For-profit colleges encourage fraud, government report finds

Overpriced, default, fraud. Sounds like a typical day on Wall Street, right? According to a Government Accountability Office report released last week, these signal a growing trend in the sales and marketing practices of private, for-profit universities.

According to the report, GAO investigators posed as potential students at 15 for-profit colleges in order to find out how colleges that receive billion sin federal Pell Grants and federally subsidized student loans treat their students.

GAO investigators found that all of the colleges made “deceptive and otherwise questionable statements” to them. Four of the colleges encouraged fraudulent practices by the prospective students, including falsification of financial aid forms. Other college representatives violated federal regulations to provide students with accurate information about the length of programs offered, costs, and graduation rates. College staff frequently told applicants they would be in classes for 12 months but quoted prices of tuition for nine moths of classes.

GAO investigators reported that private colleges in California and Texas encouraged students to falsely increase the number of dependents on their financial aid form in order to qualify for grants. Another investigator applying to a Pennsylvania school was told not to report some $250,000 in savings in order to qualify for financial aid. An undercover applicant to a Florida school said they were falsely told that the school was accredited by the same organization as that which had accredited Harvard. Others grossly exaggerated the incomes they would earn after graduation, or implied to students that student loans don’t really have to be repaid.

The GAO report noted that student loan default rates for former students of for-profit colleges are much higher than those at public universities and colleges.

GAO investigators who used for-profit college websites to seek more information began receiving high-pressure phone calls within five minutes of their activity on the website. They reported receiving 180 calls in a month from the colleges anxious to get them into their classes.

A comparison between the tuition rates of for-profit colleges and local public universities with the same or similar programs found enormous disparities as well. According to data compiled by GAO investigators, students attending for-profit colleges could expect to pay far more for the same program. For example, a student seeking an associate’s degree in respiratory therapy at a for-profit Texas college could pay as much as 19 times more than a student in a similar program at a local publicly operated college. Earning a certificate in web page design at one Pennsylvania for-profit college could cost as much as 10 times more than the same program at a local public college.

The report showed that while some of the staff at these colleges provided accurate and helpful information for prospective students, deceptive or harmful practices were far too frequent. The names of the schools were not disclosed but they were located in Arizona, California, Texas, Pennsylvania, Illinois, Florida and Washington D.C.

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