FTC Sues DeVry Education Over Allegedly Deceptive Ads

WASHINGTON—Federal regulators took aim at another major for-profit chain of colleges Wednesday, suing DeVry Education Group Inc. for allegedly running false television and online advertisements about the employment success and earnings of its graduates.

The Federal Trade Commission, one of several agencies investigating the for-profit education industry, faulted DeVry advertisements that claim 90% of its graduates who sought jobs found them in their field of study within six months of graduation. For example, it accused the school of including business-administration graduates who found retail jobs like selling cars or waiting tables as having found work in their field.

The commission asked a federal judge in California for monetary remedies—including refunds and restitution—for potentially as many as 50,000 students who enrolled at the company's various campuses since 2008, the period under scrutiny.

The FTC's lawsuit also seeks to bar DeVry from using faulty statistics in its advertisements.

Illinois-based DeVry, one of the nation's largest for-profit education chains by sales, denied the allegations and said it would vigorously contest the lawsuit. "DeVry University measures the employment and income of its graduates on a sound, rational and transparent basis, and has published these results in a consistent manner over the years," the company said.

DeVry's shares sank 15% in New York Wednesday.

Student-advocacy groups and individual borrowers are pushing the federal government—which backs most of the nation's $1.2 trillion in student debt—to forgive the debt of borrowers who attended for-profit schools. Thousands of Americans have petitioned the government to cancel their loans on the grounds they were deceived by their institutions.

"Educational institutions owe it to prospective students to tell the truth about whether their courses will help them obtain the jobs they want in their chosen fields," said FTC Chairwoman Edith Ramirez.

Ted Mitchell, undersecretary of education, said the Education Department was conducting a related investigation of DeVry. He added that the department is still working on rules specifying when aggrieved borrowers can have their loans forgiven.

The DeVry lawsuit is part of an effort by federal and state officials to root out what they characterize as overaggressive—and deceptive—recruiting tactics by for-profit colleges. Officials say those tactics helped fuel a surge in for-profit school enrollment in the past two decades—particularly among poor and vulnerable Americans—helping drive up student debt.

Many of those students now are defaulting on their loans, largely because they can't find the lucrative careers they were promised, federal officials say.

Corinthian Colleges Inc. liquidated in bankruptcy last year amid federal and state probes into similar allegations involving that company.

In November, Education Management Corp., owner of the Art Institutes, agreed to pay $95.5 million to settle Justice Department claims that it unlawfully paid admissions workers solely on the basis of the number of students they enrolled.

In addition to questioning DeVry's job-placement claims about its graduates, the FTC also faults a claim that its graduates earned 15% more than those from other schools.

DeVry says it calculates its graduates' job success using a method similar to one hod that was recently endorsed by attorneys general in 39 states. "DeVry University's measures are more rigorous and further substantiated than most" other schools, the company said.

The DeVry case also touches on what student advocates have decried as a lack of data and standards across higher education to help students decide which school to attend and how much to borrow. There are no federal rules on how colleges should calculate their graduates' employment status, said the Education Department's Mr. Mitchell.

Write to Josh Mitchell at joshua.mitchell@wsj.com and Brent Kendall at brent.kendall@wsj.com

(END) Dow Jones Newswires

January 27, 2016 21:15 ET (02:15 GMT)

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