After a year of investigations, the U.S. Department of Education reached a settlement agreement with DeVry University over a charge that the for-profit institution used unsubstantiated job placement claims in recruitment and advertising materials.
The settlement is related to an investigation into DeVry's claim that since 1975, 90 percent of its graduates were employed in their field of study within six months of graduation. However, the Federal Student Aid office determined that DeVry could not provide sufficient evidence to support that claim for certain times during that period.
“Students deserve accurate information about where to invest their time and money, and the law is simple and clear: recruitment claims must be backed up by hard data,” said U.S. Secretary of Education John B. King Jr. in a news release.
Despite the settlement, the Federal Trade Commission is continuing to pursue a lawsuit regarding the 90 percent claim and another DeVry assertion that its graduates had 15 percent higher incomes one year after graduation on average than did the graduates of all other colleges or universities.
As part of the settlement, DeVry is required to post a five-year letter of credit of no less than $68.4 million. The institution received approximately $684 million in federal student aid last year. A letter of credit is collateral the government asks colleges to set aside when officials have concerns that an institution may be unable or unwilling to pay back money it owes to the government.
The institution was also ordered to cease making any marketing claims related to the “since 1975” reference. DeVry must also remove the claim from its website and from websites not under its control.
“The settlement in no way hinders DeVry University’s ability to serve current or future students,” said a statement from the institution’s parent company, DeVry Education Group. “DeVry University is pleased to have resolved the notice in full cooperation with the department and continues to cooperate with the department to resolve the remainder of its August 2015 investigation. The settlement allows DeVry University to continue communicating its strong student outcomes while providing assurances regarding the extent of its graduate employment data.”
DeVry’s president and chief executive officer, Lisa Warner Wardell, tweeted that she was pleased the issue with the department was resolved.
The department and the FTC took initial action against DeVry for these marketing claims in January. At the time, the institution defended the formula used to make the claims because the data from the 1975-80 period were rolled up by campus and not by graduate. The department requested graduate-specific data from DeVry to back the assertion.
DeVry was also placed on Heightened Cash Monitoring 1, which is a tighter form of federal financial oversight that requires institutions to provide documentation of qualifying federal aid expenses before accessing funds. It also allows the department to closely monitor how DeVry uses federal dollars.
"Requiring that DeVry make honest disclosures to students of their actual job placement results and that the school provide a letter of credit to protect taxpayers in the future are prudent steps when we consider our recent experience with other for-profit schools," said U.S. Senator Dick Durbin, of Illinois, in a statement.
The department's announcement also underscored that the Obama administration’s Enforcement Unit, which was announced in February, was part of the investigation into DeVry.
Despite the penalties imposed on the institution, the department acknowledged that DeVry was moving in the right direction by no longer requiring students to sign mandatory arbitration clauses that block students from suing the for-profit college. More recently, DeVry adopted a reform to the so-called federal 90-10 rule by altering that ratio to 85-15. That change, favored by for-profit critics, means that DeVry will derive at least 15 percent, and not 10 percent, of its revenue from nonfederal sources.
In September, when DeVry announced that it was making the controversial reform, Wardell said that the decision was unrelated to the FTC lawsuit or the department’s marketing investigation. Instead, she said, the company was looking to confront an issue affecting the sector.
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