In recent years, more than two dozen companies that run for-profit colleges have been investigated or sued by state prosecutors. To handle the load, 37 state attorneys general have teamed up to form a working group. Together, the 152 schools under investigation received about $8.1 billion in federal student loan and grant payments last fiscal year, according to a detailed analysis by Mr. Miller for The New York Times, using data provided by the Education Department. One of those is Alta Colleges, partly owned by the Boston private equity firm Housatonic Partners. Alta, which operates campuses and an online division in several states, is being sued by the Illinois attorney general, who claims the colleges engaged in “deceptive, unfair and abusive practices in the marketing and selling of their criminal justice program,” a three-year degree that costs $75,000, according to the complaint. Students were promised they would be primed for careers as police officers, sheriffs, corrections officers and FBI agents, but only 3.8 percent of graduates were actually employed as sworn law enforcement officers or correctional officers, the lawsuit states. The two most common jobs for graduates of the criminal justice program were as security guards or in retailing, positions that typically require only a high school or equivalency diploma. Alta schools received more than $104 million in federal aid in the last school year. Alta filed papers in court denying the allegations. The company did not return several phone calls seeking comment. Other schools under investigation complain they are the target of a witch hunt. Chris Hardman, senior vice president for communications at Education Management, said that the company was cooperating with prosecutors but that many of the investigations related to past recruiting practices. “We are dedicated to providing the opportunity for an education that, were it not for schools like ours, many of our students might never achieve,” Mr. Hardman said. Other schools, including Lincoln Technical Institute and Kaplan Career Institute in Massachusetts, have negotiated settlements with state prosecutors.
The U.S. Department of Education has not cut off federal funding to schools that have been targeted by state attorneys general, the Consumer Financial Protection Bureau, the Justice Department, or the Securities and Exchange Commission on grounds of suspected fraud. But it is unclear whether any such action will be taken against Corinthian Colleges, which was founded in 2003 with a promise to help students pay for college. Furthermore, the report alleges that for-profit colleges have been manipulating their student outcome data to obscure their worst-performing campuses, and thus going on to receive hundreds of millions of dollars in federal student aid.