WASHINGTON -- Four for-profit colleges encouraged undercover applicants to commit fraud, and all 15 visited by undercover investigators made "deceptive or otherwise questionable statements," according to a report by the Government Accountability Office released Wednesday.
The pervasive nature of the problems found by the GAO appeared to contradict the for-profit industry's previous assertion that problems in the sector are limited to a few bad apples, senators said.
"GAO's findings make it disturbingly clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight," Sen. Tom Harkin, D-Iowa, said Wednesday at a hearing by the Senate's Health, Education, Labor and Pensions Committee.
"To the contrary, the evidence points to a problem that is systemic to the for-profit industry."
The so-called for-profit colleges differ from traditional colleges in that they are operated as publicly traded companies.
Westech College in California, Medvance Institute in Florida, Anthem Institute in Pennsylvania and Westwood College in Texas, all privately owned schools, allegedly encouraged undercover applicants to commit fraud to qualify for federal aid.
The colleges were not named in the GAO report but were identified by the committee Wednesday.
The investigators told the colleges they had $250,000 in the bank.
"Although we had enough money to pay for this, they told us to commit fraud so the federal government would pick up the tab," said Gregory Kutz, managing director of forensic audits and special investigation for the GAO.
The Career College Association, which represents for-profit colleges, said it found the results of the GAO investigation to be "deeply troubling" and would take steps immediately to help its members comply with regulations.
"Even if the problems cited in the GAO report are limited to a few individuals at a few institutions, we can have zero tolerance for bad behavior," CCA President Harris Miller said in a statement.
The GAO investigation raised questions about some of the largest companies in the industry.
Those schools included University of Phoenix campuses in Pennsylvania and Arizona; Everest College (owned by Corinthian Colleges) campuses in Arizona and Texas; Kaplan College campuses in Florida and California; and the Westwood College campus in Texas.
The University of Phoenix, which has more than 400,000 students on campuses throughout the country, allegedly encouraged an undercover applicant to take out federal loans that he did not need, and provided an inflated graduation rate.
Apollo Group, which owns the University of Phoenix, has begun its own investigation into the GAO findings, spokesman Manny Rivera said in a statement.
Westwood College said it was appalled by the findings of the investigation and would terminate employees who did not follow its "strict code of conduct."
At Congress' request, the GAO attempted to determine whether for-profit colleges engaged in fraud, deception or questionable marketing practices.
The GAO selected schools that received nearly 90 percent of their revenue from federal student aid or were located in states that received the most federal funding, among other factors.
GAO investigators posing as prospective students documented their experiences with cameras hidden in hats and portfolios.
According to the report, an admissions representative at MedVance Institute in Florida noted that unlike car loans, "no one will come after you if you don't pay."
Several admissions representatives tried to pressure undercover applicants into signing enrollment contracts before speaking with financial aid officers.
Some admissions officers provided accurate and helpful information to undercover applicants, Kutz noted.