Two For-Profit College Chains Lose Government Funding Over Misrepresentations, Inflated Job Placement Rates

If you hear a for-profit college touting its high job-placement rate, you’ve got good reason to be skeptical. Federal regulators have cut of government funding to two more for-profit education chains caught inflating placement stats.

Yesterday, the Department of Education denied applications for continued participation in the federal aid program for 23 campuses of Marinello School of Beauty and three healthcare-focused campuses for the Computer System Institute chain.

According to the DOE’s notice [PDF] to CSI, the school allegedly misrepresented job placement rates to both the Dept. and its accreditor.

Specifically, the schools claimed 42 of its students who completed either the Health Care Center program or the Business Career program were working for a company called Home Health Consultants, which was found to be just one man working from his home.

“In brazen contrast to CSI’s misrepresentation, not a single one of the randomly interviewed students had ever been employed by HHC,” the DOE states in its notice.

Two students told the investigators that HHC was a single individual, a “Dr. Quinn,” who “hired” them to hand out flyers advertising medical services to elderly people on the street.

Another alleged employer, Dream Team Home Health Care Services, purportedly provided jobs to 14 CSI students in 2013.

Upon investigating, the DOE found that the address for DTH was an abandoned warehouse-type building. The operator of the company told investigators that he failed to incorporate the company and that he had been contacted by CSI to employ students.

However, because the company did not have a business license, the school contact said they could not send students to DTH. Still, that didn’t stop CSI from counting the business as an employer for graduates.

In all, the Dept. says CSI schools received $20 million in federal funding during the 2014-15 school year.

For Marinello Schools of Beauty, the Department alleges that some campuses fabricated high school diplomas so that students would be eligible to receive financial aid.

Some schools also limited the amount of federal financial aid funding students could receive, even when they were eligible for more funding, forcing students to make high monthly payments out of pocket to cover the full cost of the school, according to the DOE notice [PDF].

In a sample review of student financial aid awards, the Dept. found that 92% of those students were given less aid than they were entitled to.

During the 2014-15 school year, the Marinello school chain — with 56 campuses across the country — received more than $87 million in Pell Grants and federal loans, according to the Dept.

“Students were threatened with suspension if the monthly payments were not made,” the Department alleges in its notice. “Marinello failed to increase student loan awards even when students explained that the payments were causing an extreme financial hardship, or that they needed extra funds for child care or transportation.”

In some cases, students told the DOE they had to withdraw from the school because they were unable to make the required payments.

Additionally, the school was found to have misrepresented its courses to prospective students, failed to provide equipment or necessary materials to complete programs, and were charged excessive fees for make-up hours.

The Dept. determined that in both cases, students at CSI and Marinello were lured into taking out loans for programs that didn’t adequately prepare them for jobs they were promised.

In all, the Department’s decision affects 23 Marinello locations in Las Vegas, Los Angeles, Burbank, Moreno Valley, and Sacramento, CA, that enroll about 2,100 students.

“Our students depend on higher education institutions to prepare them for careers through a quality education,” Under Secretary Ted Mitchell said in a statement. “These unscrupulous institutions use questionable business practices or outright lie to both students and the federal government. In these cases we are taking aggressive action to protect students and taxpayers from further harm by these institutions.”

CSI and Marinello have the opportunity to appeal the decision by submitting factual evidence to dispute the Department’s findings. The Marinello schools have until Feb. 16 to submit such evidence; CSI has until Feb. 12 to do so.

[via MarketWatch]