FTC warns of ‘significant financial penalties’ if for-profit colleges deceive students

The Federal Trade Commission (FTC) is warning of “significant financial penalties” to for-profit colleges if they deceive students.

The commission announced Wednesday that it is using its penalty authority to impose “significant sanctions” on schools that engage in unlawful practices and that such practices could lead to civil penalties of up to $43,792 per violation.

The commission said it notified 70 for-profit higher education institutions that it is “cracking down on any false promises they make about their graduates’ job and earnings prospects and other outcomes and will hit violators with significant financial penalties.”

This is the first time the FTC is using the penalty authority to protect students, the commission said. Complaints to the FTC regarding education-related issues surged approximately 70 percent between 2018 and 2020.

The FTC is targeting specific claims that institutions make about the percentage of graduates who get jobs in the field they want, whether the school can help its graduates get a job and how much money a graduate can expect to earn.

“For too long, unscrupulous for-profit schools have preyed on students with impunity, facing no penalties when they defraud their students and drive them into debt,” said FTC Chair Lina Khan said in a statement. “The FTC is resurrecting a dormant authority to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers.”

The Biden administration has been aggressively forgiving student loan debt for defrauded students.

In late August, the Education Department said it approved more than $9.5 billion in loan discharges. Of this, $1.5 billion are in borrower defense claims, which is intended to protect students who were defrauded.