Attorneys general in 20 states announced a settlement Wednesday with an online marketing company that aims to connect for-profit college recruiters with veterans who have generous educational benefits from the government.
The group of top prosecutors claimed that QuinStreet Inc. uses "false, deceptive and misleading representations," such as the domain name www.gibill.com, that have the potential to deceive users into believing that the site is somehow endorsed by the federal government.
"If you were to Google 'GI bill,' the first thing that would come up is this web site," said Kentucky Attorney General Jack Conway (D), who led the inquiry into QuinStreet and has initiated a multi-state probe of potential consumer protection violations at for-profit colleges. "It looks official. It looks like a website that would be owned and operated by the U.S. government, much like goarmy.com. It was masquerading as a website for veterans."
As part of the settlement agreement, QuinStreet will turn over the gibill.com website to the Department of Veterans Affairs and pay $2.5 million to the states involved.
QuinStreet, based in California, is one of the largest companies in the so-called lead generation business, an assortment of online marketing firms that has helped fuel the meteoric rise in enrollments at for-profit colleges over the last decade. Websites owned by QuinStreet and other lead generators serve as advertising platforms for some of the largest for-profit education companies, where users supply contact information that is then beamed to recruiters at colleges that pay for the leads.
The attorneys general argued that QuinStreet's military-related marketing sites -- which feature domain names like us-army-info.com and photographs of uniformed men saluting -- gave the impression that the schools listed were the only ones that would accept tuition benefits from the "Post-9/11 GI Bill," a multi-billion dollar grant program put in place in 2008 for returning veterans from Iraq and Afghanistan. In reality, the for-profit colleges listed were QuinStreet's clients.
As part of the agreement, QuinStreet admits no wrongdoing. In a statement released Wednesday, the company said it "does not engage in deceptive marketing practices and does not believe that its websites were misleading prior to the agreement." The company added that the gibill.com site "has never been a material contributor to QuinStreet revenue."
"QuinStreet believes that entering into the agreement provides greater clarity and certainty, and avoids a potentially longer, more costly and distracting process," the release read.
The company disclosed in a May Securities and Exchange Commission filing that it had received an investigative demand letter from Conway and other attorneys general regarding the military education sites.
Veterans groups and members of Congress have stepped up criticism of for-profit colleges over the past year, arguing that such schools are targeting service members -- and their generous federal tuition benefits -- as a way of increasing revenues.
"Using one of these lead-generator sites is extremely unlikely to assist veterans in making an informed choice between different types of schools," said Holly Petraeus, assistant director for the Office of Servicemember Affairs at the Consumer Financial Protection Bureau. "Instead, no matter what the veteran's educational goals or financial situation, the recommendation always seems to be that they attend a for-profit school that is paying for the site, even though it may cost more and have higher student-loan default rates and lower graduation rates."
Not only do GI Bill benefits represent a new pot of federal money, but the military benefits provide an opportunity for such schools to receive even more revenue from the federal government in form of student loans and Pell Grants.
By law, for-profit colleges must receive at least 10 percent of revenue from sources other than federal student aid. Many schools struggle to comply with the regulation.
Yet because of a wrinkle in federal law, the military benefits aren't counted as federal aid dollars, allowing schools to consider GI bill and other military money as part of the non-federal 10 percent category.
Representatives of the for-profit college industry have argued that they "proudly serve" military and veterans, providing an important service. When President Obama announced an executive order in April asking for more transparency at colleges marketing to veterans, an industry trade group called it a "deeply unfortunate development."
"The fact is that the vast majority of private sector schools provide curriculum and training that prepares our men and women in uniform for successful careers in civilian life," read the statement from Steve Gunderson, president and chief executive of the Association of Private Sector Colleges and Universities.
In addition to handing over the gibill.com domain, QuinStreet must provide additional disclosures on its websites to ensure users understand that the site is not affiliated with the military. If one of the sites provides a listing of schools, the site must include a disclaimer that reads: "sponsored listing" or "sponsored results." The sites also must remove any claims that certain schools are "right for you" or "best meets your needs," according to the settlement agreement.
Lead generation companies over the years have flocked to the for-profit higher education market, which has been growing at a rapid rate as legions of jobless Americans seek to improve their lives through education.
Between 1999 and 2009, enrollment at for-profit colleges more than tripled, far outpacing the growth of traditional higher education, which grew by only a fifth, according to an analysis of federal data from the Education Trust, a student advocacy group. For-profit schools devote substantial resources to marketing expenses -- 23 percent on average, according to a Senate analysis of the 15 largest publicly-traded, for-profit education companies.
According to QuinStreet's filings with the SEC, the company receives nearly half of its revenue from the education marketing business, and "nearly all of that revenue is generated from for-profit educational institutions."
In the statement, QuinStreet noted that as for the bottom-line of selling leads, "the new disclosures and disclaimers under the agreement could negatively affect [business]."