Some of the biggest names in the for-profit college education business – University of Phoenix, Kaplan College and Westwood College among them – stand accused of unethical recruiting practices, high pressure sales tactics, lying, and possibly fraud, according to congressional witness testimony Wednesday.
The Senate Health, Education, Labor and Pensions Committee, which held the hearing, released the names of the colleges involved in an undercover investigation as Government Accountability Office investigator Gregory Kutz played damning video tapes of coercive practices, deception and lies college admissions officers told to try to entice students to enroll and take out government student loans.
Another witness, a former recruiter for Westwood, testified that recruiters were given gift cards, extra time off and vacation trips to such places as Cancun, Mexico, as incentives for signing up more students. Successful sign-ups were celebrated with banging drums, ringing bells or blowing whistles, the former recruiter Joshua Pruyn testified. He said one supervisor was given a “best liar” award at a company function.
In testimony by the lead GAO investigators, he details these possible criminal activities;
- Urging students to understate or withhold information on their savings so they could get federal loans.
- Suggesting prospective students claim false dependents so they would qualify for federal student loans.
- Insinuating that the loans wouldn’t have to be paid back.
- Stating that the colleges were a “good value” for the tuition cost when similar degrees could be obtained for thousands less at community colleges.
- Grossly exaggerating the amount of money one could earn with a degree from the school, for example, $150,000-$250,000 annually as a barber. The Bureau of Labor Statistics reports 90 percent of barbers make less than $43,000 a year.
- Lying about accreditation – in one case saying the school was accredited by the same organization that accredits Harvard.
Information about all of the incidents is being turned over to the U.S. Justice Department and the U.S. Department of Education for possible further action.
In addition to the University of Phoenix, Kaplan and Westwood, the GAO’s undercover investigators went to two campuses of Everest College, in Arizona and Texas; Westch College in California; Potomac College and Bennett College, both in Washington, D.C.; MedVance Institute in Florida; College of Office Tech and Argosy University in Illinois; Anthem Institute in Pennsylvania and ATI Career Training in Texas.
While some of the institutions exhibited “good practices,” every single one of them also exhibited bad practices, according to Kutz, managing director of Forensic Audits and Special Investigations at the GAO. “There were none that were completely clean,” he said. He said the three schools that also provided some good advice were Office Tech, Argosy and Potomac College.
But the fact that all of them exhibited bad, false or misleading behavior indicates that the problem is “more widespread than a few bad actors,” Kutz told the committee.
In a video tape played for the committee, a “prospective student,” (actually a GAO undercover employee) was told by a Texas school recruiter to omit a $250,000 savings account from his federal financial aid application form. “They don’t need to know that, that’s why you have a tax return,” the admissions officer said. Federal financial aid forms require listing of assets such as savings accounts.
In another tape, a recruiter is shown suggesting that an applicant claim extra dependents, even though he didn’t have any, and justified the action by saying that during bad economic times “people have to move in with other people.”
HELP Committee Chairman Tom Harkin (D-Iowa) has suggested that laws need to be strengthened to crack down on the schools, particularly since so much federal money is involved in Pell Grants and student loans. There are about 2,000 for-profit colleges in the United States and while they enroll less than 10 percent of all college students, those students received about a quarter of the federal aid, about $24 billion in the 2008-9 school year. And the default rate at for-profit colleges is much higher than at non-profit schools.
HELP Committee ranking member Mike Enzi (R-Wyo.) suggested that the committee’s inquiry be broadened to include nonprofit colleges as well as public colleges in addition to the for-profit institutions.
Several of the colleges involved in the investigation issued statements pledging to look into the reported incidents and to discipline employees found to have engaged in deceptive practices.
Corinthian College Inc., which owns Everest College, said – in a statement that was typical of those issued by the schools -- that the organization does not tolerate “improper behavior,” and pointed to dismissals of 68 employees last year, out of a workforce of 2,100, for misconduct. “We are investigating these situations and will follow the facts where they lead and we will take whatever action is necessary to ensure that our students are treated fairly and honestly,” Corinthian said.
Sen. Al Franken, D-Wis., said if the videotapes and the investigation show how these schools recruit students, it may not be possible to rely on the institutions to self-police. “If this is how they hoodwink people into signing on and then ripping them off, they may not be willing to give this up,” he said.
“I’m very disturbed by these videos – Andrew Breitbart didn’t edit these did he? Franken joked, referring to the blogger who took an Agriculture Department employee’s words out of context to falsely portray her as racist.
As titters swept the room, Kutz assured Franken that was not the case.
“This is about Pell Grants going to schools that are recruiting people in an unethical manner,” Franken said. “They are lying to people and we should remedy this.”