The Federal Trade Commission (FTC) headquarters stand in Washington, D.C., U.S., on Tuesday, May 14, … [+]
The University of Phoenix (UoPx) used to be one the largest for-profit colleges in the county. Like most other for-profit schools, its enrollment has cratered. For a time, though, it was certainly the most visible for-profit – between 2013 and 2015 alone, the University and its corporate owner spent $1.7 billion on advertising and marketing.
Some of those ads have now cost the school and its new owners an additional $190,966,806, as well as a heap of humiliation. That $191 million is the amount UoPx has agreed to pay and surrender in a recent settlement with the Federal Trade Commission. The agreement includes a $50 million payment to the FTC and the cancelation of $141 million in student debt.
From a business view, the settlement can’t be anything but bad news for the private investors who bought Apollo, which owns UoPx, for $1.1 billion in 2016, paying, according to reports, about 30% more than the stock value. Even then, the school was described as “troubled,” with the New York Times reporting it was, “subject to a series of state and federal investigations into allegations of shady recruiting, deceptive advertising and questionable financial aid practices.”
True enough, some of those shady recruiting and deceptive practices now have that new, $191 million price tag.
The meat of the FTC’s suit against the school is that its ads touted relationships with high profile, brand-name businesses – implying pathways to jobs and coordination of curriculum – that did not exist. Though the school did not admit or deny the allegations, the FTC’s case is pretty clear and compelling. The FTC cites one school executive who described its own ads about jobs as “smoke and mirrors.”
That’s bad. But there are two parts to this story that may be even worse.
One is that what the FTC exposed at UoPx could be found at just about any for-profit college if someone really wanted to look. In other words, the University of Phoenix is not even close to the only for-profit to have been hauled into court over deceptive ads and promises. A great many for-profit colleges, and even some supposedly non-profit schools, regularly deceive students by claiming partnerships and pathways that don’t exist, or exist only as a logo on a website.
So long as for-profit education providers have a financial incentive to push and promise students through their doors, they will. And they do, until they are caught. In the UoPx case, the school’s leaders knew the ads were flimsy, but they were working. Students were signing up and profits were coming in as a result, according to the FTC.
The school and its owners, the FTC said, “have been unjustly enriched” through those ads and “are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest” if the court did not act. The FTC’s point was that for-profit schools such as UoPx will continue to push as hard as they can until someone stops them. There is simply no reason for them not to.
And that’s the second point – this case was brought and settled by the FTC, over ads. Surely, the Department of Education (ED) must care that students were being, according to the FTC, lied to and defrauded. Or that the quality of education at for-profits is grossly substandard. Or that it takes, on average, nine years to get a four-year degree from a for-profit school, if you get one at all. Most students don’t.
But ED does not care.
And that’s not lost on the FTC.
Largely unreported was the statement issued by Rebecca Kelly Slaughter, a Commissioner at the FTC, about the UoPx settlement. In it she said, “The FTC cannot be the sole bulwark to protect consumers whom bad actors increasingly victimize for profit only to be abandoned by the very government agency best able to help.” Slaughter said there “appears to be a complete abdication by the Department of Education, which has oversight of for-profit institutions and controls their access to federal financial aid.”
As Slaughter also pointed out, ED has not really been absent. If anything, they’ve actively, repeatedly and by design made it easier for for-profit schools to evade scrutiny and keep the loans and taxpayer funds flowing.
For example, the $140 million in student debt that the FTC managed to erase in the settlement was debt owed to the school, not federal student loans. Those need to be discharged by ED – Secretary DeVos’s ED. And right on cue, within hours of the announcement of the FTC and UoPx settlement, DeVos announced policies making it more difficult if not impossible for defrauded students to get their debt written down.
Meanwhile, for-profit schools such as UoPx continue to collect billions of dollars in tax-payer grants and billions more in tax-payer backed loans, spending those dollars on aggressive advertising to new students – not teaching, not investing in research but recruiting more students who can pay more tuition and take out more loans. It’s a cynical, expensive and dead-end revolving door that, thankfully, at least one government agency is interested in stopping.
