- FTC says for-profit educator also misled on income prospects
- Company says there's `no national standard' for data
DeVry Education Group Inc. fell as much as 21 percent after the U.S. accused the for-profit college chain of lying about the likelihood its students would find desirable jobs and earn more than those enrolled at other schools.
The Federal Trade Commission said DeVry deceived consumers by claiming that 90 percent of graduates seeking employment landed jobs in their field within six months of graduation.
“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,” FTC Chairwoman Edith Ramirez said in a statement announcing the suit, filed Wednesday in federal court in Los Angeles.
DeVry pledged to fight.
“The FTC’s complaint -– filed 40 years after DeVry University began publishing accurate graduate employment statistics -– is without a valid legal basis,” the Downers Grove, Illinois-based company said in a statement. “There is no national standard for calculating employment statistics among higher-education institutions, and the measures and standards used by DeVry University to support its statistics are appropriate.”
For-profit colleges have come under fire in recent years. Corinthian Colleges Inc. closed and filed for bankruptcy last year amid allegations it falsified job-placement data in its marketing materials and altered grades and attendance figures. Education Management Corp. agreed to pay $95.5 million to end whistle-blower suits accusing it of illegal recruiting practices.
The FTC allegations roiled for-profit education company stocks. DeVry fell more than 15 percent in New York trading. ITT Educational Services Inc. closed at $2.48 after dipping as low as $2.37, a drop of almost 11 percent, while Strayer Education Inc. ended the day at $50.87, down almost seven percent from its opening price, $54.28.
Students at for-profit colleges have had the highest default rate on federal student loans, according to the most recent U.S. Education Department data. For all schools, the rate was 11.8 percent. At for-profit colleges, defaults were 15.8 percent. Defaults are measured three years after a student finishes or drops out of a program.
“It’s time to clean up the for-profit college industry and stand up for students and tax-paying families, ” U.S. Senator Dick Durbin, an Illinois Democrat, said in a statement issued after the FTC announcement. DeVry students cumulatively hold $8.3 billion in debt and have a 43 percent default rate, he said.
A DeVry spokesman, Ernest Gibble, disputed the senator’s default-rate assertion and said the Department of Education-recognized rate is just 12.6 percent.
Those attending American colleges, and their parents, hold more than $1.2 trillion in federal student loans.
The Education Department is also disputing DeVry graduate employment rate claims dating back to 1975, and conditioning its eligibility for some federal funds on its ceasing to make those claims or substantiating them.
The educator said it would work closely with the regulator in an effort to comply while seeking a hearing on that action.
The case is FTC v. DeVry Education Group, 16-cv-579, U.S. District Court, Central District of California (Los Angeles).
DV US (DeVry Education Group Inc.)