For Profit Colleges Encouraged Fraud

On August 4, 2010, The United States Government Accountability Office (GAO) released a report on For Profit Colleges entitled “FOR-PROFIT COLLEGES –Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices.”The GAO conducted an investigation and had GAO investigators pose as prospective students and apply for admissions at 15 for-profit colleges in Arizona, California, Florida, Illinois, Pennsylvania, Texas, and Washington, D.C.

The GAO report found that for-profit colleges encouraged fraudulent practices, such as having students falsify their financial aid forms to qualify for federal aid.The colleges also engaged in deceptive marketing practices such as giving false information regarding students’ prospective salaries after graduation, the school’s accreditation, misrepresented the length and duration of the educational program, and the school’s student graduation rates. Federal law requires that such disclosures be made.

The GAO also found that fictitious prospective students received numerous repetitive calls from for-profit colleges attempting to aggressively recruit students.One fictitious prospective student received 180 phone calls in 1 month.The GAO report also stated that many of the for-profit colleges’ programs cost substantially more than similar degrees fount at nearby public colleges.For example, in one case, a massage therapy certificate that cost $14,000 at a for-profit was represented as a “good value” despite the same certificate at a local college costing only $520.

According to the GAO report, enrollment in for-profit colleges has grown from about 365,000 students to almost 1.8 million over the last several years and that for-profit colleges received more than $20 billion in federal loans and more than $4 billion in Pell Grants.Considering the amount of tax dollars at stake, the Federal Government has a clear interest to prevent fraud and making sure Federal Student Financial Aid is properly distributed.

SOURCE: http://www.gao.gov/new.items/d10948t.pdf