Four for-profit colleges encouraged undercover applicants to commit fraud, and all 15 visited by undercover investigators made "deceptive or otherwise questionable statements," according to a government report released Wednesday.
The pervasive nature of the problems found by the Government Accountability Office appeared to contradict the for-profit industry's previous assertion that problems in the sector are limited to a few bad apples, senators said.
"GAO's findings make it disturbingly clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight," Sen. Tom Harkin (D-Iowa) said at a hearing by the Senate Health, Education, Labor and Pensions Committee. "To the contrary, the evidence points to a problem that is systemic to the for-profit industry."
Westech College in California, MedVance Institute in Florida, Anthem Institute in Pennsylvania and Westwood College in Texas — all privately owned schools — allegedly encouraged undercover applicants to commit fraud to qualify for federal aid.
The colleges were not named in the GAO report but were identified by the committee Wednesday. The four cases of alleged fraud have been referred to the Department of Education's inspector general.
The Career College Assn., which represents for-profit colleges, said it found the results of the GAO investigation "deeply troubling" and would take steps immediately to help its members comply with regulations.
"Even if the problems cited in the GAO report are limited to a few individuals at a few institutions, we can have zero tolerance for bad behavior," association President Harris Miller said in a statement.
The GAO investigation raised questions about some of the largest companies in the industry, including University of Phoenix campuses in Pennsylvania and Arizona; Everest College (owned by Corinthian Colleges Inc.) campuses in Arizona and Texas; Kaplan College campuses in Florida and California; and the Westwood College campus in Texas.
The University of Phoenix, which has more than 400,000 students on multiple campuses, allegedly encouraged an undercover applicant to take out federal loans that he did not need and provided an inflated graduation rate.
Apollo Group, which owns the University of Phoenix, has begun an investigation into the GAO findings, spokesman Manny Rivera said in a statement. Westwood College said it was appalled by the findings and would terminate employees who did not follow its "strict code of conduct."
In its report, the GAO selected schools that received nearly 90% of their revenue from federal student aid, among other factors. GAO investigators posing as prospective students documented their experiences with cameras hidden in hats and portfolios.
According to the report, an admissions representative at MedVance Institute in Florida noted that unlike car loans, "no one will come after you if you don't pay" a federal student aid loan.
Joshua Pruyn, a former admissions representative at Alta College Inc. in Denver, testified at the hearing that one of his co-workers received the "Best Liar" award at a team celebration. Even some recruiters were deceived about the quality of the programs, he said.