FTC Nails University of Phoenix For Ad Whose Deceptions Reflect Disturbing Deal
I’ve written here before about the shameful practice of many large employers offering a dubious benefit to their employees: “discounted” tuition to overpriced for-profit colleges, some of them schools that have faced numerous law enforcement actions for fraud and deception. I’ve questioned why these employers would want to steer their employees to schools that ruin the financial futures of many students, and whether the employer companies or their executives receive anything in return.
Today, the Federal Trade Commission settled a claim against the University of Phoenix, and the case revealed that the for-profit giant exploited such troubling deals with employers by turning them into deceptive advertising aimed at other students.
The University of Phoenix, which has received as much as $4 billion in federal student aid in a single year, today agreed to a $191 million settlement — $50 million in cash to the FTC to benefit consumers and $141 worth of cancelled student debt to the school — to settle FTC claims over a Phoenix ad campaign, launched in 2012, that suggested the school worked with big companies including AT&T, Yahoo!, Avis, Microsoft, and Twitter, to provide jobs for Phoenix graduates.
One video ad depicted a beleaguered woman driving around a crowded parking lot in search of a space. Suddenly, cars fly up in the air and parking spaces open — and the woman smiles — while the ad’s narrator (Cosby Show mom Phylicia Rashad) explains that the University of Phoenix “is working with a growing list of almost 2000 corporate partners, companies like Microsoft, American Red Cross, and Adobe, to create options for you. Not only that, we’re using what we learn from these partners to shape our curriculum, so when you find the job you want, you’ll be a perfect fit.” Those and other employers are depicted as newly-available parking spots.
Other TV, radio, and Internet ads made similar claims, as did Phoenix recruiters in one-on-one pitches to prospective students.
In fact, there were no such agreements to create options for “you.” Apparently the University of Phoenix felt it could refer to the companies as such “partners” because they did have one partnership with many of them: Yes, Phoenix’s “Workforce Solutions” program, which provide those discounted tuitions to existing employees. So there were, I suppose, “options for you” if you already worked for one of those companies — but only options to enroll in University of Phoenix classes, not to get a new job. And if you worked elsewhere, or had no job, there was no arrangement for you at all.
The FTC investigation found that some companies asked by Phoenix to appear in the ads objected to the false portrayal. But other companies presumably did not object, since so many appear in the ads. And there’s no evidence that any of these falsely-depicted employers blew the whistle on Phoenix to the FTC. (Carrie Wofford, the dedicated leader of the advocacy group Veterans Education Success, did.)
So Phoenix used its deals scamming corporate employees as a semi-truthful peg for a deceptive marketing campaign aimed at hooking new students. And some of the same employers willing to direct their workers to overpriced, dubious quality University of Phoenix programs were apparently OK allowing Phoenix to borrow their reputations to lure these other prospective students.
Under the FTC deal, Phoenix will cancel all remaining account balances with the school for students who entered the school between late 2012 and the end of 2016. So that’s a contribution by the FTC to helping those students get their financial futures together; in fact it is the biggest settlement ever for the Commission with a for-profit college.
But many of those students already have paid a big financial price in terms of federal and high-interest private student loan payments, used-up Pell grants and GI Bill, and their own cash for Phoenix programs that are often of dubious value. And many also still have significant student loan debt to repay. (They could potentially apply for relief for their federal loans under the borrower defense law, except that Betsy DeVos has gutted action under that law.)
The FTC complaint notes that many students who enrolled in the University of Phoenix in 2012 or 2013 never earned a degree — and that almost 62 percent of first-time students and 80 percent of non-first time students drop out of the school without graduating.
Despite bad publicity over a spate of law enforcement probes and actions against the school for deceiving students and breaking rules, Phoenix remains the largest for-profit college in the country, with more than 100,000 students (though way down from 460,000 students in 2010), and the biggest recipient of GI Bill education benefits for veterans. The school has closed down most of its physical campuses, so the vast majority of its students now study exclusively online, a cheaper way to deliver education that is rarely accompanied by a reduction in tuition.
So Phoenix paid a price today, but still a fairly small one compared with how much it has earned despite, or in large degree because of, bad behavior. And it carries on, getting billions of our tax dollars.
FTC commissioner Rohit Chopra in a statement said today’s settlement paves the way for more actions against predatory schools and “additional recoveries by student loan borrowers and taxpayers.” I hope the Commission does move ahead on that road, keeping an eye on institutions like the University of Phoenix but also warning complicit parties — like Phoenix’s employee benefits “partners” — not to facilitate such deceptions.