Fixing For Profit College Fraud

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Researchers advocate improved regulations to reduce fraudulent practices used by for-profit schools.

Last month, the Federal Trade Commission (FTC) to put 70 for-profit colleges and universities warned for potentially deceptive conduct in higher education market. By issuing a Notice of criminal offenses, the FTC has clarified its intention to to restart its dormant Penalty Offense Authority, under which for-profit schools could be punished for deceptive practices, such as fraudulent advertising about student achievement.

The fact that a school has received the FTC’s opinion does not indicate wrongdoing. The agency’s announcement does signal a renewed interest in regulating the behavior of for-profit schools.

In 1998, the Congress update the Higher Education Law (HEA) to contain the 90/10 rule, which mandates that proprietary institutions derive at least 10 percent of their annual revenues from sources other than government. Rule acts as an indicator to measure the quality of education by ensuring that for-profit schools provide education funded by at least a portion of student money. President Barack Obama forbidden strict application of the 90/10 rule.

president obama advanced its enforcement efforts by adding Paid Employment (GE) to reign at the HEA in 2014, requiring for-profit schools to prove that the majority of their students were eligible for employment after graduation. In 2016, he also reintroduced the Borrower’s Repayment Defense (BDR) to reign, who made students whose schools had misled them were eligible for partial or full discharge of their federal student loan debt.

The Trump administration repealed the GE rule and suspended BDR regulations. Today, however, for-profit institutions to anticipate the reinstatement of the policies of the Obama era. Higher education experts recognize many ways the Biden administration can better to intervene hold for-profit schools accountable. Some connoisseurs to suggest that state governments should intervene as regulators. Others call for more severe interventions at the federal level.

In this week’s Saturday seminar, academics are examining a range of solutions to better regulate the behavior of for-profit higher education institutions.

  • In a work document published by Brown University Annenberg Institute, Stephanie Riegg Cellini of George Washington Institute of Public Policy argues that for-profit institutions capture a substantial portion of federal student aid grants while leaving the vast majority of borrowers worse off than graduates of schools in other sectors. One solution, Cellini suggests, is for policymakers to increase accountability measures to protect borrowers and taxpayers from harmful practices in the for-profit sector. Her too recommended that borrowers turn to better performing institutions in the face of such practices as a way to hold underperforming institutions accountable.
  • In a item for The Century Foundation, Robert shireman argues that federal regulation of for-profit colleges is cyclical. Federal funds to create financial incentives that lead to underperformance and questionable practices on the part of for-profit colleges, prompting federal regulation. But once the regulations job, Congress relaxes them and again authorizes recidivism. Shireman recommended several policies aimed at breaking this cycle, including the requirement for accreditation, a ban on federal assistance to programs that create a huge debt burden, and improved information provided to consumers.
  • Policy makers should to augment advertising oversight of for-profit colleges, argue Stephanie Riegg Cellini of George Washington University and Latika hartmann of Naval college. In a report for the Brooking Institution, Cellini and Hartmann assess the advertising spending of all degree-granting institutions from 2001 to 2017. They report that although for-profit colleges only serve 6 percent of students, they account for over 40 percent of all college advertising dollars. In addition, for-profit colleges spend four times more advertising per student than nonprofit organizations. Cellini and Hartmann call for increased mandatory disclosures on college advertising, recruiting and marketing spending. They too to propose stricter enforcement of laws prohibiting misrepresentation.
  • In a item in the UC Irvine Law Exam, Matthew A. Bruckner of Howard University Law School argues that the higher education “regulatory triad” – made up of the US Department of Education and state accreditation agencies – does not protect student loan borrowers from predatory institutions. Bruckner focuses on states, compete that they are “in the best position” to protect students from fraudulent practices. Because federal policy can change drastically between jurisdictions, Bruckner offers that states should implement their own paid employment rules. In addition, Bruckner suggests that states should comprehensively assess colleges for adequate material and human resources before authorizing their operation. By taking further regulatory action, Bruckner argues that states can become “stewards of the quality of higher education”.
  • Private student loan borrowers, especially those attending for-profit schools, face a serious lack of consumer protection, argues Prentiss cox of University of Minnesota Law School, Judith Renard of Notre-Dame Faculty of Law, and Stacey Tutt of UC Irvine Law School. In a item published in the UC Irvine Law Exam, Cox, Fox and Tutt to propose state-level policies based on existing federal frameworks to strengthen consumer protection. First, they to suggest that states use the FTC’s “cardholder rule” as a model to enact the Model Private Student Borrower Protection Act, which require private loan contracts to provide the types of protection afforded to federal student loan borrowers. Second, they urge States to adopt the Model Private Student Loan Mediation Law, which would create “mandatory mediation programs” based on successful state-level mortgage programs implemented during the 2008 financial crisis.
  • In a guidance note for The Center for American Progress, research assistant Melissa Alayna Navarro Explain how the Career Schools and Colleges Accreditation Commission (ACCSC) has failed to revoke the accreditation of a fraudulent organization operating for-profit colleges for more than a decade. Navarro Explain that the CCACS had numerous opportunities to revoke accreditation, but did not do so, instead allowing for-profit colleges to accept over $ 1.8 billion from the federal government and put students in harmful situations. Navarro requests a CCACS investigation and defenders that the US Department of Education should increase its oversight over for-profit colleges.


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