Wednesday, October 23, 2013

State AGs Preparing to Sue For-Profit Education Companies; the Feds are Watching Too

California Attorney General Kamala Harris’s counterparts may be preparing to do what California did last week: take on the major for-profit education companies for fraud. David Halperin, counsel for Public.Resource.Org, recently told the Corporate Crime Reporter that 32 state Attorneys General are preparing to sue the largest for-profit companies for fraud, including “lying to students about what their degree will get them, for lying about their placement rates both to students and to the government in terms of how many of the students are getting jobs after they graduate, for lying about whether it’s a federal loan or a private loan not guaranteed by the taxpayer.” The massive for-profit education industry has 13 percent of U.S. college students, but they get 25 percent of all college financial aid, and are “responsible for 47 percent of all student loan defaults.” Halperin says that the SEC, FTC, Consumer Financial Protection Bureau, and the DOJ are investigating the largest for-profit institutions. If federal authorities decide to get involved, they will be armed with the Government Accounting Office’s 2010 “secret shopper” investigation. In the study, the GAO sent undercover applicants to 15 of the biggest for-profit education companies and found that they all made deceptive or otherwise questionable statements to the applicants. In four cases, applicants were encouraged to lie on their federal financial aid forms to qualify for loans. One admissions counselor told a GAO undercover applicant this whopper: that barbers can earn $150,000 to $250,000 a year, even though 90% of barbers make less than $43,000 a year, and in Washington, D.C. where the school was, 90% of barbers made less than $17,000 per year.

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