GAO Finds Massive Fraud at For-Profit Colleges
Yesterday, the Government Accountability Office (GAO)
released a sweeping
report uncovering systemic deception, manipulation and "otherwise
questionable" admissions and financial aid practices at 15 colleges
within the rapidly expanding for-profit college market. The report even
included an undercover video.
In one widely-noted case documented by the report, an admissions
representative at a DC cosmetology school told a GAO investigator that
barbers could earn up to $800 dollars a day, over $250,000 a year, a
wildly exaggerated figure.
In other cases, financial aid representatives suggested that student
loans did not need to be paid back. One financial aid representative
explained, "it's not like a car note, where if you don't pay they're
gonna come after you." In all 15 schools examined by the GAO,
investigators found deceptive admissions practices; in some schools, the
investigators were told that they could not talk to financial aid
officers until after they were officially enrolled.
At four of the schools, admissions officers encouraged and assisted
Potential students were told not to report inheritances and savings of
$250,000 so they could qualify for government loans—one admission
officer told a GAO investigator that she would 'correct' his form by
adding in two non-existent dependents.
The report comes against the backdrop of an ever-expanding for-profit
education sector, now worth over $26 billion dollars. In the last
decade, enrollment at for-profit colleges has expanded from around
350,000 students to nearly 2 million students. At the same time, federal
aid sent to for-profit institutions has ballooned from less than $5
billion to nearly $26.5 billion in the last decade. As the GAO report
notes, many schools receive the vast majority of their funding from the
During the committee hearing where the GAO report was released, Sen.
Tom Harkin (D-IA), chairman of the committee, noted the "cruel irony"
that for-profit colleges specifically target minorities and the working
class with promises of a better life, but end up saddling them up with
Enticed by the language of increased opportunities, "these students
typically go deeply into debt," very often do not graduate, and, when
they do, often find themselves without a job. According to a College
Board report released in April, only 4 percent of students at for-profit
schools graduated without debt. In comparison, less than a quarter of
non-profit graduates and less than an eighth of public school graduates
carried such large amounts of debt.
Moreover, many of the students who end up at for-profit institutions
never graduate. Of the 15 schools examined by the GAO, 10 have
graduation rates under two-thirds—one school, a Pennsylvania-based
college offering a Bachelor's Degree in Business Administration, has a
graduation rate of 9 percent.
The question remains what will be done about the practices exposed by
the GAO report. The Department of Education plans to release a set of
rules in November to regulate Title IV federal financial aid, but this
isn't likely to stem the abuses. Sen. Harkin however suggested at the
end of the hearing that he was "not certain regulations will suffice."
Rather, "really tightly designed legislation" might be necessary. What
do you think is the best way to address the abuses uncovered in the GAO
report? Please use the comments field below to let us know.
Extra Credit, 06/08/10
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