For-profit colleges hit with claims of fraud, aggressive recruiting

In a blurry video, a financial aid officer at a for-profit college tells an applicant to leave off any mention of a $250,000 inheritance when filling out aid applications, saying it’s really not the government’s business.

The applicant was an undercover investigator, one of several who encountered aggressive recruiting tactics, deception about employment prospects, and in some cases outright fraud on their 15 visits to for-profit colleges around the country.

The investigation was conducted this summer by the US Government Accountability Office (GAO) and presented at a hearing Wednesday by the Senate Committee on Health, Education, Labor and Pensions (HELP). By not reporting the inheritance, undercover applicants would have fraudulently qualified for federal grants and loans.

The GAO’s findings “make it disturbingly clear that abuses ... are not limited to a few rogue recruiters," said HELP Committee Chairman Tom Harkin (D) of Iowa. "The evidence points to a problem that is systemic to the for-profit industry.”

Wednesday's hearing was the second in an ongoing series examining practices at for-profit colleges. About 2,000 such schools – private or publicly traded companies whose net earnings can benefit shareholders or individuals – are eligible to receive federal student aid.

The sector has grown rapidly and receives about $24 billion a year in federal grants and loans, nearly a quarter of all federal student aid. It has come under increased scrutiny because of concerns about high dropout rates and loan-default rates among its students.

In response to the GAO report, the Career College Association (CCA), the industry’s chief lobbyist, announced a series of measures to better ensure compliance with government regulations. Such steps include a beefed up code of conduct and training program, development of a “zero tolerance” standard for employees who misbehave, and an industry-run “mystery shopping” program to assess practices in recruitment and financial advising.

“As educators, our commitment must always be to put students first,” said CCA President Harris Miller in a written statement responding to the GAO report (he did not testify at the hearing). “We will continue to add to this ‘zero tolerance’ program until all such doubts about our sector are removed.”

Among the practices the GAO investigators recorded on hidden cameras:

• Deceptive information about employment prospects. Two schools said students were virtually guaranteed employment, a violation of federal regulations. Five others overstated prospective salaries, including one that said barbers can make more than $150,000 a year (on average they make less than $43,000).

• Misleading cost estimates. One representative said it would take 3 to 4 years of full time classes to get a degree, but quoted a price based on attending school just 9 months a year.

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