Education Department Announces Use of Secret Shopping to Protect Students, Crack Down on Institutions that Lure Students with Lies  

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Education Department Announces Use of Secret Shopping to Protect Students, Crack Down on Institutions that Lure Students with Lies  

Builds on Biden-Harris Administration’s ongoing commitment to holding low-performing and predatory schools accountable
March 14, 2023

The U.S. Department of Education (Department) announced today that the Enforcement Office of Federal Student Aid (FSA) will use secret shoppers as an additional tool to monitor postsecondary institutions’ compliance with the laws and regulations governing their participation in the federal student aid programs. In particular, secret shoppers will evaluate recruitment, enrollment, financial aid, and other practices of postsecondary institutions to help identify potentially deceptive or predatory practices used to recruit and enroll students.

“Secret shopping is another tool in FSA’s toolbox as we expand our oversight work to hold predatory schools accountable,” said FSA Chief Operating Officer Richard Cordray. “Our focus—as always—is to ensure that students, borrowers, families, and taxpayers are not being preyed upon to make a quick buck.”

Specifically, secret shoppers will look for misrepresentations regarding the transferability of credits, job placement rates, completion and withdrawal rates, graduates’ future earning potential, career services, the cost of attendance, the amount of federal student aid, and accreditation status, along with any other practices that may violate the laws and regulations governing an institution’s participation in the federal student aid programs.

Findings from secret shopping may serve as evidence to support an ongoing investigation or review, or provide a basis for opening a new investigation or review. Where appropriate and permitted, FSA will refer findings from its secret shopping efforts to other Department offices, including the Office of Inspector General, and share findings with other law enforcement partners at the state and federal levels.

“Schools that engage in fraud or misconduct are on notice that we may be listening, and they should clean up accordingly,” said Kristen Donoghue, FSA’s chief enforcement officer. “But schools that treat current and prospective students fairly and act lawfully have nothing to fear from secret shopping.”

Improving Student Outcomes by Bolstering School Oversight

This work represents some of the latest progress on the Biden-Harris Administration’s ongoing commitment to improving student outcomes, including by holding low-performing and predatory schools accountable for swindling students out of time and money and leaving taxpayers holding the bill.

In October 2021, the Department reinvigorated school oversight and accountability efforts within FSA by reestablishing an Enforcement Office and hiring a chief enforcement officer, who reports directly to FSA’s chief operating officer. That has already paid dividends. For example, in fiscal year 2022, FSA:

  • Initiated dozens of actions, including denying 10 school recertifications; revoking six Provisional Program Participation Agreements, which enable schools to participate in the Title IV program; and issuing two terminations, five suspensions, seven debarments, and eighteen fines totaling $2.5 million;
  • Opened new investigations into fraud and deceptive practices at multiple schools and completed related site visits;
  • Strengthened its relationships with state and federal partners, including the Federal Trade Commission, Consumer Financial Protection Bureau, Department of Veterans Affairs, and state attorneys general, to identify and take action against schools that do not put their students’ interests first; 
  • Released guidance outlining how it will implement long-standing provisions in the Higher Education Act that grant the Secretary authority to require leaders of private colleges that fail to operate in a financially responsible way to assume personal liability for the cost of unpaid debts owed to the Department of Education; and
  • Approved group discharges based on borrower defense findings, providing approximately $11.4 billion in relief to 875,000 students who attended Corinthian Colleges, Inc., ITT Tech, Marinello Schools of Beauty, and Westwood College.

In addition to today’s secret shopper bulletin, FSA issued two other enforcement bulletins to bolster school compliance and better communicate with outside stakeholders. The first bulletin warned schools that the Department will act aggressively when it finds misrepresentations made to servicemembers and veterans by schools. FSA’s chief enforcement officer also wrote about the Department’s commitment to protecting military-connected students. The second bulletin announced a new avenue for knowledgeable sources to submit tips about potential violations of the laws and regulations governing the federal student aid programs. 

FSA conducts oversight to protect students who receive federal student loans, grants, and work-study funds to attend postsecondary schools. FSA’s oversight also ensures the quality of educational programs and safeguards the interests of taxpayers through audits, investigations, and program reviews, among other oversight actions.