Over the last 15 years, state and federal regulators, driven by students speaking out, have exposed numerous instances of fraud in the recruitment and admissions process at institutions of higher education. Stopping this misconduct has required efforts from the federal government, state agencies, accreditors, and others.
For example, federal agencies like the Department of Education, Consumer Financial Protection Bureau (CFPB), Federal Trade Commission, and Department of Justice took action against ITT Technical Institute, Art Institute, University of Phoenix, DeVry University, American InterContinental University, Florida Career College, Grand Canyon University, and Baker College when those schools committed violations such as misrepresentations in their recruitment of students. States have also investigated consumer protection violations and taken action against Ashford University, LaJames College, CollegeAmerica, Colorado Technical University, Argosy University, and others.
The common through-line with each of these actions is that they involved violations of law that harmed students who enrolled at schools they would not have otherwise attended and incurred loans, exhausted Pell Grants, or wasted GI Bill and other veterans’ benefits. Predatory institutions have been harming students for years, and it is evident that stopping this misconduct necessitates a strong commitment to enforcing the law.
Short Term Programs Have a Troubling History of Abuse
Short bootcamps or college programs have been a locus of troubling promises and broken student trust. Numerous instances, some of which are detailed below, offer examples of fraud and misrepresentations that have harmed students.
- Flockjay: Offered a bootcamp related to tech sales claiming that it was “recession-proof even in the midst of a Global Pandemic,” that students didn’t have to pay tuition to Flockjay until they landed a job that paid at least $40,000 a year, and that graduates could make $75,000. The school, which was unaccredited, was reported to have merely taught students how to do things they could have learned online for free, like post on LinkedIn, and did not train for any real-life situations. Despite a California Bureau for Private Postsecondary Education (BPPE) action for operating without approval, students reported that the tuition debt still needed to be repaid.
- Lambda School: Enrolled students in an unaccredited coding bootcamp operating without approval by state regulators, and students claimed that the curriculum advertised on the website never fully materialized. Students reported that after graduating from the program and applying to numerous programming positions, they were not able to find a job. “Most of my interviewers have been saying ‘you don’t qualify,’” one student said. Other reporting indicated that students alleged that Lambda School had inflated job placement rates and staffed teaching assistants who had received “no training” in coding education.
- Prehired: A bootcamp accused of deceptive practices that led to significant harm for its students. The company marketed a 12-week online training program promising entry-level software sales positions with six-figure salaries and a job guarantee. To finance the program, Prehired reportedly encouraged students to sign income share agreements (ISAs), which it claimed students would not need to repay if they did not get a job. In reality, these ISAs contained hidden terms requiring repayment even if graduates did not obtain employment. Prehired also failed to disclose essential loan information, including the amount financed, finance charges, and annual percentage rates. When students struggled to repay, Prehired’s affiliated companies engaged in aggressive debt collection practices, including filing lawsuits in distant jurisdictions and coercing students into unfavorable settlement agreements. In July 2023, the CFPB and 11 state attorneys general sued Prehired, resulting in a court order mandating the company cease operations, refund $4.2 million to affected students, and void nearly $27 million in outstanding ISAs. Despite these actions, Prehired has appeared to relaunch under the name FastTrack.
These are some of the many examples of consumer complaints, journalist investigations, legal analysis, and regulatory action that have raised concerns regarding the education and advertising tactics used to recruit students by short-term bootcamps. In other past actions, the California BPPE issued cease and desist letters to six California coding bootcamps for concerns related to “consumer safety and fraud prevention.”
There Is No Federal Cop on the Beat to Protect Students
Unfortunately, the current administration has shown it will not enforce the laws that are designed to stop institutions and bootcamp schools from defrauding students. The Department of Education laid off or reassigned staff who were responsible for performing basic oversight and conducting investigations into institutions that receive federal grant and loan money.
In the past few months, the Department has announced investigations into many schools related to other Administration priorities, but has announced none related to potential violations of the Higher Education Act’s prohibition on institutions making misrepresentations to students. Even a recent press release titled “U.S. Department of Education Fights Fraud in Student Aid to Protect the American Taxpayer” does not relate to potential school misconduct.
The only public action related to enforcement of school fraud that the Department of Education has taken since January is its dismissal of the fine against Grand Canyon University. Unlike its announcement of other types of investigations, the Department did not put out a press release or give any public reason for its 180-degree reversal of the detailed findings of misrepresentations that it released in October 2023.
In addition, the CFPB halted all pending investigations and enforcement matters, and it laid off most of its staff that worked to ensure schools are not committing violations in the student aid or other financial product space.
The message that institutions (particularly the ones most likely to use predatory recruiting tactics) can take from these actions is clear: there is no longer a cop on the beat at the federal level to protect unsuspecting students. As a result, states must be prepared to do more to protect their students from fraud and abuse.
Congress Might Make the Problem Worse by Extending Pell Grant Funding to Unaccredited, Short Programs While not Providing Sufficient Protections for Students
In the reconciliation legislation passed by the House of Representatives in May, there is a provision that extends Pell Grants to programs as short as 8 weeks long, providing as few as 150 hours of training. Third Way and New America have broken down the details of the proposal.
One of the worst problems in this provision is that it allows Pell Grant funds to go to programs that are unaccredited. Although the Administration intends to chip away at the rules and quality controls underpinning accrediting agencies, accreditation remains a critical layer of protections for students. There is also no limitation on federal money going only to public or non-profit schools or to schools that have even a limited on-ground presence, either of which would serve as useful protection against bad actors. This would allow coding bootcamps and other programs shorter than 15 weeks to be Pell Grant-eligible for the first time.
Supporters of the proposal claim that it has “quality assurance” measures, but in truth, these are not enough to stop fraud and protect students from bad programs. The bill requires programs to have 70% completion and job placement rates and pass a value-added earnings test. Data shows, however, that the shorter the program, the higher the completion rate. And the job placement requirement does not even mandate that the job be related to the student’s program, meaning that a student who pays tuition and graduates from an 8-week bootcamp but is unable to find a job in the field of study is counted as placed if they have a job in food service. Also, the value-added test is far too low to ensure that students avoid bad programs.
Even more concerning, with reduced capacity at the Department of Education, it will be challenging, if not impossible, for the federal government to ensure adherence to quality measures, especially more complex measures based on wage gains.
States Need to Step Up to Protect Students from Short College Programs
Given the rollbacks in federal oversight and added risk that Congress will fuel the fire with new dollars, we recommend that states consider all legislative, regulatory, and enforcement tactics to protect their residents from the potential fraud and abuse committed by predatory schools offering very short programs. States should:
- Actively enforce existing consumer protection laws related to the advertising representations of short programs and boot camps. State officials should make public statements regarding their intention to enforce their laws in this growing industry and ensure that students and their families know that state consumer protection offices can receive student complaints or tips from whistleblowers at those institutions.
- Enact laws or regulations to stop predatory schools before they harm students. States could consider requiring schools to obtain a license before enrolling students, limiting schools’ use of certain financing products like income share agreements, and require documentation and certification when determining whether programs meet the thresholds needed for approval to operate. Additional protections worth considering include mandating that schools disclose their completion rates, job placement rates, and other outcomes information, and disclosures about how many students are not able to obtain jobs in their field of study.
- Collect data on student enrollment and outcomes. Although states may have a more limited role in the approval process for these short programs to enroll students than Title IV eligible college programs, states should embrace whatever tools they do have. Each school should be able to provide state regulators with the number of current and recently enrolled students, their addresses, contact information, graduation status, and employment status. This would allow the state to ensure that the schools are meeting the requirements of federal law and not violating any state laws.
