Miss Amy's will continue to make it across the internet to inform society. What is behind those doors at that Enrollment Department would shock and astound the average person! There is freedom of speech portion of the U.S.Constitution that permits me to voice my opinion even though it may not coincide with others' views in this forum. Keep up the good work Miss Amy. I support what you are doing- informing society on truths about a system that has burdened many! Ultimately I made the decision to not continue working for UOP; this was the best move for me and one I will never regret.

I enrolled as a student at the Sacramento CA campus in 2005. Two years later I graduated and came to work for the University as an enrollment counselor. I am currently an enrollment manager who trains counselors, and almost done with a Masters in Accountancy. The expectations for the way students are advised at UOPX are extremely high, I demand that my counselors take exceptional care in advising the students of all their options, taking time to understand their goals and find the best degree program for them - in some cases telling them we don't have a good option for them. This is the norm, not an exception. The instructors I have had have been some of the most accomplished professionals I have ever come into contact with. When there is a problem, the University listens and responds. The ONE class I had (in 3+ years of school)where the instructor was really not doing the job, the University replaced that instructor by week 3 of the class, offered additional tutoring and other assistance. I never received the level of service and counseling at community college as I have here at UOPX. This article lacks scholarship, there was obviously no due diligence and it rests entirely on anecdotal 'evidence' with no consideration as to whether this represents what happens here on a daily basis.

Why is the University of Phoenix being scrutinized for "making a profit in this current economic climate"? Isn't that good thing? The university paid almost a billion dollars in taxes last year – isn't that a good thing? Instead of taking from the government coffers, they are contributing to it. Considering the recent government bailouts, this is refreshing. The company also donates millions to charity.

The University of Phoenix brings the opportunity for education to the masses. The notion that learning can only happen by sitting in a crowded lecture hall, listening to a lecture by a professor whose only experience in the real world is what he’s read in a book, is outdated and elitist.

Looks like Amy Scott was out of options for a story and picked a fight with students who are proud of their education. I know I am. Did she get denied a promotion because she didn’t have a University of Phoenix degree? No school is perfect, at least the University of Phoenix strives to continually improve. Good luck keeping up brick and mortar. If not for this university, what other school could have lead our country to higher education? What other school could have improved the quality of life so dramatically for so many of our countrymen? What other school could have given so many citizens of our country the gift of offering a better future to their children???

Way to post terribly biased un-factual media. Marketplace was on my RSS feeds, I won’t be viewing their articles EVER again. Sponsors of Marketplace, I encourage you to reconsider who you sponsor.

Marketplace doesn't seem to have their facts in order! The University of Phoenix has been able to offer students a viable education that is equal to many other institutions. Where many students who have families and jobs do not have the time to go to a community college at night, the University of Phoenix offers a more flexible schedule to help students achieve a degree sooner so that they can be more marketable in the workforce. if not for financial aid, many students could not afford to achieve their goals of earning an education. With the help and encouragement of Enrollment Counselors and other staff at the University of Phoenix, many students have reached their goal of earning an education that they can be proud of for themselves and their families.

I am a Phoenix and could not be more proud of that fact. I understand that in a perfect world we all live with mom and dad straight out of HS and attend a local Community College and then a State School. But unfortunately we don't live in a perfect world and I am so thankful the UOP gave me a second chance. I will graduate with my BA next year and I've thoroughly enjoyed my experience.

I'd be willing to bet that for every disgruntled student at UOP, there are 20 that are more than satisfied with their experience.

Thanks NPR for airing this. Now, in the midst of the worst job market in decades, you are calling into question the education of thousands of hard working people who graduated from UoP. Even if there are bad enrollment practices and even if there are some losers who enroll thinking it's all easy, why hurt the careers of so many honest people who paid their tuition and studied hard? With all of the press you give the financial crisis, it's funny how you don't mind hurting the chances of UoP graduates getting jobs, huh? You should be ashamed.

As both a student and employee of the University of Phoenix, I feel compelled to comment on this story and set a few things straight. All new students have a conversation with their Finance Counselor upon beginning classes which goes over Federal Financial Aid and any Pell Grants which may be awarded. In addition, Ms. Rambo would have had to re-apply for this Financial Aid after one year into her Associates degree. Even if you give her the benefit of the doubt that she was overwhelmed with admissions paperwork and didn't realize that Financial Aid was a student loan, surely the second time she applied for money and chose a LENDER she would have thought about that fact. Ms. Clark's upset at the desert island exercise is without foundation, as this is a common lesson through all higher education. I saw this several times through my own Bachelor's degree at a state University. She sounds like a classic case of someone who took one class then dropped out of school. As other comments have mentioned, perhaps it would be good reporting to interview someone who actually finished their degree with UOPX? Where did Marketplace do their research on the graduation rates at UOPX? They mention that their are half of the 60% average? This is absolutely false. In the year that I have been an Academic Counselor, I have had around a 50% graduation rate with my Bachelor and Master level students, and this is only slightly above the University average. The best part of my job is calling my students to congratulate them and let them know their degree has been conferred and after their years of hard work, their diploma is on its way. As a University of Phoenix student, I can tell you that I put in more time and effort to my online classes than I ever had to in my Undergraduate studies. You truly get out what you put in, and I think it is a shame for Marketplace to discredit those hard-working individuals who are bettering their lives through higher education. Not all students of the University are oblivious to what is in front of them, and the two stories shared are not a valid representation of the institution. I recommend anyone truly interested in the facts, rather than these bogus and biased accusations take time to check out University of Phoenix's newsroom. http://www.upxnewsroom.com/record/

I think the Allegations against U of P are true; this because I lived through them. I think the federal goverment should investigate and take away there Education Status. By the amount of people on this site that have felt so compelled to write; there must be something to this. Where there's smoke there's fire! I too inrolled at U of P because our local community college's here in Hawaii are not down the street.
There sattlite campus was 2 blocks from work and work's tution assitance paid for it. What a deal, I thought! My impression of University of Phoenix, the first time I walked into Campus. Was like it was a cult. Young, Blond, girls with tight dresses and low cut tops to sign you up for classes and keep you signed up. "Do'nt drop that class, we have conselars to help you"
"And since your here in the office, Would you like to sign up for next semester's classes NOW!
In the end our Employee Tution program ended up paying University of Phoenix for classes that I dropped too late; due to deceptive and high pressure tactics to keep enrolled in these classes, and sign up for future classes ASAP; that I was later was put in debt for. Consequently, I filed a complaint about the school’s ways of doing business with The Hawaii Consumer Affairs Department. For all my efforts, University of Phoenix put my balence due in collections. A good school for a 60 mins or Michael Moore documentary.

First, I want to say that I have worked at several higher education institutions including the University of Phoenix. I have found that the University of Phoenix changes lives! University of Phoenix is a valuable and legitimate institution. I have been witness to any fraudulent or deceptive practices.
I received my MBA from another highly regarded University. In my program, we did the Survival Project that Katherine Clark refers to, and it was a great exercise in decision making and critical thinking. Perhaps Katherine should have paid a little more attention to her studies.
Amy Scott, I plead with you to be a genuine journalist and do your research. Assumptions and fallacies do not get you anywhere in life. I am ashamed to have paid any mind to your “reporting”.


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