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Kai Ryssdal: Education Secretary Arne Duncan made his way into the regulatory limelight today. The Obama administration’s taking on for-profit colleges. Schools like University of Phoenix and Devry are names you probably know. The White House wants to cut off their access to federally backed aid if too many students default on their loans. Before students get those loans, though, they have to know about the schools, which happens through high pressure recruiting and what are often misleading ads. Ads that the new rules won’t change.
Sharona Coutts from the investigative newsroom ProPublica has the story.
Sharona Coutts: Like so many people, Lisa Jackson spent a lot of time over the last year at home, looking online for a way out of unemployment. A new job, career training…
Lisa Jackson: The website I’m going to is blackplanet.com, which is one of the Web sites I’d seen the ad.
The ad — actually, there were a few of them — was pretty striking.
Jackson: The dancing lady, the dancing man, or she comes to the front of the screen and running back.
The ads caught Jackson’s attention not just because of the gyrating dancing, but because of what they were offering.
Jackson: $10,000 scholarship from Obama’s government. All single mothers are now getting scholarships to go back to school.
Let me repeat that. The ad said Obama’s government was handing out $10,000 scholarships to single mothers to go back to school. There are lots of ads like these online. Some appear next to e-mail. Others pop up in social networking sites. There’s only one problem.
Robert Shireman: There is no such thing as an Obama scholarship for moms.
Robert Shireman ran the financial aid program at the Department of Education until early this month.
Shireman: However, moms are eligible for federal financial aid generally — Pell grants, student loans and other aid. But nothing specific to moms or single moms.
So what’s the deal? The ads are produced by companies called lead generators, who earn upwards of a billion dollars a year to find new students for colleges, mostly for-profit. And those for-profit schools are making billions too, by signing up low-income students, who often pay tuition with government grants and loans. The Career College Association says most of those students are women, and over half have of them dependent children. That makes mothers a lucrative market for for-profit schools — mothers like Nicole Massey.
Massey lost her job teaching high school a year ago, partly because she doesn’t have a master’s degree. So she was excited when an ad appeared next to her Yahoo! e-mail, saying Obama wants single moms to go back to school.
Nicole Massey: When I clicked on it, it then took me to the next page which was, “Fill in your name, your date of birth, what’s your highest degree of education,” and I clicked bachelor’s degree.
She clicked through a number of screens, where she entered more personal information, and selected a master’s of education. Almost instantly, recruiters from mostly for-profit schools bombarded her with calls. Massey asked about the Obama grants, but no one could tell her anything. That’s when she realized there were no Obama grants for single moms. The ads were just a ploy to get her contact information.
Massey: It’s misleading. And you have a lot of people who really may not have the money or the funds to go to school, so they’re really really searching for a way to further their education, so I just feel it’s not fair.
One of the companies behind the ads is Experian. You might recognize that name if you’ve ever needed to get a hold of your credit report. Experian also promotes itself as a source of advice for consumers on how to make good financial decisions. The company refused comment for this story. But in the past, Experian used virtually the same ads it’s using for education, only with different text, to generate customers for another industry known for lending lots of money to people who couldn’t afford it, the subprime mortgage industry.
Priya Raghubir is a professor of marketing at New York University’s Stern School of Business. She says it’s no coincidence there’s an overlap between advertising for subprime and student loans.
Priya Raghubir: Obama has a very very strong appeal with the younger people, the minority citizens and green card holders of this country, lower income households.
The same groups targeted disproportionately by subprime lenders.
Raghubir: For these groups particularly, he signals the fact that he is something that they would like to associate with — the way he has used education to break a number of barriers and get to where he has at such a young age.
Critics say that sort of aspirational messaging is just one of the parallels with predatory mortgage lending. Barmak Nassirian, who represents college admissions officers and registrars, says the Obama mom ads are one example of a larger problem — the heavy marketing by for-profit schools.
Barmak Nassirian: I believe that advertising is out of control. And I think it is extremely unfortunate that people are being misled into thinking they are taking advantage of a tailor-made, heavily subsidized program, when in fact all they’re dealing with is a sophisticated marketing machine.
So who can stop the ads? The Department of Education told us they can’t, because regulating marketers is up to the Federal Trade Commission. But the FTC couldn’t point to any action they’d taken to stop the misleading ads. Even the schools say they’re frustrated, because they don’t always know what techniques lead generators are using to attract potential students.
For the moment, it’s up to consumers to make sure they know what they’re signing up for and how much it will really cost.
For ProPublica and Marketplace, I’m Sharona Coutts.
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