September 21, 2016

New CEO Says DeVry Is Seeking to Resolve Deception Charges


Lisa Wardell, who joined DeVry Education Group as CEO on May 24, says the for-profit college company is “working to resolve” claims made in a lawsuit by the Federal Trade Commission that DeVry misled students about job placement rates and salaries for its schools’ graduates.

In an interview with Republic Report yesterday, Wardell maintained DeVry’s prior position that it did nothing wrong when it advertised, year after year 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.

Addressing the FTC charges

In January, the FTC sued DeVry over those claims, alleging that DeVry counted many graduates as working “in their field” when they were in fact, for example, a business administration graduate working as a server at the Cheesecake Factory restaurant, or a business administration graduate with a health care management specialization working as a car salesman.

Lisa Sodeika, DeVry’s Senior Vice President for External Relations and Regulatory Affairs, who joined Wardell on our call, said that the FTC complaint cited “a few miscellaneous examples,” but that the company never “did anything fraudulent” or committed “systematic errors.”

While denying any misconduct by the company, Wardell said, “We want to be part of the solution… If there is an alternate methodology that the FTC and accreditors and others at the table want to use” to measure job placement, DeVry is open to adopting it.

The FTC has not responded to my request for comment on the status of the case.

The FTC lawsuit triggered new measures by the Department of Veterans Affairs, which in March removed DeVry from the VA’s “Principles of Excellence“ status indicating a commitment to protect student veterans. The VA placed a warning flag on its website to alert veterans to the FTC lawsuit.

The Department of Education also acted, the same day that the FTC filed its suit, informing DeVry that it would order the company to make only truthful claims to students regarding job placement, and, for five years, to submit its advertising claims in advance to an independent monitor. But that Department order has been stayed for eight months because DeVry filed an appeal, and the Department has not moved forward or informed the public as to what is going on.

Wardell told me, “We have been working to resolve these issues” and “we are getting some forward movement.”

Last year, DeVry received $1.47 billion in Department of Education student grants and loans.

Committing to 85/15

Wardell’s comments came as the company, which offers certificate, two-year, four-year, and graduate degrees in fields stretching from business administration to health and medicine to website design, announced that it would voluntarily hold itself to standards limiting the percentage of its revenue from federal taxpayer dollars — standards not presently required by law, but that congressional critics of the for-profit college industry are now seeking to enact.

Specifically, federal law now bars for-profit colleges from receiving more than 90 percent of their revenue from student grants and loans from the Department of Education. But VA and Pentagon education assistance to veterans and service members does not count toward that limit, giving for-profit colleges incentives to aggressively recruit such students. A growing group of lawmakers on Capitol Hill have been pushing to lower the federal funding ceiling to 85 percent, where it stood in the 1990’s, and bring the military money under it.

Wardell announced yesterday that by July 2017, no more than 85 percent of  DeVry’s revenue will come from any of the federal sources.

The new reform follows DeVry’s announcement this spring that it would end its practice of forcing students to agree that any dispute with the company had to be resolved through private arbitration, rather than a court of law. That commitment came as the Department of Education is considering new regulations that would prohibit or sharply restrict such mandatory arbitration clauses, which most of the big for-profit colleges have been using.

Some critics are suggesting that DeVry’s announced reforms are aimed at softening up federal officials regarding the pending actions against the company. Another criticism is that the steps are mostly public relations efforts to get ahead of reforms that seem inevitable. But aggressive lobbying by the for-profit college industry, even in its currently depleted state, means that nothing is inevitable. So DeVry breaking from the pack and endorsing reforms is significant — and commendable.

One indication that DeVry’s commitment could make a difference is that it caused a freak-out by Steve Gunderson, the former congressman (R-WI), who heads the for-profit colleges’ discredited trade group, APSCU/CECU.  “In all due respect to DeVry’s proposal, how does this affect the school and your programs, because most of their four-year liberal arts and medical programs are nowhere close to 90-10 threshold, so doing something that doesn’t cost you isn’t really courageous,” Gunderson complained to Inside Higher Ed. 

Brushing aside such criticism, Wardell told me that her announcement “is courageous…. No one else has voluntarily done this.” She added, “Leaders go first. If other peer for-profit groups are interested, we’ll talk with them.”

Gunderson is right that many DeVry programs, unlike many programs at some APSCU member schools, do not face intense challenges in meeting an 85-15 standard. But some are close to the line, and the tensions between an 85-15 limit, which might make it harder for DeVry to lower its tuition prices, and the new gainful employment rule, which creates pressure to lower prices, suggests DeVry’s commitment will not be without challenges.

And DeVry’s announcement could create momentum for more permanent reforms.

“It is breathtaking to say that any for-profit business will ‘limit’ its federal subsidy to 85% of its revenue, but in the bizarre world of for-profit schools, this is actually progress,” said Senator Dick Durbin (D-IL), a leader in efforts to curb predatory college abuses. “I hope now DeVry would be willing to endorse my bill to hold the rest of the for-profit industry to this standard and create real accountability.”

Flanked on the call with me by her top public policy deputies, Sodeika and Tom Babel, Wardell would not commit DeVry to supporting such legislation, which is too bad.

Discussing where DeVry went wrong

When I asked broadly if DeVry had made mistakes under Wardell’s predecessor, Daniel Hamburger, Wardell denied that the company had engaged in fraud against students, but focused on the public policy aspects of the company’s work. The for-profit college industry, she said, “has not done a good job of participating and being part of the solution.” Citing the industry’s uncompromising defense of things like the existing 90/10 rule, Wardell said, “We need to change the dialogue.”

Such a shift from total resistance to greater flexibility, if real, would be a significant step for DeVry, which has in the past hired powerful, connected lobbyists like Heather Podesta to fight back hard against Obama Administration reforms such as the gainful employment rule, a measure that penalizes career education programs that leave students with debt they cannot reasonably afford to repay.

Wardell said she understood that “folks that work in Washington are public servants and they want to protect the students.”

Wardell also said that the for-profit college industry “has not done a good job in communicating what we do well” — serving older, non-traditional students and addressing the hiring needs of employers. But with that critique, she sounded, unfortunately, more like Steve Gunderson.

In reality, the shortcomings of many for-profit schools have gone way beyond failure to communicate.  In theory, the sector should excel at meeting the needs of older students and employers. In practice, in the wake of lax oversight by the George W. Bush Administration, the sector, particularly public-traded and private equity owned firms, engaged in a race to the bottom that used deceptive and coercive recruiting to get single moms, overwhelmed veterans, and 18 year olds enrolled in overpriced and often low-quality programs.

Though never the worst actor in the industry, DeVry partook of this bad behavior.

Under Senator Tom Harkin (D-IA), the Senate HELP committee documented manipulative recruiting practices, aimed at exploiting a prospective student’s “pain,” at DeVry. Christopher Neiweem, an Iraq war veteran, testified before Congress in 2013 about his job at DeVry from 2008 to 2009, which was to recruit veterans to the school. Neiweem says his bosses, driven by 90/10 rule pressures, told him to get “asses in classes,” even for veterans deployed to active combat zones or who otherwise might not benefit from the programs. Worse, they told him to represent himself as a “military adviser,” which might have suggested he was associated with the Defense Department.  Other former DeVry recruiters have corroborated his account.

A VA official wrote to Devry earlier this year, when taking action against the company, that “VA received significant numbers of complaints” from veterans “regarding DeVry and its misrepresentation to students and prospective students of post-graduation employment outcomes as well as providing insufficient information on total cost of programs.”

In addition to the FTC lawsuit against the company, the attorneys general of Illinois, Massachusetts, and New York have been investigating DeVry for deceptive practices and fraud.

Given these allegations of past misconduct, I asked Wardell about DeVry’s apparent financial support for a legal brief filed by Gunderson’s group, urging the U.S. Supreme Court to adopt a standard that would make it harder for for-profit college employees and the Justice Department to sue schools for defrauding the government. Wardell and her lieutenants said they were not familiar with the issue and promised to get back to me.

I also asked about the controversy that ensued earlier this year when DeVry announced that Ann Weaver Hart, president of the University of Arizona, and Linda Katehi, Chancellor of the University of California-Davis, had joined its board of directors. Eight days after the announcement, Katehi abruptly resigned from the DeVry board, having faced withering criticism from a California state assemblyman and public interest advocates. Katehi subsequently resigned as UC Davis chancellor, amid growing revelations about her judgment and ethics.  But Hart, who heads one of Arizona’s two flagship universities, refused to quit DeVry’s board, despite mounting criticism in her state, including an April 2016 letter signed by 22 Arizona lawmakers calling on Hart to resign her presidency. Instead, she said, “I will remain on the board for the same reasons I accepted the appointment — I believe my experience helping public university students achieve their academic goals will benefit DeVry’s students.”  In June 2016, immediately following a meeting with the Arizona Board of Regents, Hart announced that she would not seek an extension of her contract as university president when it expires in 2018.  

Wardell insisted that Katehi’s resignation as UC Davis chancellor was “completely unrelated” to her service on the DeVry board.  And she praised Hart’s continued service: “It’s critical for us to have the type of education competency of an Ann Hart.”

At one level, I really can’t blame DeVry for trying to attract board members with traditional higher education pedigrees and experience, even if I do fault people who sell their reputations and the reputations of their institutions to for-profit schools. But, as Bob Shireman has persuasively argued, educational organizations are far more likely to put students first if they avoid compensating board members. At that is a major reason why it’s hard to ensure that for-profit colleges will be good colleges.

DeVry pays board members $70,000 a year, plus stock worth about $100,000.

This article also appears on Huffington Post