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Business and Policy Areas
Business and Policy Areas

GAO Report Finds For-profit Institutions Employing Questionable Marketing Practices and Encouraging Fraudulent Activity

August 11, 2010

The US Senate Committee on Health, Education, Labor, and Pensions held a hearing August 4 to discuss recruiting practices at for-profit higher education institutions.  Gregory Kutz, Managing Director of Forensic Audits and Special Investigations at the GAO shared his testimony at the hearing, explaining how GAO performed undercover tests at 15 for-profit institutions.  While many of the institutions examined provided accurate and helpful information to the undercover applicants, those positive statements were greatly outnumbered by the misleading statements. 

Four of the 15 institutions encouraged applicants to provide false information on their financial aid forms. Most notably, one school told an undercover applicant not to report a $250,000 inheritance, citing that the government doesn't need to know how much cash an applicant has in their accounts.  A financial aid representative at another school instructed an applicant to add dependents to allow the applicant to qualify for Pell Grants. 

All 15 institutions examined provided undercover applicants with deceptive or questionable statements.  Four schools misidentified or failed to identify their institution's accrediting organizations.  "Representatives from 13 colleges gave our applicants deceptive or otherwise questionable information about graduation rates, guaranteed applicants jobs upon graduation, or exaggerated likely earnings," said Kutz.  Students applying to 11 schools were denied access to their financial aid eligibility, or provided questionable financial advice, according to Kutz. 

Kutz's testimony also included information comparing the cost of programs at for-profit institutions with similar programs at local non-profit public and independent institutions within 250 miles of the for-profit institution.  The certificate programs and associate's degree programs at the public and independent non-profit institutions generally cost less than those at the for-profit schools.  Only bachelor's degrees, in some cases, at non-profit independent institutions cost more than the same program at a for-profit institution. 

The Health, Education, Labor, and Pensions committee site contains video of the hearing, including clips from the undercover investigation.


Bryan Dickson
Senior Policy Analyst