IBJNews

ITT, other for-profit education firms face more oversight

Back to TopCommentsE-mailPrintBookmark and Share

Education Secretary Arne Duncan will step up oversight of federal student financial-aid programs after an undercover government investigation found deceptive marketing practices at 15 for-profit colleges.

For-profit college stocks fell after the U.S. Department of Education released data that said fewer than 36 percent of the colleges’ students repaid federal loans, compared with 54 percent at public universities.

Shares in ITT Educational Services Inc., based in Carmel, declined 13 percent Monday morning, to $56.02 each, after being downgraded to “equal weight” from “overweight” at Barclays Capital.

Duncan vowed to expand the Education Department’s enforcement staff, conduct undercover probes and increase the number of program reviews, according to a letter to Sen. Tom Harkin (D-Iowa) that was obtained by Bloomberg News. The education department released data that details the earnings and debt repayment of for-profit college graduates. Proposed agency rules would restrict funds to programs whose graduates have poor records of repaying student loans.

ITT , Apollo Group Inc. and Career Education Corp. have fallen in U.S. markets as Harkin has held hearings on sales practices at for-profit colleges and their reliance on federal student grants and loans. The Education Department will hire more than 60 investigators and increase the number of program reviews by 50 percent after the inquiry by the Government Accountability Office, Duncan said in the letter, which was confirmed by the department.

“The unethical and potentially illegal practices uncovered by GAO are unacceptable,” Duncan said. “We have a responsibility to ensure that students can make informed choices about investing in postsecondary education, and that taxpayers’ investments in the federal student-aid programs are helping students.”

ITT Educational plunged $4.97, or 7.2 percent, on Friday, to $64.33 per share.

Apollo Group, the Phoenix-based operator of the University of Phoenix, fell $1.53, or 3.8 percent, to $38.94. Career Education fell 80 cents, or 4.1 percent, to $18.79. An index of 12 education stocks fell 5.1 percent and has dropped 27 percent in the past six months.

The Education Department’s Inspector General will review the GAO’s findings and potentially refer individuals for criminal prosecution, Duncan’s letter said. The department is also considering enforcement action against schools that could result either in the return of federal money or the loss of a college’s eligibility for federal financial aid, according to the letter.

The industry welcomes additional Education Department scrutiny, Harris Miller, president of the Washington-based Career College Association, said in a telephone interview.

“We look forward to working with the department,” said Miller, whose group represents more than 1,400 for-profit colleges. “We’re not supportive, and we’ve never been supportive, of schools or employees violating the law or accreditation requirements.”

The University of Phoenix supports “robust student protections,” Manny Rivera, an Apollo Group spokesman, said in an e-mail.

Career Education, based in Hoffman Estates, Ill., said any review should focus broadly on all kinds of colleges, spokesman Jeff Leshay said. Lauren Littlefield, a spokeswoman for ITT Educational, didn’t return a call seeking comment.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. By the way, the right to work law is intended to prevent forced union membership, not as a way to keep workers in bondage as you make it sound, Italiano. If union leadership would spend all of their funding on the workers, who they are supposed to be representing, instead of trying to buy political favor and living lavish lifestyles as a result of the forced membership, this law would never had been necessary.

  2. Unions once served a noble purpose before greed and apathy took over. Now most unions are just as bad or even worse than the ills they sought to correct. I don't believe I have seen a positive comment posted by you. If you don't like the way things are done here, why do you live here? It would seem a more liberal environment like New York or California would suit you better?

  3. just to clear it up... Straight No Chaser is an a capella group that formed at IU. They've toured nationally typically doing a capella arangements of everything from Old Songbook Standards to current hits on the radio.

  4. This surprises you? Mayor Marine pulled the same crap whenhe levered the assets of the water co up by half a billion $$$ then he created his GRAFTER PROGRAM called REBUILDINDY. That program did not do anything for the Ratepayors Water Infrastructure Assets except encumber them and FORCE invitable higher water and sewer rates on Ratepayors to cover debt coverage on the dough he stole FROM THE PUBLIC TRUST. The guy is morally bankrupt to the average taxpayer and Ratepayor.

  5. There is no developer on the planet that isn't aware of what their subcontractors are doing (or not doing). They hire construction superintendents. They have architects and engineers on site to observe construction progress. If your subcontractor wasn't doing their job, you fire them and find someone who will. If people wonder why more condos aren't being built, developers like Kosene & Kosene are the reason. I am glad the residents were on the winning end after a long battle.

ADVERTISEMENT