For-profit colleges ripping off the U.S. Government

A New York Times story.

The Government Accountability Office (GAO) tested the financial aid process at 15 “for profit” colleges, and found that at several, the aid officers actively encouraged the candidate to lie on their financial aid forms. This was in order to get a better financial aid package from the government, and in some cases, to qualify for a package at all.

The report gave specific instances in which some colleges encouraged fraud. At one college in Texas, a recruiter encouraged the undercover investigator not to report $250,000 in savings, saying it was “not the government’s business.” At a Pennsylvania college, the financial representative told an undercover applicant who had reported a $250,000 inheritance that he should have answered “zero” when asked about money he had in savings — and then told him she would “correct” his form by reducing the reported assets to zero, a change she later confirmed by e-mail and voicemail.

The industry received $4 billion in federal grants and $20 billion in federal loans last year, according to the article.

I guess it’s finally dawned on the con artists out there that the real nonprofit colleges have been run like businesses of sorts for the past 30 years—selling false promises and grabbing federal dough. Many times, state dough, too. So they’ve decided to get in on the act.

It’s not clear to me why burgeoning, multi-billion dollar endowments don’t cause the same alarm as profits at for-profit colleges, but Washington hasn’t gotten to that point yet. I think they are both a cause for concern when you look at the student debt crisis.