There have been many recent investigations into the activities of for-profit online colleges. A total of fifteen for-profit institutions were targeted for possible educational fraud and deceptive marketing techniques, and included three primary colleges: the University of Phoenix, Kaplan University, and Argosy University.
Focus and Findings
The U.S. Government Accountability Office (GAO) investigated online colleges as well as brick-and-mortar for-profit colleges during a two month period that began May 2010 and ended in July 2010. They conducted the investigation undercover by using “secret shoppers” who posed as prospective future students. One reason Congress is investigating for-profit colleges is because they receive approximately twenty-five percent of federal educational loans which amounted to $20 billion in 2009.
Some of the facts that were uncovered during the investigation included the following:
- Four for-profit colleges encouraged potential students to commit fraud when applying for financial aid.
- All fifteen of the colleges that were investigated committed some type of deceptive or questionable marketing scheme.
- In fourteen of the fifteen for-profit colleges, the cost of a degree was higher than a student would pay at local non-profit colleges and universities. Some of these cost differences were substantial such as the case of one in which a for-profit institution told an undercover agent its massage therapy certificate program was a good value at $14,000 when a nearby community college only charged $520.
- They used high-pressure sales and marketing tactics that sometimes included pressing potential students to sign agreements for enrollment and make deposits before they even provided them financial aid information and consistently calling them to encourage them to enroll.
- They also provided potential students with inaccurate information.
According to one 2010 report, 90% of the University of Phoenix’s students fail to graduate within six years.
Some of the schools that were investigated included:
- University of Phoenix
- Everest College
- Westech College
- Kaplan University
- Potomac College
- Bennett Career Institute
- MedVance Institute
- The College of Office Technology
- Argosy University
- Anthem Institute
- Westwood College
- ATI Career Training
As a result of the investigation, Kaplan University discontinued admissions at its Pembroke Pines, Florida and Riverside, California campuses where the investigation uncovered deceptive practices.
The Statistics of For-Profit Schools
The recruitment efforts of for-profit schools, colleges and universities focus primarily on low-income communities where most students tend to rely on a combination of federal Pell grants and federal student loans. The problem is federal student loans have a maximum benefit of $12,500 each school year, and tuition at for-profit schools is often much higher than this. For example, at ITT Tech the tuition can be as high as $25,000. Even more shocking, government money accounts for 89-90% of the revenue for these schools. By law, they must get at least 10% of their income from non-government sources. They rely on veterans (for some reason the G.I. Bill doesn’t count as government money), scholarships, and private loans for this ten percent.
Some of the ways these for-profit schools take advantage of their students include:
- Ninety-six percent of students take out loans compared to thirteen percent of students in community colleges, forty-eight percent of public college students, and fifty-seven percent of nonprofit private college students.
- While they only enroll thirteen percent of higher education students, they receive twenty-five percent of all federal student aid.
- The fifteen publicly trade for-profit schools receive over eighty-five percent of their revenue from the federal government in the form of federal student loans and financial aid.
- Forty-two percent of students who are attending for-profit two-year colleges receive private student loans compared to only five percent of students at community colleges and eighteen percent at private non-profit two-year colleges.
- One out of five graduates of for-profit colleges defaults on his or her student loan compared to only one in twenty-five who attend other colleges.
- Forty-seven percent of student loan defaults are from graduates of for-profit schools.
The focus of for-profit universities is clearly on increasing the number of students, not the quality of education. They use a variety of methods to try to accomplish this; all of which can be defined as high-pressure sales and marketing tactics. The colleges are blaming activist attorneys for the investigations in their methods of operation rather than the actual source of the problems: themselves. Some states are working on legislation that would prevent for-profit schools from taking advantage of potential students and would regulate the industry as a whole. We’re excited to see where this leads.
Of course if you’ve already been wronged by a for-profit college or trade school, we invite you to email our law firm and discuss the facts of your case with us. We can evaluate your claim and advise you of your legal options – all free of charge.