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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Please tell me what school isn't really for profit. How much money do these big name college football coaches make per year?? How about the Presidents of those Universities? "Non-profit" universities' luxury is that they don't rely on their students- they rely on government funding. This article is a joke.

With 420,000 students and the ability to attain federal funding (as well as full regional accreditation), how can you say that the University of Phoenix is not a "real" education? How would it have been able to sustain for over 30 years? These two "examples" obviously didn't do their own homework. You have to sign documents stating you are taking out federal loans. Period. These young ladies obviously didn't read the required legal documents required of attaining these loans.
Please do your research as well. Bill Pepicello is no longer the President of the University of Phoenix and hasn't been for several years

I am a former University of Phoenix student, but not a graduate. While I question some methods used in classes and didn't always high opinions of my professors, I worked hard and earned my grades. (Though, I must admit wondering about the grades of my less than stellar classmates.) With U of P, you get out what you put in. Frankly, Strategies for Lifelong Learning was one of the best classes I’ve ever taken because it helped me identify my learning style.

I do not doubt that some students were misled or misinformed. It would not at all surprise me if some staff intentionally misled people in pursuit of a larger paycheck or meeting a quota. The ‘counselors’ were persistent, usually helpful but with an air of someone employed in the customer service department of a telecommunications company. Ok – maybe not that bad.

Because the degrees offered would only have helped me move up in Corporate America, I decided to end my participation at the same time I left my corporate job in an effort to save my soul.

I was lucky enough to have my tuition fully paid by my employer so I didn’t incur any debt, but any ‘higher education’ will cost money. It sounds like those stuck in these precarious financial situations are exactly those most in need of education.

Great article, thank you very much. The academic quality of a UOP degree is horrible. For a short time I helped teach some courses, including an economics course. I was prepared to fail almost 60% of the class for an assignment when I spoke to the professor leading the course. According to him, if students turned in anything (half page or other nonsense) for their 10 page essay, I was to give them a "C" or a "B" for this assignment? In every other college this would be an incomplete or an automatic "F." After a few more requests to dumb down the assignments, I decided to move to another college. I would probably not hire someone with a degree from UOP.

This article is very typical of the media, completely one sided and not the truth. You make it seem like it about "private schools" but it is solely about the University of Phoenix. I attended a private school in the midwest from 1997-2000 that cost $21,000 per year tuition, room, and board. When starting school, I was fully aware of my financial aid package. Shortly after I graduated from college and moving to Arizona, I began working in the financial services industry where I was pressured into selling families life insurance that they could not afford 529 plans for their children, and putting money in the market that is now probably lost. After leaving the financial services industry because I did not agree with these tactics, I started to work for the University of Phoenix in the Axia program. I have worked for the University of Phoenix for over 5 years and have never pressured a student into starting school when they were not ready or mislead a student in regards to student loans nor was I told that I had to. One thing that I have learned over the last five years is that what I do makes a difference in these people's lives and that the University of Phoenix cares about these students and their success at our school. Students are given a chance that they were not given at the community college or the university. A great example is when a family situation arises and the student must leave school to take care of a family member, that school fails them out of all of their classes and keeps their financial aid for that semester. The University of Phoenix has policies that protect the student's in these cases. Furhtermore, I always tell my students that I am there for them and I want them to succeed, in order for this to happen they must let me know if they are having problems and that communication is the key to their success. I have changed the lives of hundreds of students and am very proud of that fact. It upsets me to hear stories like this one, especially since you targeted the University of Phoenix because of our success.
I do have my bachelor's degree from another private instituation that cost far more than the University of Phoenix does and I worked very hard for my education and learned alot. I have also earned a certificate in Project Management from the University of Phoenix and am working on a Master's degree in Justice Administration from the University of Phoenix which all has required hard work on my part and I feel that I have learned far more at UOPX than I did in my undergrad because UOPX is not about test taking but about applying knowledge from the real world with my education. Anyone that wants a good education should do the same and not think that online schools are the easy way out.

I completed my BS in Business Management at UOP, and my next job paid almost twice as much. This degree was HARD and TIME CONSUMING, but I learned a lot and became a confident business person. We wrote papers, gave presentations, and did team projects. Completely APPLICABLE to my career.

I did a masters program in counseling psychology at a different, high regarded university. It was much more expensive than UOP. Working as an unpaid intern for three years did not appeal to me, so I put counseling on the back burner and decided to get my MBA.

Where to go? UOP. Without a second thought. They made it easy to register, and the class times work. The course work is HARD and TIME CONSUMING. But it is an excellent program and I have learned a lot - again...

I actually got a decent job in this terrible economy.

BTW, I go to class. I wouldn't do the online program, because you actually have to put in a LOT MORE work than if you went to class. I have heard the online program is VERY HARD.

This "journalist" is biased and uneducated about UOP. Talk to the many people who have benefitted from the programs, rather than one loser who couldn't even get through two classes.


I graduated from Florida A&M University with my MBA in Finance and Marketing. I graduated with $36k in debt. When I started I didn't know how I was going to pay it down but I knew I needed a tool to survive in this country since it will not support me if I don't use that tool to contribute to it! Therefore it has been up to me to decide how I would pay that debt back. I decided to join the Army Reserve before I entered my grad years. I made this decission becasue I knew that I'd have a load of debt to pay down when I graduated and I needed to find a way to pay it down. Therefore I made the decission to pay it down useing half of every check I got through the 8 YEARS I SERVED IN THE ARMY IN AFGANISTAN and if called IN IRAQ, fighting a war I DIDN"T START!

As a UoP student who is persuing his second master's degree, I say that the system is not perfect but at least there are opportunities to live a better life through it.

I wouldn't earn what I am now if I didn't have my MBA and I could now have afforded it without the debt that I'm paying off now.

But thank GOD for the debt and the work that I had / have to do that makes me think of how to pay it down and live in my home / rent it out, at a fair rate, in this bad economy. College transforms you to become a better person.

FAMU did that and I paid for it UoP is giving me tools to do more than I am now. SO I'LL PAY FOR IT! SO THAT I WON'T HAVE TO DIE IN A WAR THAT I DID NOT START!

Like the interviewee, I too made the mistake of attending UOP for about a year at the behest of one of my co-workers. Quite frankly I found the quality of classwork and the level of rigor to be far below that of even a community college. I essentially gave up those credits and started over at a traditional school because I was more interested in gaining a legitimate education than taking the easy way out. In the end it cost me far less, and I took away considerably more than I ever would have, had I stayed at UOP. Many corporations are starting to single out for-profit universities from educational reimbursement plans due to the quality of education received by their graduates, the US Government should do the same.

In this interview the former student Katherine Clark states that she didnt qualify for student aid. What is student aid? Everyone assumes that the federal aid program is only made up of grants. Well it is not! It also has federal non credit based student loans, which are given to students. Sallie mae is not only a private lender, but the also manage the federal loan funds for the government, so she was paying federal loans through sallie mae. Grants are need based only and that is only a part of federal aid. Michele Rambo states she was told she was covered--this is impossible because after enrolling a financial aid counselor calls them to go over their funding. Some students hear what they want to hear. Yes Michele was covered, meaning that with federal pell and federal loans she has no out of pocket expense while in school. Books are included in the tuition at a local college she would have to have a few hundred bucks to cover that cost. Also, any student who thinks that just an AA degree will open doors is mistaken. Most students are aware and consulted on the fact that they are completing an AA because they have never been to college before or have little credits. The AA degree is also a lot less expensive and it is a good starting point. NPR should do a story on how many people have benefited from having a degree, like MSNBC anchor woman Christina Brown. UOPX has a market and most local colleges cannot compete because the government wont fund them for the resources it takes. UOPX is for profit but can also use that profit to create a better educational platform. I am convinced that students who fail at UOPX would have failed elsewhere. Chicago state was just on the news for accreditation issues and if you swing by harold washington CC downtown, you will also see a large student body cutting class and hanging outside--why? Because the education is free maybe? If you arent paying for it sometimes you dont value it.

As a doctoral learner with the University of Phoenix, I can vouch for the rigor of the program. Perhaps a responsible journalist from your organization would be interested in attempting a degree program with this respected learning institution. ?Financial aid is similar to the academic rigor in that it is the student's responsibility to make the appropriate choices. How odd is it in any arena to think one does not have to repay a loan? I am sitting here shaking my head about this article.


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