For-Profit Colleges Caught On Video Encouraging Financial Aid Fraud

According to the Dept. of Education, enrollment in for-profit colleges has exploded in recent years, growing nearly 500%. Last year alone, students at for-profit colleges received more than $4 billion in Pell Grants and more than $20 billion in federal loans. With all that money floating around, the Government Accountability Office was asked to investigate — and their findings will probably not please taxpayers.

The GAO sent a handful of investigators undercover as prospective students to 15 different for-profit colleges in six states and the District of Columbia. Among the colleges investigated were some that received at least 89% of their revenue from federal student aid.

Investigators found that all 15 colleges “made deceptive or otherwise questionable statements to GAO’s undercover applicants,” and four of them “encouraged fraudulent practices.”

Among those fraudulent practices encouraged:
* A financial aid rep at a school in California encouraged the undercover applicant “to change the FAFSA to falsely increase the number of dependents in the household in order to qualify for Pell Grants.”

* At a school in Florida, a financial aid representative suggested to the undercover applicant “that he not report $250,000 in savings reported on the FAFSA. The representative told the applicant to come back once the fraudulent financial information changes had been processed.”

* When an undercover applicant in PA told a financial aid rep he’d received $250,000 in inheritance, he was told “he should have answered ‘zero’ when asked about money he had in savings.” The applicant was also told to “correct” his application to reflect the change to zero.

* Everything is bigger in Texas, including the fraud. That’s where an admissions rep “encouraged applicant to change the FAFSA to falsely add dependents in order to qualify for Pell Grants,” and then “assured the undercover applicant that he did not have to identify anything about the dependents, such as their Social Security numbers, nor did he have to prove to the college with a tax return that he had previously claimed them as dependents.”

Admissions and financial aid officers also misrepresented and misled the applicants in other ways:
* Undercover applicants were frequently told they would attend classes for 12 months a year, but were quoted an “annual cost” that only accounted for for 9 months of classes.

* College reps exaggerated applicants’ potential salary after graduation and “failed to provide clear information about the college’s program duration, costs, or graduation rate despite federal regulations requiring them to do so.”

* Applicants were pressured to sign a contract for enrollment before being allowed to speak to a financial advisor about program cost and financing options. Fast forward to 8:28 in the video and watch what happens when an applicant refuses to sign the enrollment form without first discussing financial aid.

GAO also investigated the practices of for-profit colleges as they relate to websites designed to link applicants to educators.

Writes the GAO:

Once registered, GAO’s prospective students began receiving calls within 5 minutes. One fictitious prospective student received more than 180 phone calls in a month. Calls were received at all hours of the day, as late as 11 p.m.

The investigation also found that for-profit colleges are often a waste of money because the same associate’s degrees and certificates are usually available at nearby public colleges and community colleges for significantly less.

For example:

A student interested in a massage therapy certificate costing $14,000 at a for-profit college was told that the program was a good value. However the same certificate from a local community college cost $520.

Here’s the GAO video. It’s all intriguing, but if you want to see how nasty these high-pressure sales pitches can get, skip to 8:28. If you’re averse to video-watching or can’t watch the clip at work, here’s a link to the transcript of the video.

To read the entire GAO report [PDF] click here.

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