For-profit College DeVry makes $ 30 million in student loans
DeVry Education Group DV,
The operator of a chain of for-profit colleges, will be waived $ 30.35 million in student loans for misleading prospective students about their ability to get jobs after graduation.
The Loan Waiver, which covers all unpaid student loans issued through DeVry between September 1, 2008 and September 30, 2015, is part of a larger settlement with the Federal Trade Commission totaling $ 100 million. The deal does not include federal student loans made to students who attended school during the process.
The deal, which the FTC says covers tens of thousands of students, includes a $ 49.4 million payment to the FTC that the agency will distribute to students harmed by the misleading marketing. DeVry will also waive the school $ 20.25 million owed to students for items such as tuition, books, and lab fees. The company agreed to provide students with any transcripts or diplomas that were withheld on unpaid bills.
Loans will be granted automatically and DeVry will notify eligible students and their credit bureaus. The FTC will begin sending refunds from the $ 49.4 million pot in 2017, identifying students who qualify from DeVry’s records and contacting them about the refund.
The FTC sued DeVry last year, claiming the company touted a 90% job placement rate with no evidence. The agency discovered evidence that DeVry was considering a server at the Cheesecake Factory CAKE.
and a sales rep at Macy’s M,
who have a degree in technical management to work in their field of study.
As part of the agreement, DeVry agreed that whenever the company makes a claim for a class of student placement rates, it must keep records related to that claim, including files relating to the students or graduates.
“DeVry often presents themselves as a better player in the industry, but this comparison shows they are not immune to pressure from the sector to get students on the door and generate income,” said Elizabeth Baylor, director of post-secondary education at the center for American Progress, a left-wing think tank.
DeVry neither admitted nor denied any misconduct in the context of the settlement. The company is “pleased that this matter is resolved,” wrote Ernie Gibbles, a DeVry spokesman, in a statement it emailed. “The academic quality of an education at DeVry University was never in question.”
The deal comes as the Obama administration seeks to cement its legacy as a tough enforcer in higher education, particularly for for-profit colleges. Earlier this year, the Department of Education banned ITT technical institutes from accessing government funding to enroll new students amid research into the school’s dealings with students and investors. Due to a liquidity crisis, the company filed for bankruptcy weeks later. The Corinthian Colleges also collapsed last year under financial pressure resulting from additional requirements by the ministry for the school to receive federal funding.
DeVry avoided a similar fate after agreeing to reserve $ 68 million in October to settle claims of the department that the school used misleading advertising. The agency asked the company to put the money aside in order to continue to have access to federal grants. DeVry’s access to student aid will also not be affected by the FTC agreement, the company said in a statement.
The deal is the second roughly $ 100 million settlement reached this year by a federal agency with a for-profit college. But the striking number is unlikely to hurt DeVry’s legal capacity, as DeVry raised more than $ 1 billion in grants during the 2014-2015 school year, according to Baylor. Additionally, the actual cost of the settlement to DeVry is much lower than the $ 100 million touted by the FTC. In securities registrationsthe company said it would expect a pre-tax charge of between $ 52 million and $ 55 million as a result of the deal.
“The settlement will cost DeVry much less than $ 100 million, as the company has long known that many students can never repay private student loans forced on them,” Rohit Chopra, former student loan ombudsman for the Consumer Financial Protection Bureau, said in one E-mail. “DeVry’s stock has risen since election day, and their recent legal settlements are not going to stop the flow of federal funds into the company coffers.”
At 3:00 p.m. on Thursday, DeVry’s stock was up 2.69% from Wednesday’s closing price. DeVry and other companies in the higher education sector saw their stocks surge after the election, suggesting a Trump administration will be kinder to for-profit colleges and other industry players.
The deal doesn’t cover federal loans from students who attended DeVry during the process. Federal student loan borrowers who believe they have been wronged by their schools can apply to the Department of Education for their loans to be canceled through a process known as Borrower Defense. Often times lawsuits can serve as evidence of misconduct for the purpose of federal student loan issuance, but since the ruling does not identify any specific illegal behavior, borrowers could find it difficult to rely on to apply for loan waiver.
It also appears that a Donald Trump administration will be kinder to for-profit colleges, which could mean that forgiveness borrowers will have a harder time. “There are indications from the new Trump administration that they will be pretty strict about granting student relief,” Baylor said.
The Department of Education did not state whether the FTC agreement would help DeVry students with federal loans in their requests for forgiveness. When the ministry announced its own deal with DeVry, the agency said it plans to continue its own investigation into the institution. Any insights that emerge from this could aid borrowers in their forgiveness efforts.
“We are pleased that today’s settlement offers both past students financial relief and protection for current and future DeVry students,” said Ted Mitchell, secretary of state for education, Ted Mitchell in a statement.