KY. AG Issues Subpoenas to 6 For-profit Colleges

State Attorney General Jack Conway issued civil subpoenas Wednesday to six for-profit colleges in Kentucky seeking information regarding student loans default rates, recruitment practices and job placement promises.

Conway told reporters at a Capitol press conference that his office has launched a consumer protection investigation into what he termed "questionable business practices."

"I think this is an issue that affects the hopes and the dreams and the pocketbooks of thousands of Kentuckians who are simply trying to build a better life for themselves and their families," Conway said.

He declined to name the schools that received the subpoenas pending the outcome of the investigation.

For-profit colleges have faced increased nationwide scrutiny in recent months for some questionable recruiting tactics, high loan default rates, and low graduation and job placement rates. The government is taking notice because for-profit colleges are bringing in record amounts of federal aid money — $26.5 billion last year, up from $4.6 billion in 2000.

Conway said Kentucky, with a jobless rate of about 10 percent, has proven to be "fertile ground" for such colleges. More than 100, he said, are now operating in the state.

"The information we’ve obtained so far about the business practices employed by some of these proprietary colleges is troubling," Conway said in a statement.

Based in part on complaints from students, the attorney general issued the subpoenas that also called for information regarding how student financial aid is managed and dispersed, the transferability of course credits to other schools, and accreditation.

"I want to make sure these institutions are as interested in educating their students as they are in collecting federal loan money," Conway said in a statement. "I want to make sure students aren’t being misled and left owing tens of thousands of dollars in student loans for credits that don’t transfer or a degree that will not benefit them."

State investigators have been involved in at least two previous legal cases involving for-profit colleges in Kentucky.

The attorney general’s office got an estimated $3.6 million in loan reductions for students of the now defunct American Justice School of Law in Paducah, and got a U.S. bankruptcy trustee to forgive more than $4.5 million in debt for 2,200 students of the defunct Decker College.

BLOOMBERG