Education Department Reportedly Probes For-Profit Colleges

Thursday, 28 Apr 2011 06:39 PM

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The U.S. Department of Education is investigating the practice in which investors, in effect, bet on the failure of for-profit colleges, reports, citing unnamed sources.

The department hopes the investigation will determine whether investors’ short selling influenced how it regulated the career-college industry and whether investors obtained inside information about its actions.

Career schools are under the microscope amid mounting complaints that they gave misleading expectations to prospective students. The department has not confirmed that it is investigating the industry, although it is drawing up new regulations.

Ann Weismann of Citizens for Responsibility and Ethics in Washington says her organization has found documentation supporting allegations of short selling.

“First, the department has given a very bland, across-the-board assurance that everything is fine, suggesting that no one inside the department wanted to take a hard look,” Weisman told “Second, since the congressional request, we have uncovered more evidence of a collusive effort to give people advance knowledge.”

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