Failing U: State falls short on for-profit schools

Massachusetts should beef-up regulations to protect students and taxpayers

IN 2015, THE COLLAPSE of the behemoth Corinthian Colleges, which had been taking in up to $1.4 billion in federal dollars annually, and the subsequent failure of the giant ITT Tech cost taxpayers hundreds of millions of dollars and left thousands of students with enormous student loan debt and no degree or diploma to show for it.

Corinthian and ITT Tech are the tip of the iceberg where for-profit postsecondary educational institutions are concerned. There has been a well-documented pattern of abuse by these institutions going back over a decade.

In 2010, both the US Senate Committee on Health, Education, Labor and Pensions and the Government Accountability Office (GAO) took notice and investigated the for-profit college industry. Their findings were eye-opening: states were taking a passive role in oversight; several for-profit colleges were engaging in misleading advertising and recruiting practices and targeting veterans and vulnerable populations; and expenses, student loan debt and defaults were skyrocketing.

While every college will have a small percentage of students who end up in default on their student loans, estimates in the Senate health committee report and others found the default rate for students who attend for-profit postsecondary institutions are substantially higher than those of their counterparts who attended public or non-profit institutions. And because student loan debt cannot be discharged in bankruptcy, students who are not prepared adequately to find a job that pays enough to service their loans are stuck.

The expense to attend a private for-profit college, the sub-par outcomes, and the questionable recruiting practices associated with these institutions were and are enormous problems that the other two sectors of higher education, private and public colleges, do not experience with such frequency. Given this track record, it is a problem states must address.

State attorneys general, including Massachusetts Attorney General Maura Healey, have been doing laudable work filing lawsuits against predatory for-profit schools. However, typically by the time a state attorney general becomes involved, the harm has already been done. States must act to prevent harm from occurring in the first place.

Compounding the problem is the Trump administration’s Education Department. Led by Betsy DeVos, the Department has made recent moves to weaken important federal protections, and it has placed former for-profit executives in high level positions. Again, it falls on states to prevent harm to their citizens where the federal government has been inconsistent and ineffective. Unfortunately, states are largely failing to protect students and taxpayers. This failure leaves our college students, and especially veterans, foster youth, and vulnerable populations, at the mercy of an industry that has been profiting whether or not the product they sell is a quality one.

The Children’s Advocacy Institute of the University of San Diego School of Law has compiled a report analyzing and comparing each state’s laws, regulations, and oversight of private for-profit postsecondary educational institutions. Massachusetts stands out in some areas. For example: Massachusetts law outlines a performance measurement system which requires institutional compliance with performance measures. If an institution fails to perform satisfactorily a performance improvement plan is required. This is a laudable provision, and Massachusetts is one of only a handful of states that takes steps to intervene to protect students when a for-profit college is performing poorly.

Despite having enacted a few notable provisions, Massachusetts received a failing grade in CAI’s analysis, in large part because Massachusetts does not have adequate disclosure requirements in place. The state could greatly improve by requiring for-profit postsecondary institutions to provide a fact sheet with disclosures related to for-profit college performance to students prior to their enrollment in a program. Massachusetts should also strengthen law and policies requiring for-profit schools to provide full refunds to students where there has been misrepresentation or where the school has closed.

Finally, Massachusetts should consider putting in place a private right of action and making attorney’s fees available to student who prevail in such actions against bad actors in the private for-profit postsecondary education industry.

Meet the Author
Massachusetts must improve oversight of private for-profit postsecondary educational institutions and protects students and taxpayers. Quality for-profit postsecondary educational institutions should welcome these changes, which will ensure that institutions that provide a quality service to their students will thrive. The others will be forced to clean up their act or get out of business.

Melanie Delgado is a senior staff attorney at the Children’s Advocacy Institute at the University of San Diego School of Law.