Education Department Will Tap Secret Shoppers

The Education Department is planning to use undercover agents—known as “secret shoppers”—to monitor colleges and universities that receive federal financial aid for potentially deceptive practices.

The move, announced Tuesday, is the latest step in the Biden administration’s efforts to hold low-performing and predatory colleges accountable. Other efforts include revamping regulations for debt-relief programs, including borrower defense to repayment; re-establishing an enforcement office within the Office of Federal Student Aid; and issuing guidance on how the department will require private nonprofit and for-profit college executives to assume personal liability.

The department’s secret shoppers will be looking for “potentially deceptive or predatory practices used to recruit and enroll students,” according to a news release. That includes misrepresentations regarding the cost of attendance, transferability of credits and job-placement rates, among others. The secret shoppers will be tasked to monitor any institution that receives federal financial aid, not just those in one sector, such as for-profit colleges.

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

The association representing for-profit colleges said in a statement that it was concerned about how this new tool could be used as a weapon against private career schools. Advocates for students praised the department’s decision to use secret shoppers, saying it shows ED is taking more proactive measures to do its job on behalf of students.

“It is critical that this investigator’s tool be used, and my prediction is that it’ll be like shooting fish in a barrel—that they will be stunned by the frequency of lies and misrepresentations that they will be able to document,” said Barmak Nassirian, vice president of higher education policy for Veterans Education Success.

The department’s decision to use secret shoppers is “four decades overdue,” he said. The Office of Federal Student Aid has not used secret shoppers before.

“I’m very happy to see that they are using what will prove to be a very potent tool for combating the most prevalent form of fraud, which is verbal misrepresentations in bilateral communication between recruiters and targeted victims that are very hard to document or prove after the fact,” he said. “It is really wonderful that the department is now going to at least create the possibility of catching some of these fraudsters in the act.”

Nassirian said that secret shoppers are critical to enforcement.

“All the greatest regulations in the world won’t do any good unless they’re enforced, so I think this is this is arguably the most immediately impactful action they could take,” he said. “It now puts the fear of God as they lie to prospects, that the person on the other end of the phone or the person they’re speaking to could well be a federal agent documenting their lie.”

Secret shopping is one of several tools Federal Student Aid’s Office of Enforcement can use to evaluate an institution’s practices. Other tools include audits, investigations and program reviews. State attorneys general, the Consumer Financial Protection Bureau and other agencies have used secret shoppers to check for compliance or to identify wrongdoing.

“It has traditionally proven to be a really powerful tool for law enforcement to hold schools accountable in instances where their agents are lying to students and using deceptive tactics to get people to enroll,” said Ben Kaufman, director of research and investigations for the Student Borrower Protection Center.

To Kaufman, adding secret shoppers shows that the department is taking ownership and responsibility of its role as a financial regulator.

“We’re hopeful, but in the advocacy community, we are very well aware of the difficulty that the Education Department has faced in following through on enforcement,” Kaufman said. “We are now also going to be vigilant to make sure that they follow through and deliver for students.”

Kaufman said the addition of secret shoppers in one piece in a broader effort by the department to protect students from bad actors in postsecondary education.

Secret shopping “represents a new effort by the Biden administration, in particular, to identify and really aggressively weed out the failures and the policies that empower folks who would seek to profit at students’ expense,” he said.

Secret-shopping findings could serve as evidence in an ongoing investigation or lead the agency to open a new investigation or review. Findings also could be shared with other department offices as well as state and federal law enforcement agencies.

Nicholas Kent, the chief policy officer at Career Education Colleges and Universities, which represents the for-profit higher education sector, said in a statement that the association supports reasonable practices to hold all institutions accountable for misrepresentations that financially harm students and taxpayers.

“However, the federal government has a track record of using secret-shopper investigations to malign politically unfavored institutions with distorted findings that later result in the need for public correction,” Kent said. “Given the current administration’s animus toward for-profit institutions, we are concerned this self-proclaimed ‘tool’ will be used as a weapon to inflict further damage upon private career schools and limit student choice.”

CECU specifically highlighted a 2010 report from the Government Accountability Office, which said that undercover testing by the GAO found that for-profit colleges encouraged fraud and engaged in deceptive marketing practices. That report was later reissued to clarify and add more precise wording in some areas.