GAO report: How damaging to for-profits?
Within the higher education industry, there seems to be a rough consensus that Wednesday's release of a Government Accountability Office report on boiler room recruiting techniques in the industry could mark a turning point.
The report makes an emphatic point. The GAO picked 15 for-profit campuses, a small but representative sampling of the industry, and found deceptive marketing practices at every one. Four encouraged applicants to commit fraud.
The video may have hit even harder. Undercover GAO investigators captured some priceless images on hidden cameras, secreted inside baseball caps, depicting desperate recruiters using high-pressure sales techniques and making stuff up to land a sale.
For the for-profit industry, it was not a good day. One source, speaking on condition of anonymity because his company did not want to be associated with the GAO report, put it this way:
"This one of these days where I think there's a very clear before and a very clear after. Because there's images that stick in people's minds. And these images will likely stick."
Here are some of the images:
A Florida recruiter says, "I know medical assistants who are making 68, $69,000 a year, and they only went to school for nine months." (Medical assistants make nowhere near that much.)
The same guy, a few minutes later, laughs off the notion that one has some obligation to pay off one's student loans. "I owe $85,000 to the University of Florida. Will I pay it back? Probably not." (This prompts nervous laughter from the applicant.) "I look at life a little differently than most people."
When an applicant asks to see a loan advisor, a Texas recruiter says, "No, they won't even let you back there." Then, she bullies him: "Let me ask you, are you really serious about the program?"
Another recruiter theatrically rips up an application, in mock disgust, when the applicant won't sign a binding contract without first talking to an aid officer.
Donald Graham, whose Washington Post Co. owns the Kaplan Higher Education system, said the tapes were "sickening." Kaplan is among the for-profit entities targeted in the investigation.
The full impact of the report on the fastest-growing sector of higher education is hard to gauge. And unbiased sources are hard to find. Many of the most prominent higher education associations represent not-for-profit colleges, who are the nominal competition of for-profits, although only a few of their lobbyists have gone on the attack. (So far, the massive enrollment gains in the for-profit sector have not come at the expense of the not-for-profits.)
Terry Hartle, senior vice president for the American Council on Education, is in a good position to size up the damage. His group represents both for-profits and not-for-profits, being the umbrella group for presidents and provosts.
Here is Hartle's take:
"I don't think there's anything you can say about the GAO report except that it is deeply troubling," Hartle said.
The full extent of marketing trickery and deception in the for-profit industry has been "a great big unknown" up to now, Hartle said. Critics claimed it was rife, but they could only offer up a few anecdotal examples. For-profit leaders denied there was any systematic problem and accused their detractors of blowing their anecdotes out of proportion.
The GAO report will surely change the tone of this debate.
"After reading the GAO report, anyone who is involved in higher education has to feel that this is terribly problematic," Hartle said. "They did find some evidence of fraud. Equally troubling, they found evidence of misrepresentation at all of the institutions . . . There is no defense for a lot of what came forward in today's GAO report."
What the report shows most clearly, Hartle and others have said, is how relentlessly recruiters will push applicants to max themselves out in student loans. The problem is, many for-profit students are poor, and paying off a student loan may prove an insurmountable hurdle.
"These are people trying to get back on their feet, and to swamp them with debt ... that's not right," said Arne Duncan, the education secretary, in a telephone interview Wednesday with my colleague Jenna Johnson.
And, contrary to the comments of the Florida recruiter, you can't just stop making payments.
"The fact is that if you default on a student loan, the government will ruin your life," Hartle said.
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Daniel de Vise
August 5, 2010; 11:13 AM ET
Categories: Access , Administration , Admissions , Aid , For-profit colleges , Public policy | Tags: GAO investigation for-profit colleges, GAO report for-profits, for-profit colleges, for-profits
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