The court complaint outlines the Federal Trade Commission’s case. In summary, the for-profit university misled students about their job success rate after completing a DeVry degree program. Students could not obtain jobs in their degree field. For example, a student majors in IT, but ends up as a cashier at a retail store. The institution counted students in this manner. As a result, the job placement rate numbers did not add up. The complaints from students and outside observers did not help either.
For its part, DeVry issued a statement denying any wrongdoing.
“DeVry Education Group and DeVry University have agreed to settle litigation brought by the Federal Trade Commission regarding DeVry University’s use of employment statistics in former advertising. We have agreed to pay $49.4 million to be distributed at the sole discretion of the FTC; forgive $30.4 million of institutional loans issued before Sept. 30, 2015; and forgive outstanding DeVry University accounts receivable balances by $20.2 million for former students.
DeVry Group expects to record a related pre-tax settlement charge in the range of $52 million to $55 million in the second quarter of fiscal year 2017 arising from the monetary terms of the settlement. In addition, DeVry Group agreed that its institutions marketing to U.S. consumers will maintain specific substantiation to support any future advertising regarding graduate outcomes and educational benefits, and will implement training and other agreed-upon compliance measures. We anticipate the settlement will be entered as an agreed order by the court.
[The company] chose to settle this action after filing an answer denying all allegations of wrongdoing. Student services and access to federal student loans are not impacted by the settlement, and at no time has the academic quality of a DeVry University education been questioned. DeVry Group is pleased this matter is reaching resolution; particularly as its institutions implement recently announced Student Commitments and as we continue our focus on investments that directly support our students’ success.”
DeVry: Not a Cut Above the Rest
$100 million sounds like a lot of money. But consider this: The company receives $1 billion in federal financial aid annually. Furthermore, as stated in the statement, the final settlement charge will amount to about $50 million. Some observers caught this fact.
“The settlement will cost DeVry much less than $100 million; since the corporation has long known that many students would never be able to repay the private student loans that were pushed on them,” Rohit Chopra, the former Consumer Financial Protection Bureau employee, said. “DeVry’s stock has surged since Election Day; and their recent legal settlements won’t stop the flow of federal funds into company coffers.”
The company does not stand alone. Devry is not the only for-profit school to mislead students or enact poor practices. Corinthian Colleges and ITT are two other for-profit schools that made the news for all the wrong reasons. Nevertheless, DeVry portrayed itself as better than the other industry players.
“DeVry often presents itself as a better actor in the sector, but what this settlement shows is that they are not immune to the pressures of the sector to bring students in the door and to generate revenue,” said Elizabeth Baylor, a high-ranking staff member at the Center for American Progress.
If the latest news is any indication, it shows the lure of profit — without significant repercussions — can lead some companies to engage in improper behavior.
Source: Market Watch