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DeVry University students to benefit from $100 million FTC settlement

By Charlene Crowell

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.

The men and women who earned GI benefits, as well as Black and Latino consumers – many of whom are first-generation college students, do not deserve to be exploited in the pursuit of higher education.

“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.”

Charlene Crowell is deputy communications director with the Center for Responsible Lending. She can be reached at [email protected].

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