The U.S. Department of Veterans Affairs announced Monday that it would soon stop approving the enrollment of new students receiving GI Bill benefits at the University of Phoenix, Temple University and three other institutions based on information from the Federal Trade Commission or state attorneys general that these institutions misled students about the value of getting a degree from these universities.
The move, hailed as long overdue by veterans' groups, will not immediately affect current students. But in a press release, the VA said it will stop approving new GI Bill enrollments at the universities in 60 days unless the institutions, including the Career Education Corporation’s Colorado Technical University and American InterContinental University, and Bellevue University, take corrective action.
However, the agency held out the possibility of stronger action if problems aren’t fixed by then, saying the matter will be referred to a VA committee on educational allowances, which will help regional agency directors decide "whether educational assistance should be discontinued for all individuals enrolled" at the institutions named "and, if appropriate, whether approval of all further enrollments or reenrollments" at the universities "should be denied to veterans, servicemembers, reservists, or other eligible persons pursuing those courses under educational assistance programs administered by VA."
The move was supported by veterans' education advocates, who said they’ve been asking the VA for years to crack down on institutions for violating a federal law barring the use of advertising, sales or enrollment practices that are erroneous, deceptive or misleading.
“This sends a powerful message, one we’ve been advocating for VA to exercise since 2012, that the federal government and taxpayers will no longer tolerate schools that seek to defraud veterans and other military-connected students out of their hard-earned federal education benefits,” Carrie Wofford, president of Veterans Education Success, said in a press release.
“Today’s decision by the VA is more than justified based on the years of mounting evidence against University of Phoenix and Colorado Tech for maliciously defrauding veterans,” she said.
In its letter Monday to University of Phoenix president Peter Cohen, the VA cited the FTC investigation that led to a settlement last December in which Phoenix and its private investment group owners agreed to pay the FTC roughly $50 million. The university also agreed to forgive another $140 million in fees owed to the university by former students who allegedly were harmed by deceptive advertising.
That case focused on television and radio advertisements that Phoenix ran from 2012 until early 2014, featuring employers such as Microsoft, Twitter, Adobe and Yahoo!, that gave “the false impression that UoP worked with those companies to create job opportunities for its students and tailor its curriculum for such jobs,” the FTC said at the time.
The FTC, though, had announced it was launching the investigation in July 2015, when Phoenix was a publicly traded company worth more than $3 billion. Since then the university has changed owners and is now privately held by a consortium of investors including the Vistria Group and funds affiliated with Apollo Global Management.
A Phoenix spokesman said the alleged actions took place years ago.
"Let us be clear: after an FTC investigation that lasted more than five years, the one marketing campaign the Commission had issues with ended six years ago and occurred under prior ownership," the spokesman said in a statement. "The University admitted no wrongdoing in choosing to settle with the FTC and continues to believe we acted appropriately. We chose to settle to end the potential for protracted litigation that would impact our focus on our students."
Career Education Corporation, recently renamed Perdoceo Inc., reached a $30 million settlement last July with the FTC, which had been investigating whether it used deceptive marketing and advertising to identify prospective students. Career Education Corp. admitted no wrongdoing in the settlement but did agree to enhance compliance measures involving purchasing the names of prospective students from third-party firms.
The company announced another settlement in January with attorneys general from 48 states and the District of Columbia involving "unfair and deceptive practices." Although Career Education Corp. also denied wrongdoing in that deal, it agreed to write off $556 million in debt owed by 180,000 former students.
The VA cited the FTC investigation in a letter to CEC president and CEO Todd Nelson on Monday, saying, ”CEC and its subsidiaries have used illegal and deceptive telemarketing schemes to lure consumers to their post-secondary and vocational schools. CEC used three lead generators, Sun Key, EduTrek and Expand … These lead generators falsely told consumers they were affiliated with or recommended by the U.S. military. As a result of these tactics, CEC lead generators also induced consumers to submit their information under the guise of providing job or benefits assistance.”
Perdoceo said in a statement that it intends to demonstrate to the VA in the 60 days before the sanction takes effect that “we are in full compliance with their requirements and that necessary corrective action, if any, has already been taken.”
Temple agreed in a settlement in December with Pennsylvania attorney general Josh Shapiro to establish $250,000 in scholarships for Fox Business School students over the next decade. Shapiro had filed a complaint against Temple for misrepresenting data to college rankings organizations like U.S. News & World Report. In a letter to Temple president Richard Englert, the VA cited a class-action lawsuit against the university citing the misleading data.
A Temple spokesman said on Tuesday the university "will respond as requested to demonstrate the substantial corrective actions that have been undertaken. We look forward to continuing to provide an outstanding education to veterans."
In its letter to Bellevue University's president, Mary Hawkins, the VA cited a complaint Doug Peterson, Nebraska's attorney general, filed in state district court in February 2019, saying the university misled nursing students. Peterson alleged the university’s nursing program did not make it clear to students seeking a bachelor’s degree in nursing that the program was not accredited, reducing the value of the degree.
A university spokeswoman said Bellevue is contesting Peterson's complaint, and that the university believes the VA's threat "is based on unsubstantiated, recycled allegations from a state court lawsuit. ... We stand by our initial response that we have never misled or would mislead any student, and that includes our military and veteran-benefitted students. We intend to defend this matter vigorously."
The university also said it enrolls more than 1,500 students who receive veterans' benefits, and that the VA has received no complaints from them.
(Note: This article was updated to include responses from universities that were received after it was published.)