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For-profit DeVry University reaches a settlement with Education Dept. over deceptive ads

The Department of Education has reached a settlement with DeVry University over allegations of deceptive advertising. (J Pat Carter/Associated Press).

The Department of Education is subjecting DeVry University to tougher financial oversight as part of a settlement over the for-profit college chain’s alleged use of misleading information about the employment of its graduates in radio, television, online and print advertisements.

On Thursday, the federal agency said the school can no longer advertise that 90 percent of its graduates land jobs within six months of leaving school and must post a notice on its website stating that the claim is unsubstantiated. DeVry must also provide a letter of credit from a bank assuring the availability of $68.4 million to participate in the federal financial aid program.

The school has also been placed under a form of oversight known as heightened cash monitoring that requires DeVry to provide certain documentation before accessing federal financial aid dollars. And its participation in the financial aid program is now provisional for the next five years.

Is the federal government trying to take down the for-profit college industry?

The robust enforcement agreement is bound to fuel debates over the federal government’s aggressive policing of for-profit higher education. Within the last year, education officials have imposed sanctions that have led companies of all sizes to close down campuses or end operations altogether, including ITT Technical Institutes, Medtech College and Marinello Schools of Beauty. While industry proponents say the Obama administration is trying to decimate the for-profit sector, advocacy groups say action is long overdue after years of consumer complaints about shoddy programs, high loan-default rates and deceptive marketing.

“Students deserve accurate information about where to invest their time and money, and the law is simple and clear: recruitment claims must be backed up by hard data,” Education Secretary John B. King Jr. said in a statement announcing the agreement.

The settlement marks the first time DeVry has faced this level of financial scrutiny. The company has never been subjected to cash monitoring or been forced to post a letter of credit, which is meant to protect students and taxpayers if the school is unable to cover federal student-aid liabilities. DeVry will have to set aside roughly 10 percent of the $684 million it received in federal student financial aid in the 2014-2015 academic year.

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DeVry Education Group, the parent company of the university, released a statement assuring that the settlement in no way hinders its operations and ability to serve students.

“The settlement allows DeVry University to continue communicating its strong student outcomes, while providing assurances regarding the extent of its graduate employment data,” the company said in a statement.

Despite the agreement, DeVry is not disavowing its employment claims. The company noted that it supplied the department with campus-level summaries of graduate data and student-specific data. Education officials said after reviewing the information that there was no evidence to substantiate the 90 percent employment claim.

Federal Trade Commission sues DeVry University for deceptive advertising

That same claim is the basis of a lawsuit the Federal Trade Commission filed against DeVry in January. The agency accuses the university of counting numerous graduates as working in their field when they were not to arrive at the high employment number. A 2012 graduate who majored in business administration was working as a server at a restaurant, while another with a degree in technical management was working as a rural mail carrier, according to the complaint.

The lawsuit also alleges that DeVry misled consumers by claiming its graduates had 15 percent higher incomes one year after graduation than all other colleges and universities. According to the complaint, the school held fast to the claim even though its own internal data showed no meaningful difference between the salaries of DeVry graduates and graduates of other schools. DeVry has denied all of the charges and is fighting the case.

At the same time the FTC filed its lawsuit, education officials instructed DeVry to pull advertisements about post-graduation employment outcomes and notify students of its inability to substantiate the claims, under the threat of losing access to the federal financial aid programs.

Thursday’s agreement only resolves the employment claim, not the earnings statistic that education officials say they are still investigating. The department is pledging continued support of the FTC’s ongoing lawsuit against DeVry.

DeVry voluntarily dials back revenue from federal student aid

In recent months, DeVry has enacted changes aimed at changing public perception of its schools and creating a new standard in for-profit education. A few weeks ago, the company said it would limit the amount of revenue it receives from federal student aid, including veterans and military tuition assistance, getting in front of a controversial issue as the for-profit industry buckles under economic and regulatory pressure. And in May, DeVry joined the University of Phoenix in no longer barring students from filing class-action lawsuits or otherwise taking their grievances to the courts, ending mandatory arbitration clauses that consumer advocates say rob students of their rights.

Want to learn more about for-profit colleges, check out these stories:

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