A Government Accountability Office (GAO) report has announced that a study of 15 for-profit colleges shows that these colleges misled students to encourage enrollment, and that students were encouraged to commit fraud when applying for financial aid. The magnitude of the cost of such fraud on taxpayers is not known, but the Department of Education lends $20 billion annually in student loans.
GAO investigators posed as applicants and met with various officials at 15 unidentified for-profit colleges and universities. All 15 colleges misled students about the cost, duration, and quality of their programs. Among the more humorous exaggerations: one investigator was told that barbers average $250,000 per year.
Aside from misleading students about the programs, 4 out of the 15 colleges actually encouraged students to lie on loan applications to the federal government. Some employees encouraged students to lie about the number of people in their household. Others told applicants with large savings accounts to hide the money so they would get a more favorable loan from the DOE.
Representatives from some universities have been quick to point out that these could have been isolated incidents with just a few employees. However, no matter if this was not institutionally encouraged, educational institutions obviously need a better compliance training program in place. Education fraud can be extremely costly to the U.S. taxpayer, as evidenced by last year’s False Claims Act lawsuit against Apollo Group, the U.S.’s largest education company, which settled for $67.5 million dollars. This report indicates that more such lawsuits are a distinct possibility.