Legislation Would Hold For-Profit College Leaders Accountable For Misrepresentations

Lawmakers on Tuesday continued their mission to protect consumers from unscrupulous players in the for-profit college industry by introducing legislation that would impose stiffer penalties and restrictions on the leaders of such institutions. 

The Students Before Profit Act – introduced by Senators Chris Murphy, of Connecticut, Elizabeth Warren, of Massachusetts, and Dick Durbin, of Illinois – aims to protect students from deceptive practices and bad actors in the for-profit college sector by better holding schools and their executives accountable for violations and poor performance.

“For-profit colleges and their executives shouldn’t be able to get away with cheating students and leaving them with huge debt loads while these schools rake in big profits off of federal loans,” Senator Warren said in a statement. “This bill creates better tools to strengthen accountability and to protect both students and taxpayers when colleges and their executives break the law.”

Under the Act, the Department of Education would receive broader discretion to require owners and executives of for-profit colleges to assume liability for financial losses associated with Title IV funds.

The Dept. of Education can also pursue claims against these owners and executives after discharging borrowers’ student loans.

Additionally, the Act would authorize enhanced civil penalties on institutions and their executive officers if it is determined that the college misrepresented its cost, admission requirements, completion rates, employment prospects or default rates.

Fines paid by the schools, or its executives, for these issues would be filtered into a Student Relief Fund to help potentially defrauded students.

The Students Before Profit Act also aims to improve oversight of any default rate manipulations. To do so, the Act requires the Secretary of Education to use corrected data to recalculate student loan cohort default rates for institutions of higher education that have engaged in default manipulation. The Secretary would then make determinations on whether an institution should be disqualified from participating in financial aid programs.

Finally, the law would prevent “repeat offenders” – those who have once served in an executive position or on a board at a for-profit college that the Dept. of Education has brought an enforcement action upon – from holding leadership positions at another higher education institution.

“Too many students looking for a quality college education have found themselves at for-profit institutions that are more concerned with profit margins than career readiness,” Brown said in a statement. “These bad actors have misled students about graduation rates, job prospects, and cost – leaving them battling debt and unable to find work in their fields. This legislation would help protect students while also holding for-profit educational institutions accountable to taxpayers.”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.