Thursday, August 26, 2010

Senate Hearing: Videos of For-Profit School Staffers Expose Fraudulent Acts

Download the entire study, “For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices.”

You can also check out the GAO videos.

- Patricia

by Jamaal Abdul-Alim | Diverse Issues in Higher Ed
August 5, 2010

WASHINGTON – Secretly-recorded videos of shady practices within the for-profit college sector got aired Wednesday during an occasionally testy Senate committee hearing that probed the extent of those practices among the proprietary schools.

“Critics say it’s only a few bad apples. But I question if it’s the entire orchard,” said Sen. Tom Harkin (D-Iowa), chairman of the Senate Health, Education, Labor and Pensions Committee.

Harkin was referring to for-profit colleges as a whole in light of a new Government Accountability Office (GAO) report based on an undercover investigation this summer that found 15 out of 15 for-profit colleges had made “deceptive or otherwise questionable statements” to GAO workers who posed as prospective students with hidden cameras to conduct their investigation.

The for-profit college sites that were targeted by the investigation were: the University of Phoenix in Arizona and Pennsylvania, Everest College of Arizona; Westech College and Kaplan College, of California; Potomac College and Bennett College, of Washington, D.C.; Medvance Institute and Kaplan College, of Florida; College of Office Tech and Argosy University, of Illinois; Anthem Institute, of Pennsylvania; and Westwood College, Everest College and ATI Career Training, of Texas.

Four of the 15 school sites the GAO investigated this summer encouraged students to commit fraud, according to the GAO report titled For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices.

The schools’ practices are of concern, Harkin said, because they are reaping a growing amount of federal aid--$23 billion today versus $4.6 billion a decade ago—that is flowing largely into the pockets of their executives and investors.

“I’m not certain regulations will suffice,” Harkin said at the hearing, titled For-Profit Schools: The Student Recruitment Experience.

“Where this is headed is toward legislation,” Harkin added, explaining that he wanted to come up with a permanent legislative solution that could not be overturned by another administration or rendered ineffective by regulatory exceptions.

Sen. Mike Enzi, (R-Wyoming) suggested the investigation be expanded to include all types of colleges, not just for-profit colleges -- a suggestion that drew a cool response from Democratic members of the committee.

Gregory Kutz, managing director of Forensic Audits and Special Investigations for the GAO, outlined and commented on the secretly-recorded video clips during the hearing that showed for-profit college officials telling students to falsify their federal student aid forms in order to get more federal aid, misleading them about the cost and value of the colleges’ offerings, and pressuring them to enroll without being able to consult a financial aid adviser.

In one clip, a for-profit college worker told the federal worker posing as a student not to disclose that he had $250,000 in savings from an inheritance because it was “none of the government’s business.”

In another clip, the government’s undercover worker is told that spending $115,000 for a computer drafting course was a “good value,” when in reality the same type of certificate earned through the program could be gotten for $520 at a local community college.

Other clips showed the for-profit college workers telling undercover government workers that they would earn more money than statistics suggest is true. For instance, one worker at a school with a program for barbers claimed that a barber in Washington, D.C., could make from $150,000 to $200,000 a year when statistics show most barbers in D.C. earn about $19,000 a year.

The clips repeatedly showed officials at the for-profit colleges denying the government’s undercover workers’ requests to speak with financial aid advisers before they actually enrolled.

“We kept saying, ‘We want to know how much it is,’” Kutz, of the GAO, said. “They kept saying, ‘No, no, no.’”

Kutz said the colleges' wrongdoings had been referred to the U.S. Department of Education's Inspector General's Office and might be referred for criminal prosecution or civil action, depending on the circumstances.

So damning were the clips that the Career College Association, which represents the for-profit college sector, issued a statement that was void of any direct appeals to not judge the entire sector by the actions of a few.

“Even if the problems cited in the GAO report are limited to a few individuals at a few institutions, we can have zero tolerance for bad behavior,” CCA president and CEO Harris Miller said.

Joshua Pruyn, a former admissions representative at Westwood College, a subsidiary of Alta College Inc., testified that admissions representatives were coached and pressured to act as sales representatives—something critics say undermines students’ interests.

“Students were absolutely not allowed to speak to anyone in financial aid,” Pruyn testified. “Our response was, ‘This was step one, you’re not allowed to jump to step two.’”

Pruyn said that, when he asked why this was standard practice, he was told the reason was not to overburden the college’s financial aid staff. But the real purpose, he said, was to get the students to make a commitment to enroll in the college up front.

“We were directed to say things like, ‘I thought you wanted to make a change,’” Pruyn testified.

That runs contrary to the standard practice espoused by the National Association for College Admission Counseling, according to David Hawkins, director of public policy and research at the organization, who also testified at the hearing.

“Our standard practice is to allow students to ask the kinds of questions about the things they need to know about financial aid,” Hawkins said.

One of the more heated moments occurred when Sen. Al Franken (D-Minn.) took witness Michael McComis, executive director of the Accrediting Commission of Career Schools and Colleges (ACCSC), to task on McComis’ testimony that the accrediting agency he oversees strives to “hold institutions accountable to ensure that only the highest level of integrity is injected into the student recruitment and admissions process” and to make sure that students are “accurately and fully informed” of an institution’s program.

Franken asked how those statements could be true when three schools that McComis’ agency accredited were found to have misled prospective students.

“Do you think perhaps your rigorous standards aren’t rigorous enough?” Franken asked.

“I don’t think so,” McComis responded.

“To me,” Franken shot back, “there is a real discrepancy here. Doesn’t this industry have any interest in self-policing itself?”

Later, under questioning, McComis acknowledged that a “key” part of its accrediting process is a self-evaluation done by the college that is seeking accreditation.

“You kind of go to the school, ask them how they’re doing, and if they say good, you say fine,” Sen. Harkin observed.

Harkin also questioned why the ACCSC accredited 41 schools with default rates higher than 30 percent within the first three years.

McComis said the ACCSC currently uses two-year default rates but doesn’t take them into account when accrediting a college.

“We have found in our data no correlation to indicate that default rates are directly statistically correlated to the quality of the education,” McComis said, adding that graduation and employment rates are better indicators of a program’s effectiveness.

The U.S. Department of Education has proposed a set of rules that would, among other things, take the student loan default rates among students into account when determining whether the schools should be eligible for federal aid.

Wednesday’s hearing was the second in what Harkin says will be a series of hearings on the for-profit college sector in the coming months. Harkin stated that accreditation was one of the areas he planned to look at in a future hearing.

Click here for a link to the GAO videos.

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