Late last month U.S. Senators Dick Durbin (D-IL), Tom Harkin (D-IA), Frank Lautenberg (D-NJ) and Barbara Boxer (D-CA) sent in a letter to Federal Trade Commission Chairman, Jon Leibowitz. In the letter the Senators urge the FTC to not only better inform and update dated consumer guides for private vocational schools, but to investigate third-party online lead generation companies that are recruiting for for-profit colleges using deceptive practices.
“Recent reports, including a Senate investigation, have revealed that some unscrupulous for-profit colleges engage in misleading, high-pressure, and unethical recruitment practices to maximize revenue from federal financial aid. To recruit students many for-profit colleges have partnered with third-party marketing companies, so-called “lead generators,” that deceive consumers to obtain personal information by misrepresenting their affiliation with for-profit colleges, as well as concealing how and by whom their information will be used. The Federal Trade Commission (FTC) is well positioned to protect consumers from the deceptive practices used by lead generators.”
The letter comes just two months after the Senate Committee on Health, Education, Labor, and Pensions released the findings of a two-year investigation into for-profit colleges: For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success.
“The examined colleges spent $4.2 billion on marketing and recruiting, or 22.7 percent of all revenue. Publicly traded companies operating for-profit colleges had an average profit margin of 19.7 percent, generated a total of $3.2 billion in pre-tax profit and paid an average of $7.3 million to their chief executive officers in 2009.” –Executive Summary
The Senate investigation found that, in 2009 alone, the for-profit colleges examined put more money towards marketing, and recruiting for profit, than they devoted towards total actual instruction costs, faculty and curriculum included.
“For-profit education companies are successful as businesses; throughout the 2000s many of the companies had profit margins that topped most of Wall Street. In 2009, publicly trade for-profit colleges had an average profit margin of 19.7 percent and generated a total of $3.2 billion in profit.”-For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success, pg. 94.
Additionally, the investigation found that for-profit colleges have misled students by misrepresenting program costs, time involved, accreditation and credit transfer.
Recruiters Were Told to Market to Emotions
“At Kaplan recruiters were instructed to ‘Keep digging until you uncover their pain, fears, and dreams…. If you get the prospect to think about how tough their situation is right now and if they discuss the life they can’t give their family because they don’t have a degree you will dramatically increase the chances of gaining a commitment from the student! If you can stir up their emotions, you will create urgency!'” -pg. 72
The Senators wrote,
“Between 2001 and 2010, federal student aid funds flowing to for-profit colleges increased from $5.4 billion to $32.2 billion, mostly due to aggressive recruiting practices, Lead generators have become a key part of the aggressive recruiting strategy for many for-profit colleges. Search engines promise prospective students connections to admission offices of selective and well-known public and non-profit colleges. In reality, the lead generators send students’ information to for-profit colleges and not the institution(s) in which the student actually expressed interest, with which the ad owners have no relationship.”-Senators’ letter to the FTC.
The letter makes mention of the $2.5 million settlement that was reached in June by 20 State Attorney General’s offices and lead generator firm QuinnStreet Inc. The States alleged that QuinnStreet had violated consumer-protection laws by their “false, misleading, and deceptive” sites including GIBill.com, which was falsely implied to be connected with the federal government.
