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For Profit Online Colleges Named in Government Investigation of Education Fraud, Deceptive Marketing

Government Accountability Office Investigation of For Profit, Online Colleges

Three primarily online colleges—the University of Phoenix, Kaplan University, and Argosy University—were among 15 for-profit colleges targeted by an undercover government investigation that uncovered possible education fraud and deceptive marketing practices.

The U.S. Government Accountability Office (GAO) probed both online colleges and on-ground for-profit colleges from May 2010 through July 2010, using “secret shoppers” to pose as prospective applicants. Congress is investigating for-profit colleges because they receive about one-fourth of federal education loans ($20 billion in 2009).

The GAO findings were revealed in Senate hearings in early August.

Among the findings:

One admissions rep advised a student completing a federal aid application form to hide $250,000 in savings; another encouraged a student to invent three dependents.

True costs of degree programs were obscured, while benefits were overstated.

Example: a beauty college told an applicant that barbers earn $150,000 to $250,000, making the cost of the degree a good investment (yet Bureau of Labor Statistics reports, available online, reveal that 90 percent of barbers make less than $43,000 annually).

Sometimes the cost difference is vast, which is hidden by some admissions counselors. For instance, one undercover agent was told by a for-profit college that its $14,000 massage therapy certificate program was a “good value” — yet the same certificate from a nearby community college was priced at just $520.


Applicants were sometimes pressured to sign enrollment agreements and make deposits before being given access to financial aid information.

Another tactic: Repeated phone calls to recruit applicants to enroll. One potential applicant received 189 phone calls in one month.

The fifteen for-profit colleges that were investigated were picked to create a diverse sampling of schools, including both online colleges and on-ground schools—not necessarily because they were suspected of violations or because they were the only schools thought to be in violation. Some of the schools investigated receive almost their entire revenues (89 percent or more) from government loans.

Schools that were investigated include the University of Phoenix, Everest College, Westech College, Kaplan University, Potomac College, Bennett Career Institute, MedVance Institute, the College of Office Technology, Argosy University, Anthem Institute, Westwood College and ATI Career Training.

In response, Kaplan University suspended admissions at its two campuses—Pembroke Pines, Florida, and Riverside, California—where investigators found deceptive practices.

The GAO’s report, “For Profit Colleges – Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices,” is available for full download online, along with video of undercover agents interacting with for-profit college admissions officers. The report does not include the names of the online colleges and on-ground colleges targeted by the investigation; these were revealed in Senate testimony on Aug. 4, 2010, by Gregory D. Kutz, Government Accountability Office managing director of forensic audits and special investigations.


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