First, the Government Accountability Office (GAO), released a highly critical report on the for-profit higher education sector. The GAO report summarized the results of its “secret shopper” undercover investigations conducted at 15 for-profit colleges, including The University of Phoenix, Everest College, and Kaplan College. GAO investigators, posing as prospective students, found that four of the 15 for-profit colleges it tested encouraged fraudulent practices. For example, admissions representatives at several different schools told applicants to fraudulently remove $250,000 in savings from their FAFSA form in order to qualify for financial aid. Other applicants were encouraged to falsely add dependents to the FAFSA form to increase applicants’ grant awards.

GAO investigators also found that all 15 colleges made deceptive or questionable statements during the application process. Admissions staff commonly told the GAO’s applicants they would attend classes for 12 months a year, but stated the annual cost of attendance for 9 months of classes. Admissions staff used other deceptive practices, such as pressuring applicants to sign a contract for enrollment before allowing them to speak to a financial advisor about program cost and financing options. Other college representatives exaggerated undercover applicants’ potential salary after graduation. In one instance an applicant was told barbers can make between $150,000 and $250,000 per year. The U.S. Bureau of Labor Statistics reports that 90 percent of barbers make less than $43,000 a year.

If the GAO report – and resulting media reports – were not enough, the for-profit colleges were dragged before the Senate Health, Education, Labor and Pensions Committee on August 5th for a stern tongue lashing. The hearing came complete with a video – now on YouTube – showing some of the GAO’s undercover investigators' visits with admissions representatives.

Senate Democrats, led by Sen. Tom Harkin (D-Iowa), made it clear that their examination of the for-profit higher education sector has just begun. Several committee members voiced strong support for legislation to further regulate the sector.

In the past, leaders of some for-profit colleges have dismissed pressure tactics as the actions of a few rouge employees. However, both Sen. Harkin and the lead GAO investigator suggested that aggressive recruiting tactics are part of a conscious and systematic corporate strategy to grow student enrollment.

Here in Wisconsin, Everest College – one of the colleges visited by the GAO’s investigators – recently won approval to open a 45,000 square foot facility just blocks from Milwaukee Area Technical College’s downtown campus. The parent company of Everest College, Corinthian, Inc., has been sued by students who claim they were misled about whether their credits would transfer to other schools, the accreditation status of their school, and students’ ability to find work after graduating.

In recent years, the for-profit higher education sector has expanded significantly. As of 2008-09, there were approximately 2,000 for-profit colleges participating in federal student financial aid programs. Collectively, these colleges – which include numerous publicly traded multinational corporations – received $24 billion in federal student aid funds.

This issue is not going away any time soon, much to the dismay of the for-profit colleges' leaders and corporate shareholders. Stay tuned for more.