College Fraud Claims Up 29 Percent Since August 2017

June 7, 2018 update: In response to a FOIA request and litigation by The Century Foundation, the Department of Education is providing TCF with documents related to the department’s “partial relief” approach to borrower defense complaints (currently suspended). TCF is making the documents publicly available here. 

The Century Foundation (TCF) has obtained updated data, from early March, about “borrower defense” claims—applications for loan relief from students who maintain that they have been defrauded or misled by federally approved colleges and universities. The data were provided by the U.S. Department of Education in response to a FOIA request.

Compared to the data we analyzed in August 2017, the new data show an increase of 29 percent in these fraud claims, from 98,868 to at least 127,817 (a precise total cannot be determined from the format of the data provided by the department). As with the prior data, more than 98 percent of the complaints are regarding for-profit colleges, many which have been under law enforcement investigations or have since shut down.

The largest increase for any single school was for the online campus of DeVry University, which saw its borrower defense claims increase from 1,195 in August to 7,393 in the March data. The owner of DeVry, Adtalem Global Education, has proposed to sell the large online school to an investment firm that owns a small for-profit college in California. In a letter to regulators, consumer groups have raised questions about the sale, citing the borrower defense data.

Nearly all institutions categorized by the department as public or nonprofit have only a few, if any, fraud claims from former students. There are exceptions, however. The three nonprofit schools with the largest number of fraud claims are colleges that converted from for-profit several years ago but, evidence indicates, never actual shifted control from the owners to disinterested trustees.

Everglades College and its larger partner school Keiser University topped the nonprofits list with 92 claims. Everglades-Keiser was featured in the 2015 Century Foundation report, “The Covert For-Profit,” and the chancellor of the university chairs a federal advisory committee that held a hearing on the issue of bogus nonprofit conversions only last week. Wright Career College, which has closed, was second. Third was Remington Colleges, which, like Everglades-Keiser, was featured in the 2015 TCF report.

In filing borrower defense complaints, borrowers must declare, under penalty of perjury, that their school misled them or engaged in other misconduct—such as using false job placement rates, lies about credit transfer, or unrealized promises about the nature of the instructional program—that had a financial impact on the student. The department has not released details about these complaints and has ceased investigating unlawful practices described therein. But analyses of borrower defense complaints filed by over 2,000 students who attended ITT Tech and nearly 200 students who attended Wright Career College, provided by attorneys for those respective student groups, show consistent misrepresentations by for-profit and covert for-profit colleges about costs and debt, educational quality, and employment outcomes.

Despite clear evidence that some for-profit colleges have engaged in hard-sell recruiting tactics and made deceptive claims, Secretary of Education Betsy DeVos has been dismissive of the borrowers’ struggles, and her agency has ramped down its enforcement efforts even as it cut back on plans to assist defrauded borrowers. On Friday, a judge ordered the Department of Education to halt its implementation of a revised approach to paying students claims that involved cancelling only a portion of the former students’ loans.

The data in the table below represents total claims by company ownership. The borrower defense claims can relate to enrollment in any prior year and those details are not available, so for schools that recently changed ownership, the schools have been allocated to the prior owner. (For a list of college brand names associated with the larger corporate owners, see our November report.)

Tags: for profit college, borrower defense, covert for-profit