Senators Harkin &Hagan propose restricting abusive marketing practices by for profit colleges

 

 On April 18, 2012 US Senators Tom  Harkin and Kay Hagan introduced a bill to prohibit all colleges  from using money from federal student assistance programs, including Title IV student loans and grants, Veterans benefits and the GI Bill, to pay for marketing, advertising and recruiting (http://www.businessweek.com/ap/2012-04/D9U7I8580.htm).

The bill was precipitated by aggressive and misleading recruiting practices at for profit colleges.  Bloomberg news reported in 2010  the University of Phoenix spent $1.1 billion on marketing and recruiting and ITT schools spent about $400 million.   http://www.bloomberg.com/news/2010-12-31/for-profit-colleges-charging-more-while-doing-less-for-low-income-famili  In an investor presentation, Bridgepoint education stated they spend 29% of revenues on marketing while spending only 25% on instructional costs.  http://phx.corporate ir.net/External.File?item=UGFyZW50SUQ9NDAzMjI0fENoaWxkSUQ9NDExMzkyfFR5cGU9MQ==&t=1

For profit colleges are supported by a billion dollar industry known as lead generation. Lead generators place ads (mostly on line) to lure in unsuspecting prospective students. They then sell these leads to for profit colleges such as Kaplan University, which use vast telemarkteing centers to convert these leads into students.

For profit colleges operate similar to a Ponzi scheme.  The colleges obtain about 90% of their revenues from government sources. They take about 30% of  these  revenues to recruit new students. From these new students they take 30% of revenues to recruit more new students.  On and on it goes.

As senators Harkin and Hagan attempt to convince their Senate colleagues about the need to restrict for profit colleges from using federal aid for marketing and recruitment, they may want to distribute a copy of the Washington Post Company’s motion to dismiss  in the lawsuit : Plumbers Local 200 v  Washington Post, Donald Graham and Hal Jones, filed in US District Court in the District of Columbia on 8/26/2011

As  reported in Dailycensored.com  (http://dailycensored.com/2012/01/14/in-court-filing-washington-post-admits-telemarketing-boiler-room-tactics-at-kaplan-u/) The Washington Post Company, in the motion to dismiss,  admitted the following about  marketing practices at Kaplan University:

“Plaintiff alleges that KHE’s supposedly “secret business model” depended upon the recruitment of “low-income and minority” students who were dependent upon federal loans and grants. But that was not a secret.

Plaintiff further alleges that the business model depended upon a “corporate culture that transformed supposed Admissions Advisors into sales persons, potential students into ‘leads,’ and student enrollment into sales.”  But investors would hardly be surprised or disappointed to learn that a “for-profit” education company would operate like a business.

Plaintiff finds something sordid in the fact that KHE “grew its enrollments and, consequently, its revenues . . . by operating football field sized call centers” that made use of telemarketing techniques and sales goals. But this was neither sordid nor secret. It is standard practice in the for-profit sector and was well known to the market for years.

A 2003 Wall Street Journal article about KHE described a “call center” where 148 “sales representatives,” known as “admissions advisers,” “work the phones, following their training manual’s exhortation to ‘sell the dream.’“[A]dapting telemarketing techniques to higher education,” the advisors spoke to prospective students using a script, which some considered “heavy-handed.”

Typical of the complaint’s overstatement is its very first substantive allegation— that the “fraud” and “deceit” employed in the recruitment of students was manifested in a “recruiting script” that urged admissions employees to uncover a potential recruit’s “pain and fears.”
A review of that document reveals that it is not a “script” at all—and that it contains nothing remotely deceptive. It merely encourages admissions advisors to “ask probing questions to explore student motivation” and to “keep digging until you uncover their pain, fears and dreams.”  It tells advisors:  ‘Do not answer for them. Let them paint their own picture.’  Plaintiff may think this language unbecoming for an educational institution, but it is not fraudulent.”

The complaint alleges that admissions advisors felt “intense pressure to meet enrollment quotas,’” because their compensation and continued employment depended on meeting them.  It was well known, however, that KHE (like other for-profit institutions) had “quarterly sales goals,” and that admissions advisors’ jobs and compensation depended in part on meeting them.

The full motion to dismiss can be found here: (http://legaltimes.typepad.com/files/motion-to-dismiss-8.pdf)

 

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About the author

Dr. Danny Weil is an investigative journalist, author and public interest attorney who practiced public interest law for more than twenty years and has been published in a case of first impression in California. He received the Project Censored "Most Censored" News Stories of 2009-10 award for his article: "Neoliberalism, Charter Schools and the Chicago Model / Obama and Duncan's Education Policy: Like Bush's, Only Worse," published by Counterpunch, August 24, 2009 and again in 2013 for his 2012 article, "HR 347 Would Make Many Forms of Nonviolent Protest Illegal" (http://www.projectcensored.org/top-stories/articles/10-hr-347-would-make-many-forms-of-nonviolent-protest-illegal/). He writes profusely on education and for-profit predatory colleges.