Aggressive recruiting by some of the state's largest for-profit colleges is drawing scrutiny from the Minnesota attorney general, who contends that students, many of them veterans, can find themselves unable to repay federal loans, leaving taxpayers on the hook.
Although the state's investigation is a broad probe of practices at the for-profit schools, authorities are particularly focused on how the institutions target veterans and active duty military personnel who have access to lucrative GI Bill benefits.
The industry's ubiquitous advertising campaigns can be manipulative and misleading, including hidden costs and deceptive claims about graduation and placement rates, alleged Lori Swanson, the Minnesota attorney general, who has launched the investigation.
"It's a sales-oriented mentality -- sign the students up, bring them in the door, maximize the profits regardless of the student's best interest," she said.
The use of GI Bill benefits is big business in Minnesota. From mid-2009 to January of this year, 53 percent of the $300.2 million in GI Bill benefits sent to the state have gone to for-profit schools. The largest recipient has been Capella University, whose headquarters are in a downtown Minneapolis office tower.
The $53.1 million Capella received from the GI Bill in the past four years was more than double its closest public school counterpart: the University of Minnesota-Twin Cities. The U's $24.3 million wasn't even second. That was reserved for Walden University, which operates out of a remodeled building in the Minneapolis Mill District and received $39.9 million in GI Bill funding, according to figures provided by the VA.
Swanson declined to identify the targeted schools, citing the ongoing investigation, but said the number of schools was "more than one and less than six." All the schools under investigation have physical facilities in Minnesota.
Swanson said the investigation arose after speaking with military members and representatives from public community colleges who told tales of aggressive sales tactics from for-profit recruiters.
"One of the things with veterans, they are heroic, they are stoic," she said. "When bad things happen to them they are the last ones to complain."
She said the investigation was in its preliminary stages with no court action imminent, but that it focuses on deceptive claims about placement and graduation rates, loan default rates and whether credits from the schools transfer. One part of the investigation: a recruiter who was never in the military would put on a uniform when it came time to close the sale on a veteran.
Capella, which has almost 35,000 students around the country, defended its recruiting practices with veterans. Spokesman Mike Buttry said the school does not recruit at places such as VA hospitals, where other for-profit schools have been criticized for targeting vulnerable veterans.
"The conversation we have with them is similar that we would have for any student: 'What are your goals? Is this program the right fit for you?'" Buttry said. "A lot of it is word of mouth, someone knows someone who is taking a program. We don't go camp out."
Steve Gunderson, president and chief executive officer of the Association of Private Sector Colleges and Universities, which represents many for-profit schools, said accusations of recruiting excesses and misleading marketing have been exaggerated. On Monday, the association's board of directors is expected to approve a new set of recommendations to improve the quality of delivery of services for military and veteran students, including tightening standards for admission.
"Veterans coming home from the military and the war, you don't tell them where to go to school," he said. "They listen to their buddies, they listen to their colleagues about what school fits their kind of situation."
Jeff Pool, veterans services director for Anoka-Ramsey Community College, a public school, said much of his time is spent trying to fix the damage done to students who transfer from for-profit schools. Veterans have an average of 36 months of GI Bill eligibility, so losing 12 months at a for-profit school whose credits don't transfer can be costly, he said.
Pool told of the case of one for-profit that continued to receive a veteran's GI Bill benefits even after he informed them he had withdrawn. The school stopped only after Pool threatened to go to Congress.
"Every semester we have students who come from those institutions and they, unfortunately, already have their heads in their hands, they know their credits aren't going to transfer," he said. "You do feel bad for the ones who have no idea that their credits are not going to transfer and don't understand why they just spent a year of their life doing these credits that won't follow them anywhere."
For-profit colleges were put in the cross hairs last year in a report by a U.S. Senate committee. Federal law prohibits an institution from receiving more than 90 percent of its funding from federal student loans and aid. But funding from the GI Bill is not included in the calculation. The Senate committee investigation found that veterans are lucrative targets for for-profits, where taxpayers often spend more than twice as much to educate veterans than at public institutions.
The investigation, led by Sen. Tom Harkin, D-Iowa, produced internal documents showing some schools' pursuit of military benefits led them to the most vulnerable military populations, sometimes recruiting at wounded warrior centers and VA hospitals. In other cases, many recruiters misled or lied to service members about whether all their tuition would be covered by military benefits.
Some companies have created websites, such as GIBill.com, that appeared to be an official military website but was actually paid by for-profit colleges to generate leads. Minnesota was one of 15 states that last year sued QuinStreet Inc., which ran GIBill.com. The website is now operated by the VA and provides general information about education benefits.
A 2010 report by Harkin's Health, Education, Labor and Pensions Committee made a similar conclusion and suggested that the passage of the Post-9/11 GI Bill in 2008, which expanded benefits to Iraq and Afghanistan era veterans, may have invited abuse.
"Congress may have unintentionally subjected this new generation of veterans to the worst excesses of the for-profit industry: manipulative marketing campaigns, educational programs far more expensive than comparable public and non-profit programs, and a lack of needed services," the report concluded.