Lawsuit Against 'Trump University' Puts For-Profit Schools in the Cross Hairs Again

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FILE- In this May 23, 2005 file photo, real estate mogul and Reality TV star Donald Trump, left, listens as Michael Sexton introduces him at a news conference in New York where he announced the establishment of Trump University. New York Attorney General Eric Schneiderman is suing Trump for $40 million, saying that ?Trump University? didn?t deliver on its advertised promise to make students rich, but instead steered them into expensive yet mostly useless seminars. (AP Photo/Bebeto Matthews, File)
Bebeto Matthews, AP file
Donald Trump is no amateur when it comes to dispensing tough criticism, but on Saturday, he was on the receiving end of a hard hit when the New York State attorney general's office filed a lawsuit against his eponymous real estate school, The Trump Entrepreneur Initiative -- formerly known as Trump University. As the Donald faces civil litigation and demands for at least $40 million in restitution, the legal actions points another harsh spotlight on the for-profit education industry.

For-profit schools have been under attack for years, and with good reason. As DailyFinance's Brian Stoffel recently noted, the industry was dealt a crushing blow in 2010, when the General Accounting Office released a report titled "For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices." To put it mildly, the GAO's findings have been devastating for the industry: Since 2010, enrollments at The University of Phoenix, the top for-profit institution, have fallen by 37 percent. In March, Apollo Group (APOL), the company that runs The University of Phoenix, announced that its quarterly earnings were down 79 percent from a year earlier. And since early 2010, Apollo stock has shed more than two-thirds of its value.

But while most for-profit schools have watched their credibility crumble, Trump University has been able to trade the name on its famous founder -- so far.
Admittedly, it had to officially rename itself The Trump Entrepreneur Initiative in 2010 after the New York State department of education announced that the institute's use of the term "university" was "misleading" and possibly illegal. But, even with its new name, Trump's school made the same promise: that it would teach students "a systematic method for investing in real estate."

According to the NY attorney general's office, however, the entire program amounted to a very expensive "bait-and-switch" that charged between $1,495 and $35,000 for ineffective courses and programs that were neither designed nor overseen by Trump. Trump's lawyers have claimed that the lawsuit was politically motivated, and that 98 percent of the program's students wrote positive reviews of it. The Better Business Bureau is less impressed: It gives Trump's school a B- grade, noting that it had 15 formal complaints lodged against it, two of which have yet to be resolved. (Admittedly, that's up from the D- it reportedly earned back in 2010.)

The attack on the school that Trump built comes at an interesting time: On Friday, President Obama noted that,"I'm not against for-profit institutions, generally," before pointing out that many of the institutions "are notorious for getting students in, getting a bunch of grant money, having those students take out a lot of loans, making big profits, but having really low graduation rates."

The president pointed out that his proposed college ratings, which are set to launch in 2015, could cut out a lot of the guesswork associated with for-profit schools. In the meantime, however, DailyFinance's Brian Stoffel offers a guide to help you choose a good for-profit institution -- as well as ratings of some of the top schools.

Bruce Watson is DailyFinance's Savings Editor. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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John

Many employers like IBM specifically state in their employment applications to not bother with their application if you have attended a certain list of these online universities which includes University of Phoenix, Strayer University and numerous other online universities.
Maybe we should just get rid of colleges altogether and let students learn from books and Youtube since it is probably just as good and a heck of a lot cheaper than going to any college.

August 28 2013 at 4:49 AM Report abuse rate up rate down Reply
frisco9312

trump is all smoke and mirrors

August 27 2013 at 10:15 PM Report abuse +2 rate up rate down Reply
LMT

Can't wait to see the spin on this one!

August 27 2013 at 8:36 PM Report abuse +1 rate up rate down Reply
Lillian

What does Trump U. and Scientology have in common?
Everything!

August 27 2013 at 7:51 PM Report abuse +2 rate up rate down Reply
John Lutz

A N D ......., will L O S E ......., A G A I N .......

August 27 2013 at 7:21 PM Report abuse +1 rate up rate down Reply
zygi & paris

Let's see how much he runs his mouth now. He always has so much negative stuff to say about others.

August 27 2013 at 4:57 PM Report abuse +3 rate up rate down Reply
hsenpfeffer

trump university huh? Does it teach you how to inherit daddy's money, take up multiple bankruptcies and leave your suppliers holding the bag? Or does it teach you how to walk around with a groundhog on your head?

August 27 2013 at 4:06 PM Report abuse +3 rate up rate down Reply
gstev75035

I think its interesting that Obama met with the attorney general the day before they filed the suit...on a Saturday.

August 27 2013 at 4:05 PM Report abuse +1 rate up rate down Reply
h. c christian

John Kerry, John McCain , Bob Dole, the general ment has been talk that code of honor that me and i other military people have been taught just so everyone know this is not a party or I not discriminasting against senator Cain, I saw a general landing his helicopter in the middle of a fire fight to pick up injured soldier even thru her know the general before got kill that way why it the right thing to do, saw a lt. take the blame for a sergeant, E-7 when he made a mistake last of his men needless, even thru he was white and that Sargent black why to was the right thing to do but every one aspect that he was known to be a standup guy, these men were soldier before they become senator thought that same code but not a hearing to it there are no more soldier it seem I hope that by then next time this country has a real committed enemy it will so it can stand in battle imagine these who those he were standup guy, there are none any more I hope be time this country has an enemy that committed to fight it have standup guy like this against or it want be able to stand against it enemy
And you can add to this list all of the below what happen top all; the standup guy that the military insisted we me and the guy like the general and the LT. And the platoon Sargent and the battalion surgeon and other I knew and Coleen Power whose simple done think because it was right and the honorable think to do Conrad Burns (R-Mont.) Marine Corps 1955-57 Cpl.
Ben Nighthorse-Campbell (R- Colo.) 1951-53 Airman 2nd Class
John H. Chafee (R-R.I.) Marine Corps 1942-52 Capt.
Thad Cochran (R-Miss.) Navy 1959-61 Lt. j.g.
Paul Coverdell (R-Ga.) Army 1962-64 Capt.
Larry E. Craig (R-Idaho) Idaho National Guard 1971-73 E-3
Michael B. Enzi (R-Wyo.) Air National Guard 1968-73
Slade Gorton (R-Wash.) Army 1946-47, Air Force 1953-56
Air Force Reserve 1956-81
Chuck Hagel (R-Neb.) 1967-68 Sgt.
James M. Inhofe (R-Okla.) Army 1957-58 Pfc.
Richard G. Lugar (R-Ind.) Navy 1957-60
John McCain (R-Ariz.) Navy 1958-81 Capt.
Frank H. Murkowski (R-Alaska) Coast Guard 1955-56
Don Nickles (R-Okla.) National Guard 1970-76
Pat Roberts (R-Kan.) Marine Corps 1958-62 Lt.
William V. Roth Jr. (R-Del.) Army 1943-46 Capt.
Jeff Sessions (R-Ala.) Army 1973 2nd Lt. Army Reserve 1973-86 Capt.
Robert C. Smith (R-N.H.) Navy 1965-67 Ensign
Arlen Specter (R-Pa.) Air Force 1951-53 1st Lt.
Ted Stevens (R-Alaska) Army Air Corps 1943-46 1st Lt.
Craig Thomas (R-Wyo.) Marine Corps 1955-59 Capt.
John W. Warner (R-Va.) Navy 1944-46 Marine Corps 1950-52 1st Lt.
Darn those guys like me that insisted on doing thinks because it the right think top of shifting this company over too country that done mined me and the wife owning it and running it going back to collecting her and the daughter moving them there with me to safety why because it the right thing to do

August 27 2013 at 3:23 PM Report abuse -5 rate up rate down Reply
freeetob

Trump U promotional hype sounds like a cross between a Tony Robbins infomercial comeon and any multi-level marketing pitch you name.

August 27 2013 at 2:41 PM Report abuse +3 rate up rate down Reply