Proposed For-Profit College Watchdog Group Would Call Out Which Problem Schools To Avoid

For-profit colleges have been dominating the news cycle lately; from a newly proposed “gainful employment” rule to federal agencies suing schools for deceptive marketing tactics. The fight to rein in these sometimes predatory higher-education institutions doesn’t appear to be losing steam. Legislation proposed last week aims to improve the coordination between federal agencies that oversee the industry, while providing student with a list of unsavory schools.

Senators Tom Harkin of Iowa and Dick Durbin of Illinois introduced the Proprietary Education Oversight Coordination Improvement Act [PDF] that would create an interagency oversight committee to improve enforcement of federal laws and regulations while increasing accountability of for-profit colleges. The act was also introduced in the House by Rep. Elijah Cummings of Maryland.

“For many years, for-profit schools were allowed to operate one step ahead of the law.  As the number of investigations by federal, state and local agencies increase, however, I think we are starting to turn the corner,” Durbin says in a statement on his website. “With so many agencies involved in these oversight efforts it is important that they are effectively working together to hold these schools accountable to taxpayers who often subsidizes up to 90% of their operations and to students who ultimately are the victims of their schemes.”

Better coordination will help regulators prevent fraudulent and abusive practices within the for-profit education industry, which rakes in more than $25 billion in federal dollars every year, Durbin says.

The proposed Proprietary Education Oversight Coordination Committee would consist of representatives from the Dept. of Education, Consumer Financial Protection Bureau, the Dept. of Justice, Securities and Exchange Commission, Dept. of Defense, Dept. of Veteran Affairs, Federal Trade Commission, Dept. of Labor, and Internal Revenue Service.

The committee will work with attorneys general at the state level to coordinate federal and state activities related to the for-profit college industry. It will also take a proactive stance by warning prospective students about specific, allegedly predatory schools.

Each year the committee will publish a warning list of schools that have engaged in illegal activities, had programs withdrawn or suspended and or have been proven to engage in abuse, unethical, fraudulent or predatory practices. The measure would arm students with information that could prevent them from falling into the debt-trap that has become the for-profit college industry.

“Far too many students seeking the American dream are instead enrolling in schools that leave them with worthless degrees and burdensome debt,” Harkin says in an online statement. “We need to do more to ensure that students attending these schools are receiving a quality education—one  that justifies the billions of dollars taxpayers are spending each year.”

In 2012, the Senate Committee on Health, Education, Labor and Pensions (HELP), which will be the first to review the proposed legislation, found that $32 billion in federal student aid is going to for-profit schools. Additionally, nearly 1-in-5 for-profit college graduate default when trying to repay student loans.

In recent years the institutions have been criticized for failing to provide sufficient education and guidance to students who are then stuck without jobs and without the ability to pay back the often expensive student loans.

The proposed committee will compile a report to include student complaints, data about student outcomes, financial information related to executive compensation, marketing and other metrics used in the industry.

“This legislation is common sense,” Harkin says in an online statement following the bills introduction. “Federal and state agencies must work together to ensure that these schools are held accountable to students and taxpayers—not just shareholders. I look forward to working with my colleagues to move this important effort forward.”

The act is just the latest in a line of measures the government has taken in an attempt to control the for-profit college industry.

Last month the Dept. of Education made a second attempt to regulate for-profit colleges that benefit from financial aid to students without providing them the education needed to find gainful employment after graduation.

The proposed regulations would require institutions to certify that all career-education programs meet applicable accreditation requirements, along with state and/or federal licensure requirements.

Programs would be deemed failing if loan payments of typical graduates exceed 30% of discretionary income or 12% of total annual income. Programs would be given a warning if a student’s loan payments amount to 20 to 30% of discretionary income, or 8 to 12% of total annual income. Discretionary income is defined as above 150% of the poverty line and applies to what can be put towards non-necessities.

A similar rule was introduced in 2011 but was struck down a year later when judge blocked major provision of the rule.

Back in January, the federal government launched a new reporting system to streamline consumer complaint investigations of veterans’ and servicemembers’ being targets of higher education abuse.

Additionally, a number of federal and state lawsuits have been filed against for-profit institutions in recent months.

In February, the CFPB filed a federal lawsuit against ITT Technical Institute for allegedly exploiting its students and pushing them into high-cost private student loans that were likely to end in default.

That same month, Consumerist reported on a federal lawsuit filed against a for-profit college by former employees alleging the school made false promises to students of gainful employment after completing a short program.

Seven former employees are part of a federal lawsuit accusing the Harris School and its parent company, Premier Education Group, of misleading students — who paid more than $10,000 a year for various programs — about career prospects, and falsifying records to enroll students and keep them enrolled in order to continue receiving government grant and loan dollars.

Last October, California Attorney General Kamala Harris filed suit against Corinthian Colleges, Inc. and its subsidiaries that operate Everest, Heald and WyoTech Colleges for false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.

Cummings, who introduced the new legislation in the House, says it could go far in preventing the need for lawsuits in the future.

“The streamlined oversight created through this legislation will combat the deceptive practices common in this industry and help students enrolled in these schools get what they – and, frequently, taxpayers – are paying for,” he says in an online statement.

Only time will tell if the legislation has enough staying power to make it through the HELP Committee and the House Education and the Workforce Committee.

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