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

At a Senate hearing Wednesday, government investigators released evidence that some for-profit colleges encouraged students to falsify financial aid documents.

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Aggressive tactics. Representatives at four schools repeatedly told the applicants that they could not speak to a financial aid representative until signing enrollment forms and paying a small fee. In one video clip, a supervisor intervenes, questioning whether the applicant is really serious about going to school and improving his job prospects. The supervisor said that if the applicant was committed, he’d make the sacrifice and take on the cost and figure out the details of what grants and loans they could get for him after he enrolled.

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The GAO has shared the report with the US Department of Education, which can follow up to enforce laws and regulations.

Another witness at the hearing was Joshua Pruyn, who spoke about working as an admissions representative for Alta College Inc. in Denver. He was trained in sales tactics, including interviewing students to find the “pain points” in their lives that could be used to pressure them to enroll, such as worries about being in a dead-end job. Misleading potential students to make enrollment targets was standard practice and was rewarded with incentives such as trips, he said.

Mr. Pruyn quit after nearly 6 months. The final straw, he said, was discovering that students who wanted to withdraw and clearly would eventually dropout (including a military person who was called up for active duty) were pressured to stay enrolled for at least 14 days because after that point, the school could keep federal money that the student had been awarded.

The Department of Education recently proposed rules that would, among other things, close loopholes dating back to 2002 that are widely thought to have gutted a ban on incentive rewards for enrolling students.

“The rule changes proposed take a step in the right direction, but they are far from adequate if the goal is to clean up the [for-profit] sector,” says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (who did not testify).

For example, he says, the bar should be set higher for what portion of a school’s students are repaying student loans. The proposed regulations set 35 to 45 percent in repayment as the benchmark for a school’s eligibility for federal aid, depending on the debt-to-earnings ratio of its graduates.

Sen. Mike Enzi of Wyoming, the HELP Committee’s top Republican, criticized the hearings for focusing on negative practices at for-profit colleges and said he would soon lay the groundwork for a broader look at the value students and taxpayers receive from the whole higher education sector.

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