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Kai Ryssdal: President Obama turned to education today. He dangled $5 billion in grant money in front of states that are willing to line up their priorities with his. That's K-through-12 education, of course. Yesterday we were talking about higher education. For-profit higher ed, specifically. The biggest for- profit university in the country -- the University of Phoenix -- is fighting a lawsuit. The suit says the school cheated taxpayers out of billions of dollars. Money that came from federal student loans. It's just the latest in a series of claims that for-profit schools use deceptive tactics to sign people up. Our story reported by Marketplace's Amy Scott and Sharona Coutts of ProPublica continues now. Here's Amy.

AMY SCOTT: It might start with a click on a banner ad. Or maybe an online competition to win an iPod. You fill out some personal information. And then the calls start.

KATHERINE CLARK: They were very persistent.

TERESA BARRON: She called me every day.

DANIEL RAY: I legitimately got three or four calls a day for about two weeks until I finally talked to him.

Katherine Clark, Teresa Barron, and Daniel Ray are just three of the many students around the country who tell a similar story. They've been hounded by enrollment counselors from for-profit colleges. Anyone familiar with the sales profession will recognize some of their hard-sell tactics.

But ProPublica and Marketplace have uncovered several instances where recruiters crossed the line. One tactic: win the target's trust.

CLARK: We would e-mail constantly throughout the day, text message, talk on the phone.

Kat Clark was a student at the University of Phoenix in Long Beach, Calif.

At first, she had a great relationship with her enrollment counselor.

CLARK: We had barbecues and stuff together.

Scott: Did you feel that the friendship was genuine?

CLARK: Yeah, I don't really think it was like a genuine thing, I think it was more of a, this is my job and I'll do anything to make sure that I get paid.

Enrollment counselors do get paid based at least in part on how many students they sign up. And how long those students keep coming to class. That's legal, as long as pay isn't solely based on recruitment. The company says frequent contact with students is about supporting them.

Bill Pepicello is the university's president.

BILL PEPICELLO: Certainly we want the students to believe that we are acting in their best interests, but it's certainly not by developing personal relationships.

But another student told us a University of Phoenix counselor buttered up her grandmother.

Jewel Calderon lived in Fayetteville, N.C. She says the counselor told her he and grandma had what he called "church" over phone.

JEWEL CALDERON: He said he prayed with her over the phone, and he told her his mother was sick, and that they prayed about that. And he gained her trust, which made me gain his trust, and that's why I decided on that college as opposed to others.

Calderon ended up taking out close to $12,000 in government loans. When she and other students started having problems with the school, the
friendships they'd developed with counselors evaporate.

Brandon Burke lives in Portland, Ore.

Until last December, he worked as an enrollment counselor at the University of Phoenix. He says managers taught him and his colleagues a number of strategies to trick students into signing up. One ploy was to create a "sense of urgency."

BRANDON BURKE: One thing 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.

BURKE: 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.

Burke wasn't the only counselor we spoke to who says managers told them to lie. And we've learned Phoenix isn't the only for-profit school that's used these tactics. Brandon Burke says managers encouraged him to bend the truth in other ways, too.

BURKE: People would say you know I saw the CSI, and I want to do that.

CSI: I got three GSWs. One to the left kidney area, one to the left thigh.

Burke says he got frequent calls from fans of the popular TV show. He says supervisors told him to steer them to the criminal justice program. That might qualify them to work as prison guards. But not as forensic criminologists. But one of the biggest complaints students had was that counselors misled them about credits.

BURKE: One of the things that we were told to do was, you say we are regionally accredited, which means they're transferable anywhere, which isn't true. They're eligible for transferability.

In fact, it's up to each school to decide whose credits they accept. And in many cases, University of Phoenix credits don't transfer. Burke says he never misled students. He left the company in disgust. Two former counselors from another campus sued the university, claiming they were pressured to sign students up.

Last week, the company announced it expects to cough up more than $80 million to settle that case. But the University says it doesn't train its counselors to lie or to mislead students.

Harris Miller is CEO of the Career College Association, an industry lobby group. He chalks any wrongdoing up to a few rogue employees.

HARRIS MILLER: If these accusations are correct than the appropriate authorities should investigate them. And if it's true, then my response is hang 'em high.

Miller says higher education is a heavily regulated industry with oversight by federal and state authorities, as well as private accreditors.

MILLER: The fact of the matter is we're educating over two million students. And focusing on a few wild allegations, and a few documented instances of violations of the law, is not the way to describe the career college sector.

But the sector has been in trouble before. In the early 90s, the government cracked down on hundreds of for-profit trade schools for abusing student-aid programs.

Barmak Nassirian represents college admissions officers. He sees many of the same abuses today.

BARMAK NASSIRIAN: The M.O. has not changed over the years. We have one step at a time over the course of the past 15 years removed all of the provisions that together momentarily cleaned the system up.

Congress and the Department of Education are looking at the rules again. The Obama administration wants more people to go to college. Congress poured more than $15 billion in stimulus money into college grants. Advocates welcome the investment in higher ed. But they also want change.

They say without it, the system will continue to benefit for-profit companies more than the students they're supposed to help.

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