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States Crack Down on For-Profit Colleges

Washington — Inundated by complaints of false marketing, a number of states — including Massachusetts — are working to protect college students against abusive student loan practices.

Thirty-two states are now working together under the leadership of Kentucky Attorney General Jack Conway to investigate potential abuses in the for-profit college industry, which saw enrollment more than triple between 1998 and 2008, according to the Consumer Finance Protection Bureau.

“While some for-profit schools offer quality training and legitimate diplomas, we have found that this industry often markets subpar programs to veterans and low-income students who depend on federal aid,” Massachusetts Attorney General Martha Coakley said.

Coakley’s office is investigating DeVry University, as are Illinois Attorney General Lisa Madigan and the Federal Trade Commission.

“We’re approaching them with a view toward transparency and an interest in demonstrating the compliant nature of our practices,” said Ernest Gibble, a spokesman for DeVry, on the investigations.

Coakley also has taken aim at for-profit Corinthian Colleges and Corinthian Schools, with more than 100 schools nationwide. In a lawsuit filed earlier this month, she alleges Corinthian used deceptive marketing and high-pressure tactics to persuade students to enroll and take out high-interest subprime loans.

Corinthian disputes the allegations and said it has a strong record of offering students a quality education and treating them honestly and fairly.”

In January, 13 states issued subpoenas to four for-profit colleges over concerns about possible misrepresentations to students about financing, recruitment and graduates’ employment rates.

Coakley’s office in Massachusetts has proposed regulations for for-profit colleges and occupational schools. The rules would require schools to disclose accurate information about tuition, fees placement statistics and graduation rates. The rules would also bar the schools from using high-pressure sales tactics and calling recruitment personnel “counselors” or “advisers.”

In February, the new federal Consumer Financial Protection Bureau, created by the 2010 Dodd-Frank Act, filed suit against another for-profit college chain, ITT Educational Services, which operates about 150 institutions in nearly 40 states, alleging predatory student lending. The lawsuit was the bureau’s first public enforcement action against a for-profit college.

And last year, New York Attorney General Eric Schneiderman won a $10.25 million settlement with the for-profit Career Education Corporation over inflated job placement rates.

Previously, Conway led an effort involving attorneys general in 20 states, which resulted in a $2.5 million settlement in 2012 with QuinStreet, which operated a website, www.GIBill.com, that aimed to recruit veterans to attend for-profit colleges. The states alleged the website gave the false impression that it was affiliated with the federal government. QuinStreet settled, but denied wrongdoing. Under the settlement, the domain name was transferred to the U.S. Department of Veterans Affairs.

At the federal level, U.S. Sen. Dick Durbin of Illinois and Sen. Tom Harkin of Iowa, both Democrats, introduced legislation earlier this month designed to improve coordination among federal agencies overseeing for-profit colleges. Their proposal would establish a committee with representatives from federal entities including the Department of Education, Department of Justice, Securities and Exchange Commission and CFPB.