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DeVry University Hit With $100 Million FTC Fine Over Misleading Students

DeVry University Hit With $100 Million FTC Fine Over Misleading Students

DeVry Education Group Inc (NYSE: DV) shares are on upsurge after the company announced a settlement agreement with the Federal Trade Commission regarding misrepresenting ads.

The Lawsuit

The FTC had pulled up the company for issuing ads that misled prospective students regarding high employment success rates and income levels upon graduation.

The Settlement

The company has agreed to pay $100 million in settlements, with $49.4 million to be paid in cash to qualifying students and $50.6 million in debt relief. DeVry is to notify the students who will be receiving debt relief and inform credit bureaus and collection agencies of the debt forgiveness.

The debt forgiveness will constitute $30.35 million in full balance owed by undergraduates to whom DeVry issued loans between September 2008 and September 2015 and $20.25 million in debts traced to tuition, books and lab fees.

"When people are making important decisions about their education and their future, they should not be misled by deceptive employment and earnings claims," said FTC chairwoman Edith Ramirez. "The FTC has secured compensation for the many students who were harmed, and I am pleased that DeVry is changing its practices."

With the regulatory overhang now behind, DeVry can move ahead with no legal entanglements, which explains the positive sentiment towards the stock today.

Meanwhile, in an 8-K filing on November 25, Apollo Education Group Inc (NASDAQ: APOL) said its University of Phoenix higher education institution ceased enrolling new students in programs that could be impacted by gainful employment regulations. This would mean cessation of 20 percent of the University's total degree enrollment as of August 31, 2016.

The announcement came after 16 percent of the University's total degree enrollment was found wanting in the draft gainful employment debt service-to-earnings ratios provided to it by the Department of Education in late October 2016.

Stocks of for-profit colleges having a rough ride due to federal and state regulators' clamp down on their recruitment and student financial aid practices found some relief from Donald Trump's election. The reasoning? Trump may loosen some of the regulatory shackles that had curbed enrollments and limited profitable lending practices.

At the time of writing, DeVry was advancing 2.59 percent to $31.65 and Apollo was up 0.10 percent at $9.76.

Image Credit: By Daderot, Public Domain, Wikimedia Commons


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