January 27, 2016

Federal Trade Commission Sues For-Profit DeVry For Deceiving Students


The U.S. Federal Trade Commission today filed a lawsuit against one of the largest for-profit colleges, DeVry University, for allegedly misleading students about job placement rates and salaries for the school’s graduates.  The FTC complaint, filed in federal court in Los Angeles, alleges, “Through the use of English and Spanish-language advertisements and other marketing materials, and during sales pitches with prospective students [DeVry has] made deceptive representations about the benefits of obtaining a degree.”

DeVry last year received $1.47 billion in taxpayer dollars from federal student grants and loans.

The complaint focuses on claims that DeVry repeatedly made in its TV, radio, online, print and other advertising: that 90 percent of DeVry graduates actively seeking employment got jobs in their field within six months of graduation; and that DeVry graduates had 15 percent higher incomes one year after graduation on average than the graduates of all other colleges or universities. The FTC asserts that these claims were deceptive.

The complaint alleges DeVry counted many graduates as working “in their field” when they were not:

  • a business administration graduate working as a server at the Cheesecake Factory restaurant;
  • graduates who majored in technical management working as unpaid volunteer positions at medical centers;
  • a business administration graduate with a health care management specialization working as a car salesman.

The complaint also alleges that DeVry counted as placed in jobs graduates who were working in the same jobs they held prior to enrolling at DeVry.

The Commission voted 4-0 to file the lawsuit.

The FTC chairwoman, Edith Ramirez, said in a press release, “Millions of Americans look to higher education for training that will lead to meaningful employment and good pay. Educational institutions like DeVry owe prospective students the truth about their graduates’ success finding employment in their field of study and the income they can earn.”

In a related action, the U.S. Department of Education gave notice to DeVry to stop certain advertising regarding student employment outcomes.

The FTC press release quotes Under Secretary of Education Ted Mitchell as saying, “As required by the law and expected by the public, institutions need to be accurate in their marketing and recruiting to prospective students. And we confirm this truthfulness of advertisements through the backup information schools provide upon request.”

DeVry has previously asserted that its actions complied with the law.

This article also appears on Huffington Post.

UPDATE 01/27/16, 1:30 pm:

On a press call today, Chairwoman Ramirez estimated that 30,000 to 50,000 DeVry students may have been affected by the deceptive claims, and that the Commission would be seeking monetary relief on behalf of those students. Ramirez also said the FTC would work with state law enforcement to monitor the accuracy of DeVry’s claims.  She also said the FTC wanted to hear from students at other schools who might have been impacted by similar deceptive claims.

Under Secretary Mitchell noted that DeVry had the right to pursue an administrative appeal of the Education Department’s decision.  He also said that the Department was pursuing “an ongoing investigation, a complex investigation of DeVry.”

DeVry released a statement asserting that the FTC’s complaint “is without valid legal basis” and adding, “DeVry Education Group intends to vigorously contest a complaint filed by the Federal Trade Commission, challenging the employment and earnings outcomes of DeVry University graduates.” DeVry also said it would request a hearing to contest the Department of Education’s action.

UPDATE 01/27/16, 5:00 pm:

Huffington Post‘s Shahien Nasiripour points out that Ramirez’s estimate of 30,000 to 50,000 affected students appears to reflect the FTC complaint’s assertion that DeVry enrolled 29,000 to 49,000 new students each year from 2008 to 2014, thus totaling as many as 300,000 students. Nasiripour reviewed Department of Education data and concluded that total DeVry federal student loans totaled about $5.3 billion from the 2008-09 academic year through June 30, 2015.  That figure does not include federal Pell grants or the private loans taken out by many students.

Also today, Senator Dick Durbin (D-IL) said in a statement, “The FTC’s charges of deception against DeVry University are the latest chapter in the shameful story of so many for-profit colleges. It is time to clean up for-profit colleges and stand up for the students and taxpaying families who are the real victims of their pathetic practices.” Durbin’s statement says that DeVry students cumulatively hold $8.3 billion in student debt – the fourth highest debt volume of any higher education institution in America – and have a 2009 five-year cohort default rate of 43%. He also noted that Devry CEO Daniel Hamburger received $5.7 million in total compensation in 2014.