This article originally appeared on ProPublica.
After federal regulators accused the University of Phoenix of systematic enrollment abuses in 2004, the school’s parent company paid out nearly $10 million to resolve the allegations.
Phoenix allegedly had broken the law by tying recruiters’ pay to enrollment numbers, US Department of Education investigators found, creating pressure to sign up unqualified students.
In the years since, Phoenix cemented its stature as the nation’s largest for-profit school and the single biggest recipient of federal student aid. But some of the school’s recruiters have continued to use high-pressure, deceptive tactics, according to a dozen current and former students and two former recruiters who spoke to ProPublica and Marketplace as part of a joint investigation.
The students said Phoenix counselors misled them about whether credits would transfer to other schools, pretended to befriend them and lied about financial aid. The recruiters said they were told to rope students in with phony claims that classes were filling fast, or by suggesting that federal grants would cover costs, even if that was uncertain.
Last week, Phoenix’s parent company, the Apollo Group, announced that it had put aside $80 million to settle a whistleblower lawsuit that makes allegations similar to those in the 2004 investigation.
In making the announcement, Phoenix said its “compensation programs and practices were in compliance with the applicable legal requirements.” And the university’s president, Bill Pepicello, said in an earlier interview that if any recruiters had acted dishonestly, it was not with the company’s approval.
Phoenix is not the only for-profit university to get into trouble in recent years. Over the past decade, federal and state agencies have found that other schools improperly paid recruiters based on how many people they signed up, falsified enrollment tests and fabricated financial aid documents.
But with the bad economy, the industry has boomed. Enrollments have leapt 20 percent in the last two years, as people look to gain skills or fill gaps in their resumes. Now the Obama administration plans to expand federal student aid programs to a record $130 billion, further benefiting the schools. Phoenix stands out. With 420,000 students, the school drew $3.2 billion in federal aid last year.
The federal government disburses aid directly to schools, which then use the money to cover tuition and other fees and return the balance to students.
Critics worry that more students than ever are at risk of being sucked in by questionable enrollment methods and left with thousands of dollars of debt — often without graduating.
“There is nothing more counterintuitive than to spend massive amounts of money and end up with actual adverse consequences, to leave people literally worse off after spending money on them,” said Barmak Nassirian, of the American Association of Collegiate Registrars and Admissions Officers, an industry group whose members include some for-profit schools.