Biden begins ‘secret shopper’ undercover crackdown on colleges

The Biden administration is warning US colleges and universities that it will begin using undercover officials posing as students to identify and potentially prosecute those involved in recruiting misrepresentations.

In outlining the plan, the Department of Education described the “secret shopping” operation as part of its continuing efforts to halt deceptive, “potentially deceptive or predatory practices” in finding and enrolling students and offering them financial aid.

The department did not specifically mention for-profit colleges, though they have been a focus of similar criticisms and crackdowns, and representatives of that sector immediately protested that the effort would unfairly affect its member institutions.

“We support reasonable practices that hold all institutions accountable for misrepresentations that financially harm students and taxpayers,” Nicholas Kent, the chief policy officer at the Career Education Colleges and Universities association, said in a written response to the government announcement. “However, the federal government has a track record of using secret-shopper investigations to malign politically unfavoured institutions with distorted findings that later result in the need for public correction.”

As evidence for its suspicions, the for-profit association cited a 2010 report by the US Government Accountability Office, the nonpartisan congressional auditing agency that carried out its own undercover test of prospective students applying for admission at 15 for-profit institutions.

That investigation found all 15 colleges “made deceptive or otherwise questionable statements to GAO’s undercover applicants” and that four of them “encouraged fraudulent practices”. That case, however, also led to complaints from the industry and its Republican allies in Congress about the ways in which the GAO authors described some of the exchanges between the faux students and the institutional representatives, using characterisations designed to make the problems sound worse. The GAO subsequently revised some parts of the report but did not change its overall conclusion.

The decade-old incident should nevertheless serve as a cautionary tale, said Jenny Faubert, a spokeswoman for the for-profit association. “The referenced GAO report was riddled with careless errors because the agency was rushed to help achieve a political narrative against for-profit institutions,” she said.

Either way, the GAO study stands as one instance among numerous analyses – from inside and outside the government – that have consistently shown for-profit institutions as a group underperforming the rest of US higher education, leaving their students on average with greater debt, lower earnings and higher levels of unemployment.

These studies include a 2019 analysis from the Booth School of Business at the University of Chicago that found for-profit colleges enrolled 10 per cent of US students but accounted for 50 per cent of student-loan defaults, with lower-income students hurt the most.

One 2012 study published in the Journal of Economic Perspectives, credited for-profit institutions with enrolling larger shares of minority and disadvantaged students and retaining them better in their first years. But that study affirmed that those students still ended up with worse than average long-term outcomes in terms of unemployment, earnings and student-loan defaults.

Despite the heightened anxiety within the for-profit sector, the Biden administration has been signalling its intent to bolster its oversight across all US higher education, due to broad and long-standing public concerns about the rising cost and relatively worsening value of all colleges and universities. The US secretary of education, Miguel Cardona, began the year issuing “a warning to colleges and to post-secondary programmes that says we’re going to strengthen accountability”.

His department said the undercover investigators would hunt for misrepresentations in a wide range of areas, including transferability of credits, job placement rates, completion and withdrawal rates, graduate earnings, cost of attendance and “any other practices that may violate the laws and regulations governing an institution’s participation in the federal student aid programmes”.

“Where appropriate and permitted”, findings from the undercover effort would be used by offices throughout the department and shared “with other law enforcement partners at the state and federal levels”, it said.

paul.basken@timeshighereducation.com