Get Out of Debt Guy

FTC Makes Case Students Deceived in College Enrollment

Posted January 28

I've been rattling on about a trend I'm seeing in college enrollment deception and the ability for people to file a claim to discharge, in full, their federal student loans. See this article.

I've advised haste to get claims in and what to do before the door closes on this current process. See this article.

The basic issue is students were induced by misleading facts and claims made by college recruiters in both the for-profit, public, and non-profit world. This led to students, who had practically zero chance of ever receiving the benefit of the education to go deeply in debt so the school could profit.

When it comes to education, these ideas of deception are rebuffed by many. But it is interesting that an automobile manufacturer like VW can get caught making false claims about emission tests and everyone is outraged and government investigations ensue. But when it is shown over and over that some schools only have 11 percent graduation rates and 85 percent of students can't pay their student loans because they don't go on to make enough money as the school claimed, the blame is placed on the student by many. My argument is the school should bear responsibility to make a substantial effort to only admit students who have a likelihood of achieving the promised results before pushing them into a lifetime of debt.

Here's another example. If you walked into a car dealership and bought a car because the salesperson and window sticker said you'd get 50 MPG and then you found out 90 percent of purchasers only got 10 MPG, you'd be pretty upset. In fact it could be argued you had been intentionally deceived in order to encourage you to buy the car since the car company knew what the actual performance was.

Yesterday the Federal Trade Commission (FTC) filed suit against DeVry University and alleged the school deceived students into enrolling in programs and loans. The case did not go as deep into the deception as this whistleblower case did against ITT, but in my mind it's a case to watch.

DeVry University isn't the only school under investigation. Even the University of Phoenix is under investigation by the Federal Trade Commission and they are pushing back in an attempt to not release data.

In the case filed by the FTC the claim is specifically made DeVry engaged "unfair or
deceptive acts or practices in or affecting commerce" and misrepresentations or deceptive omissions of material fact which constitute deceptive acts or practices prohibited by Section 5(a) of the FTC Act.

The complaint, which you can read here, goes on to say: "Consumers have suffered and will continue to suffer substantial injury as a result of Defendants' violations of the FTC Act. In addition, Defendants have been unjustly enriched as a result of their unlawful acts or practices."

The FTC said, "In its complaint against DeVry, the FTC alleges that the defendants' claim that 90 percent of DeVry graduates actively seeking employment landed jobs in their field within six months of graduation was deceptive. The complaint charges that another key claim made by DeVry, that its graduates had 15 percent higher incomes one year after graduation on average than the graduates of all other colleges or universities, also was deceptive."

It would be unreasonable to expect everyone who goes to college is going to graduate. Life happens and things come up that prevent people from making it to the finish line and obtaining the degree. But as much of a critic as someone might be of this idea some schools enrolled students to get federal and private student loan disbursements, using lies, mistruths, and deception; it is a fact. And if it is a fact, then those holding federal student loans can file a claim to have their loans discharged and the money clawed back from the school to repay the government for the fraudulent behavior.

The Department of Education has their eye on such activities as well. "As required by the law and expected by the public, institutions need to be accurate in their marketing and recruiting to prospective students," said Under Secretary of Education Ted Mitchell.

This article by Steve Rhode first appeared on Get Out of Debt Guy.

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.