College is generally considered to be a place of rules, regulation, and fairness, but many for-profit schools have come under great scrutiny for various questionable practices. Some schools have been investigated for misleading advertising, unethical recruiting practices, or unlawful use of federally held student aid dollars.
In general, for-profit schools boost their enrollment through aggressive and deceptive marketing tactics. These tactics, which make ambitious promises of high-paying or prestigious jobs to all who attend, play on students idealism. Many students jump into these programs with little research, which leaves them unprepared for the high price tags and poor program outcomes.
The schools with the flashiest, pushiest marketing tactics are often the least cost-effective, and many students are forced to drop out under the weight of crippling student loan debt. The students who do graduate often pay a lot of money going through an expensive degree program that often turns out to be worthless. A staggering amount of these students fail to find adequate employment, can no longer make loan payments, and wind up defaulting on their student loans.
The federal government is aware of this, which is why there have been several investigations in recent years.
Federal Report Findings
In 2010, the United States Senate initiated a full-fledged investigation. The Government Accountability Office, or GAO, looked into the ways that for-profit schools used $24 billion federal dollars. The GAO discovered that many schools (particularly the ones that operated online) relied on deceptive marketing tactics to make a profitâ€”or, in legal terms, they committed fraud.
The majority of these schools touted their degree program as the only viable option, and they aggressively pushed students to enroll immediately, without looking into their other options. Many schools flat-out lied to prospective students, relying on incorrect estimates of their graduation rates, their graduates average salary/employment opportunities, and their programs average cost/duration. Some schools even encouraged their students to lie when applying for federal student aid applications.
The real outcomes for students who attended these schools were bleak. For many students, the costs were crippling: the price of an associates degree at a for-profit school turned out to be four times higher than the same degree earned at a community college, and a bachelors degree cost about 20% more than it would at a state university. Whether they completed the program or not, 96% of the students going through for-profit schools left school with some amount of student loan debt. One out of every five of them defaulted within their first three years of student loan payments.
And for many, that â€œinvestmentâ€ yielded nothing: just over half (54%) of all students attending for-profit institutions dropped out without earning a certificate or degree.
The GAO report sparked further investigation, and soon after, the 2012 Senate HELP Report, which studied for-profit schools for two years, was released. Its findings were no less incriminating.
The top for-profit schools made a whopping 86% of their total revenue in federal student aid dollars. They spent almost a quarter (23%) of their budgets on marketing and recruiting, while only 17% of their budget funded actual instruction. To provide a basis for comparison: non-profit colleges can expect to spend less than one percentage point of their total revenue on marketing or recruiting.
The Senate HELP Report also discovered that some schools sent recruitment teams to hospitals which treated war veterans. These recruiters would often lie to veterans about the military benefits offered to their studentsâ€”some even suggested that benefits could fully cover their tuition.
The Federal Government Acts
Unsurprisingly, both the GAO report and the Senate HELP reports resulted in lawsuits and legislation. The Department of Education released a new series of regulations for all colleges and universities, called the Gainful Employment Regulations, in 2014. As a result, schools are now required to follow their students debt and employment outcomes following graduation, thereby proving that their program is worthwhile.
How does the federal government define a worthwhile degree program? The measurement works like this: in order to meet federal guidelines, a schools graduate must not spend more than 20% of their discretionary income (or 8% of their entire income) on student loan payments. If a school does not meet these guidelines, they are at risk of losing federal funding.
A year later, in 2015, the government introduced the Students Before Profits Act, which sought to protect students from the deceptive marketing tactics witnessed at many for-profit institutions. This act places responsibility for poor student outcomes on the institutions owners/executives, ensures that students will receive accurate information, increases the penalties for colleges found guilty of lying about their program, and strengthens government oversight.
This bill also holds executives and owners liable for all financial loss associated with Title IV dollars.
The Federal Government has Sanctioned For-Profit Schools
While the informed can easily spot aggressive (and potentially misleading) marketing tactics, figuring out whether or not a school has a history of being financially responsible is more difficult. For your convenience, we have included a list of the schools that were sanctioned by the federal government as part of the GAO investigation in 2010, along with some more recent information.
American InterContinental University/Colorado Technical University
Both of these schools are owned by the Career Education Corporation. In 2010, the GAO discovered that the Career Education Corporation relied heavily on misinformation, misleading recruitment techniques, and a large number of students who withdrew from classes and/or defaulted on their student loans.
Career Education Corp. settled with the New York Attorney General for $10.25 million in August of 2013. This was after the Attorney Generals investigation discovered deceptive advertising, which included inaccurate career outlook statistics.Â This proved to be the nail in the coffin for the Career Education Corporation, and after a couple years of dwindling profits, it announced the closure of all of its career colleges in May of 2015.
American Military University/American Public University
Both of these schools performed well under the GAO investigation. Compared to their peers, AMU and APU boasted more affordable tuition costs and better graduation rates.
After the GAO report revealed the poor employment and salary outlooks for their students (who often defaulted on loans), Anthem College closed its doors in 2014.
Argosy University is owned by the Education Management Corporation. After the GAO report revealed them to have sky-high withdrawal rates and less-than-legal federal financial aid practices, they lost a lawsuit in 2013. The EDMC then paid $3.3 million in both restitution and fines for deceptive marketing techniques, but they did not have to admit liability.
In May of 2015, the EDMC was undergoing further investigation, this time at the hands of the United States Department of Justice.
Like many others on this list, Ashford University was found guilty of questionable recruiting tactics, no job placement support, and a low percentage of their total budget spent on instruction.
In 2011, they were audited by the United States Department of Education. This audit revealed that the university had kept roughly one million federal financial aid dollars that had been given to students who subsequently withdrew.
In 2013, their advertising practices were investigated once againâ€”many Iowa students claimed that recruiters had lied to them to convince them to enroll. One year later, Ashford paid $7.25 million in settlements. In 2015, they were still under investigation.
This university spent a disproportionate amount of its total revenue on marketing tactics. In addition, it was found to have a high withdrawal rate in students participating in their bachelors degree programs.
Capellas questionable business model came into question even before the GAO report: back in 2008, the Department of Education found that the university had overcharged them by just over $500 thousand dollars. The school also failed to return money granted to students who later withdrew from their classes.
This school had expensive programs and aggressive recruiting tactics, but compared to the other schools on the GAO report, it spent more of its revenue on academic instruction and had much better student outcomes, including a below-average default rate. Chancellor University closed its doors in 2013.
Despite a high withdrawal rate and expensive tuition, DeVry had positive outcomes for students who did not withdraw. This university was found to have fairer recruiting practices, better work experience programs, and better student services than its competition.
In 2014, the Illinois and Massachusetts attorneys general investigated DeVrys marketing and advertising techniques. A lawsuit in 2013 suggested that officials had broken federal regulations and offered students bribes. It was still under investigation in 2015.
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Though online students often had difficulty making their student loan payments, the GAO found that students attending on-campus programs had overall positive experiences.
This school, which was owned by Corinthian Colleges, Inc., had an extremely high number of students who withdrewâ€”almost 70% of those in associate degree programs. To make matters worse, 36% of all students wound up defaulting on their student loans.
In 2014, following a lawsuit, Corinthian paid a fine of nearly $30 million to the United States Department of Education. The school closed and filed for bankruptcy the following year.
This school did not yield much information, but it was found to be painfully understaffed in the areas that mattered: though it had seven recruiters, there were only four staff members in student services, and none working in career services.
Henley-Putnam does not participate in federal financial aid programs, which means that it does not have to meet the minimum requirements set by the U.S. Department of Education.
Herzing University had more ethical recruiting techniques and lower withdrawal rates than the other schools investigated by the GAO. In 2015, it became a non-profit university.
ITT Technical Institute
ITT Techs online degree programs were among the most expensive in the study. In addition, a large number of students defaulted on their student loans. ITT Tech is owned by ITT Educational Services, which, following a number of large investigations and lawsuits, closed its doors in 2016.
Kaplan University had high student loan default rates. In addition, almost 70% of its students undergoing bachelors degree programs withdrew, and in 2015, Kaplan settled with the United States Department of Justice following a lawsuit which accused them of hiring instructors who were poorly qualified for the job. It was still under investigation in 2015.
This school had high tuition, a large number of students who defaulted on their loans, and high withdrawal rates. It was the subject of a lawsuit following accusations of failing to meet regulations for federal and state funding. In 2015, all 15 campuses were sold to the non-profit wing of the Keiser company.
Lincoln College Online
Lincoln did poorly in the GAO report: they had low retention rates, they had high student loan default rates, their programs were twice as costly as community college alternatives, and their student services were weak. In 2015, Lincoln had to pay former students over $2 million due to accusations of dishonest recruiting techniques. Since then, most of their on-site campuses have closed their doors.
National American University
This school did better than many of the other schools examined, however, it did not spend a significant portion of its revenue on instruction. Much of its money went to recruiting/marketing.
Well over half (63%) of all Rasmussen students failed to complete the expensive degree programs. This statistic had not changed in the 2012 HELP report, which discovered that a large number of students withdrew from their classes within their first five months.
Remington had slightly higher retention rates than many competing for-profit schools, but a large number of students eventually defaulted on their loans. The school became a non-profit back in 2011, but there is some thought that this may have been an attempt to avoid tightening regulations on for-profit colleges.
GAO performed well, according to the GAO report: this school had higher retention rates, better student services, and more ethical recruitment tactics than many of its competition. However, following an increase in federal regulations, Strayers enrollment has dropped by over half since 2010.
This school spent a small portion of its revenue on instruction, but boasted more affordable tuition, lower rates of withdrawal, and a smaller number of students who defaulted on their loans.
This does not mean that Trident has escaped scrutiny: after failing several different financial responsibility examinations, it was put under â€œHCM-Cash Monitoring 1â€ status by the United States Department of Education in 2015.
University of Phoenix
Like many for-profit schools examined, University of Phoenix valued profit more than the wellbeing of its studentsâ€”its student instruction spending was small in comparison to its recruiting/marketing spending, and over half (66%) of the students pursuing an associate degree withdrew.
Following a series of lawsuits, the Higher Learning Commission sanctioned the school in 2013. Though the university held onto its accreditation, it was heavily monitored by the agency.
In 2015, it was investigated by two different state attorneys general. That July, the FTC revealed that it was investigating Apollo Education Group, Inc., which is the schools parent company, under suspicion of dishonest marketing techniques.
Despite fairly high default rates, Vatterott impressed GAO investigators with solid student services and lower than average rates of student withdrawal. However, in 2013, it paid out $13 million to a former student, who accused the school of lying to her about student outlook statistics.
This school, owned by the parent company Alta Colleges, Inc., was one of the most expensive investigated. Since 2009, however, Alta has been plagued by lawsuits for student aid fraud and misleading recruiting tactics.
Protecting Yourself from Sanctioned Schools
Some for-profit schools take advantage of students who are already overwhelmed by applications, financial aid, and daunting life choices. To protect yourself from dishonest or aggressive marketing tactics, its important to take it slow, avoid on-the-spot enrollment, and do your own research.
Already a victim? Dont know what to do if your school has been sanctioned? Here are a couple options:
•Transfer your credits elsewhere.
Students who have come close to finishing their degree often do not want to start over from the beginning. If that sounds like you, search for a school with a comparable program that will take your credits, and finish your education there.
Unfortunately, many sanctioned schools have credits that are difficult to transfer elsewhere. Transferring your credits also means that you will probably be ineligible for student debt relief in the future. To make sure you dont lose too much money, work closely with your new school to ensure that most of your credits transfer successfullyâ€”and research your new school to make sure it is more reliable!
•File for a Federal Loan Discharge (Student Loan Forgiveness)
If you have federally held student loan debt, you may be in luckâ€”the student loan forgiveness program that President Obama introduced back in 2008 means that more students are eligible to have their loans completely forgiven. This is in addition to measures which have tightened the noose on for-profit schools who sustained themselves on financial aid fraud, and the closed school forgiveness safety net that has been put in place to protect their victims.
How do you find out if you are eligible to have your student loans forgiven? Goodbyeloans is a fast, easy way to begin to dig yourself out of the financial hole. Simply fill out a form including information like your annual income and your loan status, click submit, and you will receive a quick quote within 24 hours.