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Investigators probe company marketing for-profit colleges to vets

 
They say consumers might believe websites are affiliated with government

Attorneys general in 15 states are investigating QuinStreet, a Foster City-based Internet marketing company that connects its for-profit college clients with service members and veterans looking to spend their military education benefits.

In their inquiry, the investigators expressed concerns that QuinStreet's marketing websites, such as www.GIBill.com and www.ArmyStudyGuide.com, mislead consumers into believing that the sites are affiliated with the government or that the for-profit colleges recommended by the sites are the only ones that accept subsidies such as the GI Bill or Tuition Assistance, which is for service members on active duty.

According to QuinStreet's most recent quarterly report filed May 8, Kentucky Attorney General Jack Conway is leading the multi-state inquiry into the company, with attorneys general in Alabama, Arizona, Delaware, Florida, Idaho, Illinois, Iowa, Massachusetts, Minnesota, Nevada, North Carolina, Oregon, South Carolina and Tennessee joining the investigation.

Conway is also leading a group of 26 state attorneys general who are investigating the for-profit college industry in general.

A Google search of "GI Bill college" leads consumers to the QuinStreet website www.GIBill.com, which shows up right next to the official Veterans Affairs website, www.gibill.va.gov. The QuinStreet website prompts visitors to search for "military-friendly colleges" or "GI Bill Schools," but the resulting list includes only for-profit colleges, such as Carrington College or Empire College in Santa Rosa.

In fact, the GI Bill covers the full cost for in-state students at public colleges and universities and up to $17,500 for tuition and fees per year at private schools.

Allison Gardner Martin, spokeswoman for the Kentucky attorney general's office, said she couldn't confirm or deny the existence of an investigation into QuinStreet. But speaking generally, she said Conway is looking into companies that promote for-profits.

"Of particular concern to the attorney general are websites that look and feel to be official government websites, when they are, in fact, clearinghouses and marketing tools for for-profit colleges," Martin said.  

Military personnel are a particularly attractive pool of potential new students for colleges. The Post-9/11 GI Bill expanded benefits to more service members than previous packages and enabled educational benefits to be passed along or shared with a spouse or child.

In addition to the potential for new enrollments and the accompanying growth in tuition revenues, enrolling service members and veterans who use their education benefits helps colleges to meet a regulatory requirement.

The "90/10" rule was intended to prevent for-profit colleges from relying solely on federal financial aid dollars. It requires that no more than 90 percent of an institution's revenues come from federal aid. But GI Bill and Tuition Assistance benefits are exceptions to the law and don't count toward the 90 percent.

For-profit colleges have seen a huge increase in the amount of military education benefits they receive. According to a December 2010 report [PDF] by U.S. Sen. Tom Harkin, D-Iowa, the combined Veterans Affairs and Department of Defense education benefits received by 20 for-profit education companies increased from $66.6 million in 2006 to a projected $521.2 million in 2010, an increase of 683 percent.

With nearly half of its revenue coming from clients in the for-profit college sector, QuinStreet also has enjoyed increased profits. The company, which had its initial public offering in 2010, reported revenues of $403 million in 2011, according to the company's most recent annual report. QuinStreet CEO and Chairman Douglas Valenti was paid $1.1 million in salary, incentives and other pay in 2011.

In its quarterly report, QuinStreet said the company is cooperating with the inquiry but can't yet assess the outcome or impact of the investigation. Officials with QuinStreet did not respond to requests for comment.

The company has, however, changed its GIBill.com website since first receiving inquiries from the attorneys general. While the current version of the website prominently states that it is "a non-government privately sponsored website," an archived version of the website from July 2011 does not include the disclaimer.

"I would say some websites have likely changed their content after being contacted by the office of the attorney general," Martin said. "But our efforts are still ongoing."

While California is not on the list of states investigating QuinStreet, California Attorney General Kamala Harris was one of 21 attorneys general to sign a letter last week urging lawmakers to change the 90/10 law so that military benefits are counted toward the 90 percent.

The letter to the Senate Committee on Health, Education, Labor & Pensions pushed for closing the "apparent loophole" in federal law, saying it creates a harmful incentive for for-profit schools to target military men and women.

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