🚗 🚙 Turn your trusty old car into trustworthy journalism Learn more
News In Brief

Government investigation finds widespread abuses at for-profit colleges

Amy Scott Aug 5, 2010

As Marketplace and other media outlets have reported on abusive recruiting tactics at for-profit colleges, the industry’s response has been consistent. Company spokespeople chalk these stories up to “rogue employees,” and insist that a few anecdotes don’t represent the whole sector.

But a new report from the Government Accountability Office suggests such abuses are widespread in the industry. The GAO sent employees posing as applicants to 15 for-profit colleges in seven states, and found that employees at all 15 schools made “deceptive or otherwise questionable” statements to the GAO’s undercover applicants. Four encouraged applicants to commit fraud. The GAO’s Gregory Kutz testified at a Senate education committee hearing on the report today. “Certainly it gives you an indication that this is much more widespread than a few bad actors,” he said.

CAUGHT ON VIDEO: A hidden camera records an employee at a for-profit college making “deceptive or otherwise questionable” statements to an undercover GAO employee posing as an applicant.

An applicant at Westwood College in Texas, for example, was told not to list $250,000 in savings on his application for federal financial aid. “A lot of people honestly answer it, and that’s fine,” the representative said. “Frankly, in my opinion, they don’t need to know how much cash you have.”

At Westech College in California, a financial aid counselor encouraged an applicant to invent a couple of dependents, so he could qualify for more financial aid. “With the economy, it’s understandable, because people have to move in with other people,” the counselor said. The schools investigated by the GAO get more than 89-percent of their revenue from federal financial aid programs.

You can watch video clips of these encounters here. There are some positive examples, too. At Potomac College, in Washington, DC, a financial aid counselor encouraged an applicant to reduce her debt by returning unneeded funds to the lender, rather than keeping the money. Overall, though, the videos are troubling. Six of the 15 schools refused to let the GAO’s undercover applicants talk to financial aid officers until they had signed up and paid an application fee. In other words, they weren’t allowed to find out how much attending the schools would cost them until they committed to enroll.

Responding to the GAO report, the industry’s main trade group, the Career College Association, called the findings “deeply troubling.” The association said it would expand its own compliance program for members. But the group maintained its “rogue employees” defense. “Even if the problems cited in the GAO report are limited to a few individuals at a few institutions, we can have zero tolerance for bad behavior,” the association’s president, Harris Miller, said.

The Department of Education has proposed new rules to discourage aggressive enrollment tactics. If the rules are adopted, schools may no longer pay employees based on how many students they sign up-an incentive critics say leads to abuse.

Joshua Pruyn, a former admissions representative at Westwood College, in Denver, also testified today. He said it would take a lot more than changing how employees are paid to change the culture at his former employer, where he said representatives were trained to lie about the school’s offerings. Changing the compensation system, he said, “would help rein in some of the more egregious claims, but I still think the fundamental problem is still going to be there.”

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.