DEVRY UNIVERSITY STUDENTS TO BENEFIT FROM $100 MILLION FTC SETTLEMENT

New Federal Educational Requirements Designed to Eliminate More Fraud
Charlene Crowell says that under the settlement terms, DeVry will pay $49.4 million in cash to qualifying students who were harmed by the deceptive ads, as well as provide $50.6 million in debt relief.
Charlene Crowell says that under the settlement terms, DeVry will pay $49.4 million in cash to qualifying students who were harmed by the deceptive ads, as well as provide $50.6 million in debt relief.

DEVRY UNIVERSITY STUDENTS TO BENEFIT FROM $100 MILLION FTC SETTLEMENT New Federal Educational Requirements Designed to Eliminate More Fraud

By Charlene Crowell (NNPA Newswire Columnist)

For the third time in two years, a large for-profit college has

faced charges of defrauding its students. This time the charges

stem from promises of jobs and incomes that never materialized.

On December 15, the suburban Chicago-based DeVry

University agreed to a $100 million settlement to end a lawsuit

filed by the Federal Trade Commission (FTC). Filed in January,

the FTC charged that from 2008 to 2015 the for-profit institution

engaged in deceptive marketing and advertising.

According to FTC, prospective DeVry students were told in

recruitment and in advertising that 90 percent of its graduates

secured employment in their chosen fields within six months

of matriculation. A second institutional promise was that one

year following graduation they would earn incomes that were 15

percent higher than those earned by graduates from other colleges

and universities.

Under the settlement terms, DeVry will pay $49.4 million

in cash to qualifying students who were harmed by the deceptive

ads, as well as provide $50.6 million in debt relief. The debt being

forgiven includes the full balance owed—$30.35 million—on all

unpaid private student loans that DeVry issued to undergraduates

between September 2008 and September 2015, and $20.25

million in student debts for items such as tuition, books and lab

fees.

“When people are making important decisions about their

education and their future, they should not be misled by deceptive

employment and earnings claims,” said FTC Chairwoman Edith

Ramirez. “The FTC has secured compensation for the many

students who were harmed, and I am pleased that DeVry is

changing its practices.”

Once approved by federal courts, DeVry will be required to

immediately notify the students who will receive debt relief as

well as credit bureaus and collection agencies of the impending

debt forgiveness. DeVry will also release transcripts and diplomas

previously withheld from students due to outstanding debt, and

will cooperate with future requests for diplomas and transcripts

and related enrollment or graduation information.

This most recent settlement is yet another reminder of how

some of the largest for-profit colleges have failed their students

and caused them to become indebted without the educational

credentials promised.

California’s Bureau for Private Postsecondary Education

issued an emergency decision on August 26, directing ITT Tech

and its subsidiaries to cease enrollment of any new students at 15

locations across the state. At the time, the for-profit school was also

under investigation by other state and federal offices.

Once the Accrediting Council for Independent Colleges

and Schools (ACICS) determined that ITT Tech was “not in

compliance”, and was “unlikely to become in compliance” with

accreditation standards, it lost access to federal student aid before

ceasing operations of its national online programs as well as its 130

campuses located in 38 states. As many as 45,000 students had

been enrolled at ITT Tech.

Just days before Christmas, John King, U.S. Secretary of

Education, upheld a September decision that terminated the

Department’s recognition of ACICS as the accrediting agency

for nearly 240 institutions – most of which were for-profits.

Education determined that ACICS failed to meet several regulator

criteria and was therefore out of compliance.

Even earlier in 2014, CFPB sued Corinthian Colleges, Inc.

for luring tens of thousands of students to take out private label

loans, known as “Genesis loans,” to cover expensive tuition costs by

advertising bogus job prospects and career services.

More than 60 percent of Corinthian school students

defaulted on these high-cost loans within three years. Corinthian

also used illegal debt collection tactics to strong-arm students into

paying back those loans while still in school. Even for borrowers

who did not default, interest rates were more than twice as

expensive as interest rates on federal loans.

Corinthian Colleges was forced in 2015 to close its 107

campuses while its parent organization, ECMC Group agreed

to multiple stipulations that included:

• $480 million in debt relief for Genesis loan borrowers;

• An end to improper debt collection practices; and

• The removal of negative information from student

borrowers’ credit reports.

• Unfortunately, these three colleges and universities often

perpetrated their frauds against veterans and people of

color.

“There must be more vigorous efforts to prevent

schools that use deceptive practices from accessing federal

student aid in the first place,” remarked Whitney Barkley-

Denney, a policy counsel with the Center for Responsible

Lending. “We’ve seen the fallout from these abusive recruitment

practices over and over again.”

Fortunately, two recent federal developments may curb

these kinds of educational quagmires.

On December 15, President Obama signed into law the

recently-passed Career Ready Student Veterans Act. It will

prevent the Veterans Administration from approving programs

for GI bill benefits if graduates are ineligible for licensure in

related occupations.

Similarly, a new U.S. Department of Education rule

addresses post-secondary distance education learning,

requiring that colleges be authorized to operate in states

where their students live. To participate in federal student aid

programs, these post-secondary distance education programs

must affirmatively certify that enrolled student borrowers are

able to obtain state licensure in their field of study.

“While these rules are a step in the right direction,” noted

Barkley-Denney, “they also underscore the need for states to

increase their own role in higher education oversight…States

can prohibit schools from enrolling students into programs

for which the school is not properly accredited and therefore

students are not eligible for licensure in their field.”

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