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For-Profit Educational Fraud Addressed by Congress

On September 28, Senator Majority Whip Dick Durbin (D-IL) addressed Congress in an attempt to highlight the fraud-ridden for-profit education industry.  Durbin states that for-profit colleges receive the largest share of federal funding, yet are often under-performing. The University of Phoenix, DeVry University, and Kaplan University rank as the top three college recipients of federal funding — and all three have faced False Claims Act or class action lawsuits alleging questionable loan practices, false and misleading statements and advertising, and falsified documents to obtain accreditation. Kaplan University currently faces a False Claims Act suit already slated for trial.

Durbin stated:

“[For-profit schools] represent about 9 percent of all the students taking post-secondary education. They represent 25 percent of all the Federal aid to education and 43 percent of all the student loan defaults…We are shoveling money in the name of educating students at institutions which are heaping them up with debt and not providing them with training or preparation for a good-paying job.”

Most recently, the University of Phoenix settled a False Claims Act case for $78.5 million. The settlement ranks among one of the largest False Claims Act settlements in which the government declined to intervene. According to the whistleblower, the university fraudulently rewarded recruitment counselors largely on enrollment numbers, a practice that is expressly forbidden by the Higher Education Act.  The full transcript of Durbin’s remarks is available here.

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