Don’t kill fraud protections, Congress is advised

In the wake of a “60 Minutes” expose on questionable proprietary school recruitment practices, a House education committee revisited the question of fraud and abuse in the federal student aid programs at a hearing in early March. Among those testifying before the House Committee on Education and the Workforce was U.S. Department of Education deputy inspector general Thomas Carter. The department, he reported, continues to find cases of fraud throughout higher education, and 75 percent of them are in the for-profit sector.

His advice to Congress: Don’t rush to throw out or reduce the rules in place to protect students and taxpayers. “I would go slowly on eliminating any rule before I knew what the effect of eliminating that rule would be,” he said, unless there were substitute rules made for addressing the problem.

Earlier this year, committee Republicans, led by chair John Boehner (R-Ohio), introduced H.R. 609, the College Access and Opportunity Act, as part of the effort to reauthorize the Higher Education Act. The bill would lift restrictions put in place in the early 1990s to address a raft of fraud cases and high student loan default rates in the for-profit sector.

One restriction, known as the 10 percent rule, dictates that institutions participating in the federal student aid program must get at least 10 percent of their revenue from a source other than federal aid. Another regulation limits the number of distance learning courses a college qualifying to receive federal aid may offer to no more than 50 percent.

In his opening statement, Boehner bemoaned the unfair treatment the current law deals proprietary schools and their students. Ensuring access and fairness, he said, must be Congress’s first priority. This means going after the “nonprofit” schools that are also engaging in fraud and, worse, playing a role in the hyperinflation of college costs.

In addition to Carter, the committee heard from two representatives of the for-profit school industry and two witnesses who documented their experiences with the fraud and abuse problems. Rep. Maxine Waters (D-Calif.) described how “thousands” of her central Los Angeles constituents have been “ripped off” by the unethical and illegal tactics of proprietaries.

In 2002-04, she said, the student loan default rate for students in the for-profit schools there was 44.6 percent. “The greater the needs of students, the greater the default rate,” she said. It’s a scandal the Department of Education is failing to address. She called the department’s efforts pitiful. She also called for strict liability provisions to be enforced that would require for-profits to list, “book, chapter and verse,” their completion rates, job placement rates and names of companies taking the specific placements.

Another witness, Paula Dorsey, described the tactics she observed while serving a brief stint as director of admissions for the California-based for-profit Bryman College.

Speaking for the for-profit sector, Nick Glakas, president of the Career College Association, criticized the unfair treatment of his group’s 1,250 members at the hands of CBS News. “Education and compliance” with federal laws “are job one,” he said. “That’s because we cannot allow a repeat of what happened 10 years ago,” when hundreds of for-profits were shut down after findings of fraud.

On Feb. 25, the AFT announced the formation of a coalition of groups representing students, faculty, consumer advocates and admission and enrollment officers to oppose H.R. 609’s elimination of student aid protection rules. The coalition, called Keep Integrity, placed a series of ads during the first week of March in Roll Call, the Chronicle of Higher Education, The Hill, Community College Week and insidehighered.com, among other publications.