Economy First Look

DeVry University agrees to $100 million settlement over misleading ads

The for-profit chain agreed to pay $49.4 million to compensate those who were misled by the ads, and $50.6 million in loan and debt forgiveness.

DeVry University (Miramar, Fla., campus shown here) and its parent company are paying $100 million to settle a federal lawsuit alleging deception in the school’s ads.
J Pat Carter/AP/File
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DeVry University, a college chain based in Downers Grove, Ill., has agreed to settle a lawsuit claiming that its advertising misled prospective students, the Federal Trade Commission said Thursday.

The for-profit college chain reportedly reached a $100 million settlement deal with the FTC, which brought the suit back in January. The FTC charged that DeVry had repeatedly misrepresented itself to prospective students in its advertising, exaggerating graduates’ success at finding jobs – and their expected salaries. The college stopped using these claims as part of a Department of Education settlement reached in October.

The lawsuits against DeVry University were part of a crackdown effort against for-profit colleges that began in 2010, prompted by high levels of student debt and low graduation rates at these institutions. For the government, it’s a question of ensuring that students know what they’re getting before they enroll.

"When people are making important decisions about their education and their future, they should not be misled by deceptive employment and earnings claims," explained FTC Chairwoman Edith Ramirez, the Associated Press reported.

Deception issues have dogged other for-profit college chains. Indiana-based ITT Educational Services closed its doors in September, following a federal ban on enrolling students with federal financial aid. And students who took out those federal loans could have their debt erased if they could prove that they were deceived by the college about the quality of the education they would receive. That precedent was set in cases against Corinthian Colleges, another for-profit chain based in Santa Ana, Calif.

The deception cases against DeVry University centered on the university’s advertising claims. At least since 2008, the college chain, which says on its website that it has more than 55 locations across the United States, had advertised that 90 percent of its employment-seeking students found a job in their field within six months of graduation. But federal investigators found that the 90 percent figure actually included those who found jobs outside their field – like a health-care graduate working as a restaurant server – and those who had jobs before enrolling.

The government also interrogated the claim that, a year after graduation, DeVry students are earning 15 percent more than students who attended other colleges. That statement was found to be without foundation. 

The school's October settlement with the Department of Education required the university to "post a more than $68 million letter of credit, cease advertising with its '90 percent' statistics, and prominently state on its website that the previous claims were unsubstantiated," the The Christian Science Monitor reported at the time.

On Thursday, DeVry agreed to a $100 million payout, Reuters reported: $49.4 million to the FTC, which says it will distribute the funds to those misled by the ads; and $50.6 million in loan and debt forgiveness.

For the company, the main thing is moving forward. Heightened government scrutiny has been problematic for the college chain’s bottom line, and DeVry has closed 39 campuses since 2014, leaving 60, according to the Associated Press.

In a statement, DeVry did not acknowledge misleading students but said it was "pleased this matter is reaching resolution." Shares in the company were trading up 3.4 percent on Thursday, at $31.90, Reuters reported.

Though the future of for-profit colleges is unclear, some say a balance between profit and education can be found. 

"For for-profits willing to live by reasonable rules ... there is an opportunity there to make some money," David Halperin, the author of "Stealing America’s Future: How For-Profit Colleges Scam Taxpayers and Ruin Students’ Lives," told The New York Times.

And their prospects may look up under Donald Trump, who is widely expected to favor business – and has had his own share of legal troubles over the for-profit Trump University. Following President-elect Trump’s election, shares in DeVry Education Group Inc shot up by 30 percent.

This report contains material from the Associated Press and Reuters.