Lawsuit filed by California’s attorney general could jeopardize university’s funding from Veterans Affairs
By Richard Lardner
and Collin Binkley
Associated Press
WASHINGTON (AP) — A lawsuit against Ashford University describes an admissions office with a cutthroat sales culture more akin to a used-car lot than a place of higher learning, peddling “false promises and faulty information” to lure students eligible for federal financial aid.
Sound familiar? The allegations in the lawsuit filed by California’s attorney general are strikingly similar to past complaints against now-defunct for-profit chains that spurred sweeping regulation by the Obama administration. And they’re being echoed today in other lawsuits, complaints and ongoing government scrutiny of for-profits even as Education Secretary Betsy DeVos engineers her own seismic shift in the regulatory landscape that stands to benefit the multibillion-dollar industry.
The changes, according to DeVos’ critics, will weaken protections for students who claimed they were defrauded by their schools.
Education Department documents obtained by The Associated Press through an open-records records request show that students filed nearly 24,000 federal fraud complaints between President Donald Trump’s Jan. 20, 2017, inauguration and April 30 this year, almost entirely against for-profit colleges. More than 3,600 were lodged against DeVry University, while the University of Phoenix drew 1,100.
Separately, the Federal Trade Commission is investigating the University of Phoenix chain for possible deceptive or unfair business practices, a probe that began under the Obama administration.
And the Department of Veterans Affairs is in an extraordinary dispute with Ashford over the school’s eligibility to receive federal GI Bill funding, which many military veterans use to pay tuition. The outcome could have major implications for Ashford if it’s cut off from that funding.
But DeVos’ about-face from Obama administration regulation could amount to a lifeline for many for-profit schools already wrestling with image problems, sliding enrollments and growing competition, even in online education.
Schools like the nonprofit Western Governors University, for example, have seen enrollment soar as they offer online programs with tuition as low as $6,500 a year. Meanwhile, at DeVry, which charges more than twice as much, enrollment has fallen by nearly 20 percent in the last year, according to its federal Securities and Exchange Commission filings.
Among most four-year, for-profit colleges, enrollment fell this spring by nearly 7 percent from the year before, to about 925,500 , according to the National Student Clearinghouse Research Center. It continued a downward slide that began in 2010 as the U.S. economy began to improve, steering adult students back to the workplace.
Most for-profit colleges opposed the Obama administration’s industry crackdown but have eased up on lobbying since Trump brought his business-friendly approach to the White House. Steve Gunderson, president and CEO of Career Education Colleges and Universities, the industry’s largest trade group, said for-profits have generally received a warm reception from Trump officials.
“That’s been a very different attitude toward us,” he said. “During the Obama administration, they declared war on our sector. We were fighting for survival.”
The Education Department proposed earlier this month to revoke a 2014 regulation that sought to cut federal funding to for-profit college programs that left graduates with high ratios of debt compared to their incomes. Late last month, the department outlined a plan to weaken another Obama-era rule that would have made it easier for students defrauded by schools to get their loans erased.
Both rules were created after thousands of students brought complaints of fraud against the now-defunct Corinthian Colleges and ITT Technical Institute chains. The schools had been accused of lying about their job placement rates, using high-pressure recruiting tactics and other unethical behavior.
Although both chains collapsed under pressure from the Obama administration, the complaints haven’t stopped under Trump. Roughly half the 23,970 federal fraud complaints made since Trump’s inauguration were against Corinthian and ITT.
DeVos’ department said its approach will better shield students from misconduct while protecting for-profit colleges from false accusations and from being targeted because of their tax status. Gunderson’s group applauded the changes, but student advocacy organizations and a coalition of attorneys general from 16 states and the District of Columbia criticized DeVos for prioritizing schools over students.
“For-profit colleges are the big winners,” said Debbie Cochrane, vice president of The Institute for College Access and Success. “The department is much more receptive to their message.”
With allies instead of adversaries in the executive branch, lobbying by for-profit schools is expected to dip this year. The total — modest when compared to other industries — has averaged about $5.6 million since 2015, according to the political-money website Open Secrets.
Apollo Education Group, the parent company of the University of Phoenix, shows no signs of backing off, however. Apollo Education led all organizations in lobbying spending, with $1.2 million in 2017, and is on track to match that amount in 2018. Apollo Education also donated $25,000 to Trump’s inaugural committee, according to Federal Election Commission records.
Meanwhile, complaints against the schools continue.
In California, Attorney General Xavier Becerra’s lawsuit alleges that Ashford “employed an army of sales representatives who worked in boiler-room conditions” to pursue prospective students and hit enrollment targets. The lawsuit also stresses how important federal financial aid is to Ashford’s bottom line: From 2009 to 2016, government-backed loans accounted for 80.9 to 86.8 percent of the school’s revenue.
Admissions counselors also misinformed candidates about their ability to obtain financial aid, according to the lawsuit. In one repeated tactic, the lawsuit said, counselors told potential students they could use their financial aid money for noneducational expenses, “even though federal law prohibits this conduct.”
Bridgepoint Education, Ashford’s owner, declined to comment on the case. But attorneys for the company said in a January filing that Becerra’s case is based almost entirely on “unattributed quotes regarding undated or stale misconduct.” There also is no allegation of current wrongdoing by Ashford employees, they said.
The school’s legal battle with the VA could jeopardize its funding from the department — a sum that topped $30 million last year.
To be eligible for VA funding, schools have to get their states to vouch for the quality of their programs. Although Ashford has that approval in Arizona and Iowa, the VA ordered it last year to apply in California, where its headquarters are located, because the chain had moved most of its programs online. Officials in California say they received an application from Ashford early this year but determined it was incomplete.
A VA spokesman says Ashford is still out of compliance, but the chain is disputing that in federal court. According to Ashford’s lawyers, the VA never formally adopted the rule it’s trying to enforce. The case has yet to be decided.
The FTC has been investigating the University of Phoenix since at least 2015 for possible deceptive or unfair business practices. The commission’s probes are nonpublic and can last years. Apollo Education said in an SEC filing in January 2016 that investigators had asked for information on a “broad spectrum” of matters, including marketing, enrollment, financial aid, tuition and military recruitment.
Apollo Education and the University of Phoenix did not respond to requests for comment. FTC spokesman Peter Kaplan said the commission had no comment on the investigation.
The University of Phoenix also has come under repeated scrutiny for its handling of U.S. military veterans.
Over the past decade, the University of Phoenix has received nearly $830 million in GI Bill funding, more than any other school, according to data from the VA. It has also been the subject of 574 student complaints to the department, more than twice as many as the next school, DeVry. That figure includes only complaints that have been resolved.
The University of Phoenix’s troubles came to a head in 2015 when the Defense Department briefly barred Apollo from enrolling new veteran students after finding that the company had sponsored events on military bases without proper approval. The company quickly told the department it had taken “corrective action,” and the ban was lifted.
But a group that represents veterans said the problems persist.
“We continue to receive complaints from veterans that University of Phoenix recruiters lied to them about key elements of the college, including the true cost, the number of credits needed to graduate, whether the credits would be recognized by other colleges, and their job prospects,” said Carrie Wofford, president of Veterans Education Success.
Adtalem Global Education late last year announced a deal to unload DeVry University by transferring ownership of the struggling school at no cost to a small for-profit education company in California. The move came a year after DeVry agreed to a $100 million settlement to resolve an FTC lawsuit alleging the school misled students through deceptive ads.
The settlement opened the door for former DeVry students to sue the school. In Texas, nearly 100 DeVry graduates are party to two lawsuits filed in federal court this year that alleged they did not find jobs in their fields of study within six months of graduating as the chain had advertised.
The lawsuit also declared as false DeVry’s representations that its graduates would earn more money than graduates with bachelor’s degree from other schools.
Adtalem and DeVry did not respond to requests for comment. Attorneys for DeVry countered the lawsuits by saying the “threadbare recitals” of the former students fail to explain how their perceived damages were caused by any of the school’s alleged representations.
