Fraud and For-Profit Universities

If ongoing events at two such institutions are any indication, the answer to this question is “yes.”

California Attorney General Xavier Becerra recently filed suit against Ashford University.  According to court documents, counselors subjected prospective students to high-pressure tactics; former employees described the company’s culture as “grimy,” “brutal,” and “a money grab.”  To fulfill unrealistic expectations, counselors supposedly told prospective students that they could spend their student loan money on luxury items and misled them about their future job prospects.

Similar allegations plagued the now-defunct Trump University.  In 2016, Mr. Trump agreed to pay $25 million to former students who said they learned almost nothing at the institution, even though school officials claimed that Mr. Trump “hand-picked” the instructors.  Now, one woman wants a federal appeals court to undo the settlement so that she may pursue further action against Mr. Trump for the sake of “public accountability.”

Fraud in Schools

The allegations against Ashford University and Trump University sound all too familiar to attorneys who often represent the victims of these for-profit colleges.  Since they usually have low endowments, these institutions are almost entirely dependent on tuition and fees for operating revenue.  Therefore, they do anything possible to increase that revenue, even if it means misleading potential students about the college’s benefits and even committing fraud.

Essentially, fraud is a damaging lie.  Therefore, fraud undercuts the very nature of an agreement between two people.  The elements are:

  • Misstatement: Sometimes, the statement at issue is an outright lie. But more often than not, the statement is technically true but highly misleading.  For example, a college might claim that 90 percent of its graduates are employed, but that statistic counts anyone who has any job as opposed to former students who work in their field of study.
  • Material Fact: Job placement is clearly material to postsecondary education. On the other hand, a statement about the quality of food in the dormitory cafeteria is probably not material.
  • Reliance: The victim must give the school money because of the material misstatement or must take other action in reliance on the statement, such as moving to another state or turning down another offer from another college.
  • Damages: To obtain compensation, the victim must suffer a physical injury, usually in the form of lost money or opportunity.

Many former students at for-profit universities have problems repaying their student loans, and that can be how they satisfy the damages element.

Fraud is present in many contracts. For a free consultation with an experienced litigation attorney, contact Butler Tobin. We do not charge upfront legal fees in these cases.

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