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For-Profit Colleges' Marketing Firm Is Target Of Inquiry By Attorneys General

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President Barack Obama speaks to soldiers at the Fort Stewart Army post in Georgia, where he discussed an executive order meant to crack down on unscrupulous colleges targeting veterans and their federal tuition benefits.
President Barack Obama speaks to soldiers at the Fort Stewart Army post in Georgia, where he discussed an executive order meant to crack down on unscrupulous colleges targeting veterans and their federal tuition benefits.

The explosive enrollment growth of for-profit colleges in recent years has been aided by the lead-generation industry, a little-known collection of online marketing companies that aim to connect salespeople with the phone numbers and emails of potential customers.

For-profit colleges have already come under fire for aggressive recruiting tactics targeting veterans and low-income students eligible for government loans and grants. Now, one of the nation's largest lead generation companies has disclosed that attorneys general in 15 states have inquired about marketing websites directed toward veterans who have earned generous federal tuition benefits.

QuinStreet Inc., of California, noted in a securities filing last month that the company had received an investigative demand letter from Kentucky Attorney General Jack Conway and others. The letters questioned whether QuinStreet sites including www.gibill.com and www.armystudyguide.com, which serve largely as advertising platforms for for-profit colleges, were misleading to veterans returning from Iraq and Afghanistan.

"The attorneys general expressed concerns that the websites could mislead consumers into believing that the websites are affiliated with the with the government or that the featured schools are the only ones that accept scholastic subsidies," read the recent QuinStreet filing, which was first noted by California Watch.

Conway is leading a multi-state probe investigating potential consumer protection violations by for-profit colleges.

"Generally speaking, I have serious concerns about any business masquerading as a government entity that is really a funnel for the for-profit college industry," Conway wrote in an e-mailed statement. "It is an issue that has garnered my attention and the attention of several attorneys general." He would not confirm the existence of any investigation.

QuinStreet executives did not return a phone call seeking additional comment.

In recent months, members of Congress and President Barack Obama have weighed in with concerns about unscrupulous sales tactics employed by colleges seeking to capitalize on billions of dollars in federal benefits going to active-duty members of the military and veterans.

In an executive order issued in April, Obama directed the Department of Veterans Affairs to pursue a registered trademark of the term "GI Bill" to prevent companies from designing websites that appear to be sanctioned by the government.

QuinStreet's site, www.gibill.com, connects users to a list of "military-friendly colleges," most of which are for-profit schools. Another QuinStreet site, armystudyguide.com, lists "GI friendly colleges" at the bottom. All are for-profit schools.

According to QuinStreet's filings with the Securities and Exchange Commission, the company receives nearly half of its revenue from education companies, and "nearly all of that revenue is generated from for-profit educational institutions."

Recently, gibill.com has posted a disclaimer on the site that reads, "This website is not affiliated with the U.S. government or military." Earlier this year, there was no such disclaimer.

As for-profit colleges have faced increased government scrutiny, lead generation companies have been squeezed. Last summer, the Department of Education stepped in with stricter rules meant to crack down on misleading advertising at for-profit colleges, making schools liable for deceptive statements made by third-party marketers.

Doug Valenti, the chief executive of QuinStreet, told investors in a recent conference call that the regulations "are continuing to create uncertainty and to affect client marketing approaches and effectiveness."

Military members are a particularly attractive group of students at for-profit colleges because their tuition benefits, such as the GI Bill, don't count as federal student aid dollars. By law, colleges can receive no more than 90 percent of revenues from student aid programs.

Many for-profit college corporations receive the vast majority of their revenues from federal loans and grants, which means they struggle to comply with the 90 percent rule. Because of a wrinkle in federal law, veterans benefits count toward the non-federal 10 percent required by law.

Veterans' advocates and many in Congress have argued this gives schools an incentive to actively pursue military students.

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