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Deceptive recruiting is widespread at for-profit colleges, federal officials say

High-pressure sales pitches. Outlandish promises. Outright lies. And fraud.

That's what federal investigators said they found after going undercover this summer to check on recruiting tactics at 15 private, for-profit colleges, several with a presence in the Tampa Bay area.

"The evidence points to a problem that is systemic to the for-profit industry," Sen. Tom Harkin, D-Iowa, said at a hearing on the U.S. Government Accountability Office's investigation.

GAO investigators did not check any for-profit school in the Tampa Bay area. They did visit out-of-state campuses of the University of Phoenix, Everest College and Argosy University, all of which have branches in Pinellas or Hillsborough counties.

Everywhere they went, they said they saw practices that were questionable, deceptive, even fraudulent.

"It certainly appeared a little bit like the wild, wild west out there," said Gregory Kutz, managing director of the GAO's Office of Forensic Audits and Special Investigations.

At stake is billions of dollars in federal student aid — $20 billion in loans last year, plus another $4 billion in Pell Grants for low-income students. In the 2008-09 school year, for-profit colleges received nearly one-fourth of all federal aid to college students.

Students who take out loans that they don't repay can ruin their credit. Their wages can be garnished and, in most cases, they cannot discharge the debt through bankruptcy.

Moreover, when students default on their loans, taxpayers get stuck with the bill. And the GAO has found that students who attended for-profit colleges were more likely to default.

In spite of the stakes, investigators said they encountered cavalier attitudes among admissions officers at for-profit colleges.

"I owe $85,000 to the University of Florida," a Florida-based Kaplan college recruiter says on a video secretly recorded by the GAO. "Will I pay it back? Probably not. I look at life a little differently than most people. I look at life as tomorrow is never promised."

That recruiter falsely claimed Kaplan was accredited by the same agency that accredits Harvard University and the University of Florida.

In another video, a recruiter on a Florida campus of MedVance Institute said student loans shouldn't be a big worry.

"It's not like a car note, where if you don't pay they're gonna come after you," the recruiter said.

MedVance was one of four schools where employees encouraged students to participate in fraud by not disclosing assets when they filled out a financial aid application, investigators said.

A MedVance campus director in West Palm Beach declined to comment, directing a reporter to a Baltimore number where no one returned several messages.

Kaplan, a wholly owned subsidiary of the Washington Post Co., said the activities the GAO described are unacceptable and "contrary to our standards and values in every way."

The company said it has suspended enrollment at its Pembroke Pines campus and promised to "take all necessary actions," including firing any employee who violates its standards and code of conduct.

The parent companies of the three schools with Tampa Bay campuses likewise issued statements saying they take such matters seriously:

• The University of Phoenix said it has begun an internal investigation and could fire employees who violate policies written to protect students during enrollment.

• Everest College opened an investigation at the campuses GAO visited. It says it enforces its ban on making false and misleading statements with a secret shopper program and a corporate compliance team that makes unannounced campus visits. Its parent company has about 2,100 admissions representatives and has fired 68 in the last year for misconduct.

• Argosy said it "does not tolerate misleading recruiting activities," holds employees accountable and will work with regulators and accrediting agencies "to ensure that maximum safeguards are in place."

About 2,000 for-profit colleges nationwide are eligible to receive federal student financial aid. They offer degrees or certificates in everything from business administration to criminology to the culinary arts to cosmetology.

Enrollment in such schools has more than tripled over the past 10 years to nearly 2 million students. During that time, federal financial aid to students attending for-profit colleges has grown fivefold.

For-profit schools sometimes rely on federal student aid for nearly 90 percent of their total revenue, and many advertise aggressively on TV, radio and billboards.

A federal analysis of eight publicly traded schools found that, on average, they spent 31 percent of revenues on recruiting and marketing. By comparison, officials say, community colleges typically spend about 1 or 2 percent on marketing.

To be eligible to receive federal student aid, schools must be accredited by an accrediting agency recognized by the U.S. Secretary of Education. Several senators said Wednesday that the government needs to make sure the agencies do their job.

Schools that substantially misrepresent information can be fined up to $25,000 per violation and can lose their federal student aid eligibility.

As a result of its investigation, the GAO said it would refer cases involving fraud or deceptive practices to the inspector general at the Department of Education.

Meeting with GAO investigators who had cameras concealed in hats and portfolios, recruiters:

• Urged applicants to list additional dependents to qualify for Pell Grants.

• Suggested that upon graduation, some students could earn six-figure incomes or land jobs for which they would not be prepared.

• Low-balled the costs of their programs, sometimes falsely stating they were cheaper than public college programs that cost a fraction as much.

• Blocked prospective students from speaking to financial aid officers until after they paid an application fee and enrolled.

For-profit schools also generate leads by using websites that claim to match students with colleges, officials said.

Two investigators filled out forms on the websites saying they were interested in business management.

Within a month, each received nearly 180 calls.

The schools

These are the for-profit colleges the GAO said it visited during an investigation and the states where the campus visits took place:

University of Phoenix, Arizona and Pennsylvania

Everest College, Arizona and Texas

Westech College, California

Kaplan, Florida and California

Potomac College, Washington, D.C.

Bennett Career Institute, Washington, D.C.

MedVance Institute, Florida

College of Office Technology, Illinois

Argosy University, Illinois

Anthem Institute, Pennsylvania

Westwood College, Texas

ATI Career Training, Texas

Source: U.S. Government Accountability Office

See the video

Watch excerpts of the GAO's undercover visits to the recruiting offices of for-profit colleges at links.tampabay.com.

Deceptive recruiting is widespread at for-profit colleges, federal officials say 08/04/10 [Last modified: Wednesday, August 4, 2010 11:44pm]
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