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trump university

Allegations from former employees of the now defunct Trump University that the for-profit school was a “fraudulent scheme” and “a total lie” surfaced Tuesday when court documents related to a lawsuit were released by a judge.

Boiler room-like pressure tactics that “preyed upon the elderly and uneducated” were among the charges leveled and have led to denials by Republican presidential candidate, Donald Trump who said Trump University students got their money’s worth.


Scrutiny Elsewhere

Attention being paid to the Trump University lawsuit has renewed focus on government and public concern about other players in the for-profit education industry.

This scrutiny, along with an overall 28% decline in enrollment has increased default risks on up to almost $1.9 billion in commercial mortgage-backed securities, according to analysts at Morningstar Credit Ratings.

Other Schools In The Spotlight

Apollo Group (:APOLN/A) subsidiary, the University of Phoenix, Inc., the largest for-profit higher education institution in the U.S., has been investigated for its marketing and recruiting practices. Enrollment at the university, which peaked in 2010 at 470,800 had dropped to 179,600 by February of this year.

In addition to the University of Phoenix, Capella Education Company (:CPLAN/A) along with Devry Education Group, Inc. Stock not found DV and Strayer Education, Inc. (NASDAQ:STRAB) have also been under investigation by multiple federal and state agencies for deceptive recruiting and questionable business practices. In fact, DeVry’s CEO resigned recently in the wake of a lawsuit against the company by the Federal Trade Commission for deceptive advertising regarding job placement.

Career Education Corp. (NASDAQ:CECOC) has been under investigation by the FTC and the Securities and Exchange Commission, as well as the attorneys general of 21 states and the District of Columbia. In 2013 CECO agreed to pay more than $10 million to settle charges of inflated job placement rates brought by New York’s attorney general.


Investing In For-Profit Education

Although government investigations, lawsuits and public sentiment matter greatly, there’s more to consider than just those things.

On the plus side, there’s an almost unlimited customer base in the form of workers who need retraining to find a spot in an economy in transition. Public companies that are able to use market principles to make the product (education) more effective can do well.

The risks are significant. Most experts seem to feel that for-profit higher education entities that find a niche and don’t try to be an online version of Stanford or MIT have the greatest chance for success.

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