FTC Sues DeVry Education Over Allegedly Deceptive Ads
January 27 2016 - 9:30PM
Dow Jones News
WASHINGTON—Federal regulators took aim at another major
for-profit chain of colleges Wednesday, suing DeVry Education Group
Inc. for allegedly running false television and online
advertisements about the employment success and earnings of its
graduates.
The Federal Trade Commission, one of several agencies
investigating the for-profit education industry, faulted DeVry
advertisements that claim 90% of its graduates who sought jobs
found them in their field of study within six months of graduation.
For example, it accused the school of including
business-administration graduates who found retail jobs like
selling cars or waiting tables as having found work in their
field.
The commission asked a federal judge in California for monetary
remedies—including refunds and restitution—for potentially as many
as 50,000 students who enrolled at the company's various campuses
since 2008, the period under scrutiny.
The FTC's lawsuit also seeks to bar DeVry from using faulty
statistics in its advertisements.
Illinois-based DeVry, one of the nation's largest for-profit
education chains by sales, denied the allegations and said it would
vigorously contest the lawsuit. "DeVry University measures the
employment and income of its graduates on a sound, rational and
transparent basis, and has published these results in a consistent
manner over the years," the company said.
DeVry's shares sank 15% in New York Wednesday.
Student-advocacy groups and individual borrowers are pushing the
federal government—which backs most of the nation's $1.2 trillion
in student debt—to forgive the debt of borrowers who attended
for-profit schools. Thousands of Americans have petitioned the
government to cancel their loans on the grounds they were deceived
by their institutions.
"Educational institutions owe it to prospective students to tell
the truth about whether their courses will help them obtain the
jobs they want in their chosen fields," said FTC Chairwoman Edith
Ramirez.
Ted Mitchell, undersecretary of education, said the Education
Department was conducting a related investigation of DeVry. He
added that the department is still working on rules specifying when
aggrieved borrowers can have their loans forgiven.
The DeVry lawsuit is part of an effort by federal and state
officials to root out what they characterize as overaggressive—and
deceptive—recruiting tactics by for-profit colleges. Officials say
those tactics helped fuel a surge in for-profit school enrollment
in the past two decades—particularly among poor and vulnerable
Americans—helping drive up student debt.
Many of those students now are defaulting on their loans,
largely because they can't find the lucrative careers they were
promised, federal officials say.
Corinthian Colleges Inc. liquidated in bankruptcy last year amid
federal and state probes into similar allegations involving that
company.
In November, Education Management Corp., owner of the Art
Institutes, agreed to pay $95.5 million to settle Justice
Department claims that it unlawfully paid admissions workers solely
on the basis of the number of students they enrolled.
In addition to questioning DeVry's job-placement claims about
its graduates, the FTC also faults a claim that its graduates
earned 15% more than those from other schools.
DeVry says it calculates its graduates' job success using a
method similar to one hod that was recently endorsed by attorneys
general in 39 states. "DeVry University's measures are more
rigorous and further substantiated than most" other schools, the
company said.
The DeVry case also touches on what student advocates have
decried as a lack of data and standards across higher education to
help students decide which school to attend and how much to borrow.
There are no federal rules on how colleges should calculate their
graduates' employment status, said the Education Department's Mr.
Mitchell.
Write to Josh Mitchell at joshua.mitchell@wsj.com and Brent
Kendall at brent.kendall@wsj.com
(END) Dow Jones Newswires
January 27, 2016 21:15 ET (02:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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