Federal Trade Commission Protects For-Profit College Students in New Guidance


Center for Responsible Lending
November 12, 2013

The Center for Responsible Lending applauds the Federal Trade Commission for its tough new guidance against deceptive practices by vocational schools.

"The FTC's new guidance on vocational schools identifies some of the most deceptive practices by for-profit colleges,” said Maura Dundon, Senior Policy Counsel at the Center for Responsible Lending. “For-profit colleges that mislead students about their expected salaries, job placement, or the quality of the education should take notice that they are violating the FTC Act. The guidance does not technically extend to all for-profit colleges, but it is a warning to the whole industry about deceptive recruitment."

Schools risk FTC enforcement action if they mislead students about whether credits will transfer to other colleges, job placement rates, salaries, graduation rates, and whether the program is “current and up-to-date.” The guidance also addresses the common practice of making prospective students believe that they are enrolling in a selective program for which they have qualified, when in reality the school has few enrollment standards, and admits everyone willing to pay tuition.

The guidance applies only to vocational schools that do not offer at least 2-year degrees. This excludes many for-profit colleges, which do offer such degrees. However, the FTC made clear that the deceptive practices discussed in the guidance may still constitute FTC Act violations whether or not the violator is covered by the guidance, and advises that for-profit colleges look to the guidance as “useful guidance” for their own practices.

The FTC first released the Vocational School Guides in 1972, and last updated them in 1998. Since 1998, the for-profit college sector has exploded in size and financial impact on students and taxpayers. In the most recent data on student loan defaults, for-profit colleges accounted for 46% of defaults - even though they only enrolled 13% of students. For-profit colleges generally charge much more than public schools - an average of four times more than a comparable community college for a certificate or associate's degree. The sector derives tens of billions of dollars from federal student aid, absorbing up to 25% of all federal aid funds. Over 800 for-profit schools received more than 80% of their revenue from federal aid. A greater proportion of for-profit college students than students at other types of schools borrow to pay tuition, especially those enrolled in two-year degrees and certificate programs.

The FTC's newly revised Vocational School Guides are available at http://rspnsb.li/HRS3sc.

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For more information, contact Ellen Schloemer at 919-539-9092 or ellen.schloemer@responsiblelending.org

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About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.