Market Overview

For-Profit Colleges Cheat Pretty Much Everyone


As if there weren't enough reasons to hate for-profit universities. They suck students into massive student loan debt with a degree that might prove useless — particularly if the latest allegations about widespread cheating and academic shenanigans proves true.

According to the Government Accountability Office, seven of twelve for-profit colleges were caught in a massive cheating and fraud scandal. They were caught by government investigators, who went undercover to determine the level of cheating at these for-profit colleges. What they found is that a majority of the colleges violated their own "rules" on cheating, loan counseling, and grading standards.

For example, two of the colleges had instructors who noted, on more than one occasion, that students submitted plagiarized work — an academic felony at most institutions. Yet, nothing was done to punish the students. The report even highlighted one student's essay response that consisted of little more than photographs of celebrities and political figures. That student earned a passing grade.

The problems started well before students were cheating their way through classes. According to the report, the investigators were able to enroll themselves into the colleges with blatantly falsified high school records.

Per the report, "GAO attempted to enroll its students using fictitious evidence of high-school graduation--either a home-school diploma or a diploma from a closed high school--at all 15 colleges and successfully enrolled in 12. Two declined GAO's request for enrollment based on insufficient proof of high-school graduation. Another allowed GAO's student to begin class, but rescinded acceptance after 1 week, citing lack of high-school accreditation."


This report is another black mark on the entire for-profit education industry. One of its biggest critics, Iowa Senator Tom Harkin, has been leading the charge to investigate the practices of these institutions. In a statement, Harkin said “The findings of this report underscore the need for stronger oversight of the for-profit education industry in order to ensure that students and taxpayers are getting a good value for their investment in these schools.”

Considering that students at these schools also receive federal student loan funding, you can expect that the schools will remain under a microscope. It's possible that there could be long-term effects for the companies that own and operate these schools. Here are a few of the larger stocks that deal with for-profit education.

  • The Apollo Group (NASDAQ: APOL) operates The University of Phoenix, Institute for Professional Development, The College for Financial Planning Institutes Corporation, and Meritus University, Inc.
  • Education Management Corp (NASDAQ: EDMC) offers academic programs to its students through campus-based and online instruction, or through a combination of both. The Company's educational institutions offer students undergraduate and graduate degrees, including doctoral degrees, and certain specialized non-degree diplomas in a range of disciplines.
  • Devry (NYSE: DV) is a provider of educational services and the parent organization of Advanced Academics, Becker Professional Education, Carrington College and Carrington College California, Chamberlain College of Nursing, DeVry Brasil, DeVry University, and Ross University.
  • ITT Educational Services (NYSE: ESI) is a provider of postsecondary degree programs in the United States. As of December 31, 2010, the Company offered master, bachelor and associate degree programs to approximately 84,000 students.
  • Bridgepoint Education (NYSE: BPI) operates two colleges: Ashford University and the University of the Rockies, which are regionally accredited academic institutions that offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. These institutions deliver programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado.

You can find the full report here.

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