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Congress's 'Secret Shopper'

August 3, 2010

WASHINGTON -- A government report detailing the findings of an undercover investigation of for-profit colleges’ recruiting tactics reveals admissions and financial aid officers engaged in unethical and sometimes illegal practices, all in the interest of persuading students to enroll and obtain federal financial aid.

The report, along with an accompanying video of undercover footage, is the culmination of a three-month effort by the Government Accountability Office, Congress’s investigative wing, to determine whether and to what degree for-profit colleges are engaging in “fraudulent, deceptive or otherwise questionable marketing practices.” A copy of the report is available here.

Both the report and the video will be released Wednesday morning at the Senate Health, Education, Labor and Pensions Committee’s second oversight hearing on the for-profit sector, where Gregory D. Kutz, GAO’s managing director of forensic audits and special investigations, is set to testify.

Also scheduled to testify at the hearing are David Hawkins, director of public policy and research for the National Association for College Admission Counseling; Michale McComis, executive director of the Accrediting Commission of Career Schools and Colleges; and Joshua Pruyn, a former admissions worker at Westwood College, part of Alta College, Inc., in Denver. But it is the information revealed in the GAO report -- obtained by Inside Higher Ed in advance of the hearing -- that, by documenting numerous instances of apparent misbehavior, is likely to drive the Senate’s continued scrutiny of the sector.

Undercover investigators posing as students found that employees at all 15 for-profit colleges visited for the investigations made “deceptive or otherwise questionable statements” to students about accreditation, graduation rates, employment outcomes, program costs or financial aid.

At four institutions visited, admissions or financial aid officials encouraged students to submit fraudulent financial information in order to qualify for federal aid, the GAO says in its report.

Though many similar tactics have been reported in the news media and recounted by former employees like Pruyn, the GAO report and video carry the weight and credibility of a Congressional investigation.

To collect a substantial number of instances of deception and fraud, GAO investigators examined a non-representative selection of for-profit colleges in Arizona, California, Florida, Illinois, Pennsylvania, Texas and Washington, D.C. The colleges selected were intended to represent a variety of educational offerings at institutions of various sizes and corporate structures, and include some that are publicly traded and others that are privately owned. Some institutions were chosen because the Education Department reports that they receive at least 89 percent of their revenues from the Title IV federal student aid programs, while others were chosen based on their location in a state that was among the top 10 recipients of Title IV money.

Because the investigators visited an admittedly specific group of institutions that were already raising red flags for the Title IV program, advocates for for-profit colleges will almost certainly challenge the report’s findings (as they have done in response to many newspaper reports and other investigations), arguing that the GAO cherry-picked institutions where data from the U.S. Department of Education already hinted at potential improprieties, and that the institutions cited represent “bad actors,” not the sector’s norm.

The investigators also submitted contact information for four prospective students with fictitious identities to “lead generation” websites that supply colleges with names of interested students, and encountered aggressive behavior, they said. Some students began receiving marketing calls from colleges within five minutes of submitting the information and, over the course of a month, one received more than 180 calls. Some came as late as 11 p.m.

In all, the four students received 436 calls in the span of a month. Of those that could be tracked, all but six came from for-profit institutions. The six that came from nonprofit institutions were all from the same public college, according to the GAO.

More damning than aggressive calls are instances in which college employees encouraged prospective students to commit fraud, or conveyed incomplete or false information about the institution’s costs and student outcomes.

The GAO sent two prospective students using fictitious identities to each of the 15 colleges it investigated -- one with income and assets low enough to qualify for a Pell Grant and the other with $250,000 in savings and annual income too high to qualify for any aid other than unsubsidized loans.

At four privately-owned colleges, the agency said, undercover students encountered admissions or financial aid officers who encouraged them to submit false financial information to improve their chances of eligibility for federal financial aid.

At a college in Texas, a financial aid officer told an undercover applicant interested in a bachelor’s degree in construction management not to report $250,000 in savings on the Free Application for Federal Student Aid, “stating that it was not the government’s business how much money the undercover applicant had in a bank account,” the report said, though the Education Department requires aid applicants to disclose all savings and income.

An admissions officer at the same institution also encouraged the applicant to alter his FAFSA to add false dependents so that he could qualify for a Pell Grant. When the applicant expressed discomfort about identifying false dependents, the admissions officer “attempted to ease the undercover applicant’s concern about committing fraud by stating that information about the reported dependents, such as Social Security numbers, was not required.”

At a college in California where an undercover student was interested in a certificate in computer-aided drafting, an admissions officer told the undercover applicant to alter his FAFSA to include three dependents so that his income would be considered low enough to qualify for Pell.

At all four institutions where college employees encouraged applicants to commit fraud, the applicants reported having just received an inheritance of $250,000 -- enough to pay full tuition without any grants or loans -- and yet were, in all four instances, encouraged to take out loans and offered assistance in altering their financial information to become eligible for federal grants and subsidized loans. But, the report said, “[I]t was unclear what incentive these colleges had to encourage our undercover applicants to fraudulently fill out financial aid forms given the applicants’ ability to pay for college.”

Not all colleges encouraged prospective students to commit fraud, but all were found to have made “deceptive or otherwise questionable statements” during the recruitment process, the GAO report said.

At four colleges, admissions officers offered misleading or incorrect information about accreditation. At one institution in Florida owned by a publicly traded company, an employee told a student that the college was accredited by “the top accrediting agency -- Harvard, University of Florida -- they all use that accrediting agency,” the report said. That statement is an impossible one, though; Harvard is accredited by the New England Association of Schools and Colleges, while the University of Florida is accredited by the Southern Association of Colleges and Schools.

At all but two of the colleges visited, college employees offered deceptive or questionable information about graduation rates, exaggerated likely earnings, or guaranteed applicants jobs after graduation. An employee at a small beauty college told an applicant that barbers can earn $150,000 to $250,000 annually. According to Bureau of Labor Statistics data, 90 percent of barbers make under $43,000 a year. At a college owned by a publicly-traded company, an employee told an undercover applicant that instead of pursuing an associate degree in criminal justice, she should go after a medical assisting certificate with which, after nine months of school, she would be able to earn as much as $68,000 a year. A salary that high would be unlikely, since according to BLS data, 90 percent of people working in the field make less than $40,000.

At six colleges in four states, according to the GAO, admissions representatives told undercover applicants that they could not speak with financial aid officers or find out what aid they qualified for until they completed the college’s enrollment forms and paid a small application fee.

Two colleges told undercover students they could earn rewards like a gift card or an MP3 player by recruiting other students -- a practice that could run afoul of a federal statute on “incentive compensation,” depending on the monetary value of those items.

One Florida college, owned by a publicly-traded company, told an undercover applicant that she needed to answer 18 of 50 questions on an exam in order to be admitted. A proctor sat in the room with the student and “coached” her during the test.

At that same college, more than one employee “used high pressure marketing techniques, becoming argumentative, and scolding our undercover applicants for refusing to enroll before speaking with financial aid,” the report said.

 

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