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House Bill Could Eliminate Restriction on Proprietary Schools’ Access to Federal Student Aid

By M.H. Miller

The community college portion of the federal student-funding pie is being threatened by provisions in a House bill that would eliminate a major restriction on proprietary schools’ access to federal student aid.

The House of Representatives’ Committee on Education and the Workforce revisited the thorny issues surrounding for-profit colleges in a hearing last month, during which incidents of fraud and abuse at proprietary colleges were discussed, as well as how such infractions might affect the whole sector’s eligibility for federal student aid.

The bill’s sponsors, including committee chairman John Boehner, R-Ohio, want to make it easier for proprietary schools to qualify for federal student aid by removing a 1992 provision known as the “90-10” rule and by simplifying the definition of “institution of higher education” to place for-profit schools on par with nonprofit colleges regarding federal-aid eligibility.

David Rhodes, president of the School of Visual Arts and chair of the Federal Affairs Committee for the Association of Proprietary Colleges, said all schools of higher learning that grant associate’s, bachelor’s and master’s degrees and doctorates, and which have been accredited by accrediting agencies, “should be recognized as institutions of education by Congress,” he says.

“There is a notion sometimes expressed that for-profit institutions are somehow less worthy of governmental support than public or not-for-profit institutions,” Rhodes says. “This is a deeply ingrained prejudice, but one that I hope you would agree is wrong. It is the institution’s programs, and their outcomes, which determine whether an institution is recognized as a member of the higher-education community.”

Rhodes told the panel that student-aid programs call for competition between all schools: “Those with robust proposals will use the funds best, regardless of whether they’re public or private.”

Opponents of the bill — called the College Access and Opportunity Act — have expressed deep misgivings about removing the 90-10 rule, which requires that at least 10 percent of for-profit schools’ revenue comes from sources other than the federal student-loan program. They fear that the elimination of the rule would open the door to higher rates of fraud by proprietary schools and rampant student-loan default rates.

Proprietary schools “had a gross (student-aid) default rate of 44.6 percent for the period 2000-2002,” Rep. Maxine Waters, D-Calif., says. “Keeping the 90-10 rule would give schools the incentive to raise the quality of education to attract a broad range of students.” Citing a 1997 General Accounting Office report, “Poorer Student Outcomes at Schools that Rely More on Federal Student Aid,” Waters spoke about students “suffering under a crushing student debt burden because the promised jobs are nowhere to be found.”

Witnesses who spoke at the hearing also included Nick Glakas, president of the Career College Association; Education Department Deputy Inspector General Thomas A. Carter; and a former admissions officer of a for-profit school.

The testimony of Paula L. Dorsey, former director of admissions for Bryman College in Reseda, Calif., — a division of Corinthian  Colleges Inc. — focused on the financial pressures faced by for-profit institutions, describing her experience with enrollment fraud by her former employer: “Somewhere in the process of a need to provide citizens with quality education, these corporations have found their only priority to be showcasing numbers for shareholders and turning an enormous profit.”

Carter recommended to the committee that Congress keep the 90-10 rule. He also asked that Congress amend the Internal Revenue Service Code so the department could match information on student-aid applications to IRS income records, a move he said would address waste in student-aid programs.

Inadequate and ineffective administrative and enforcement practices on the part of the Education Department, the states and college accreditation agencies (especially regional ones) were also cited by Carter as underlying causes of the fraud and waste that is plaguing the federal student-aid program.

Carter cited several systematic problems with the complex student-aid system. Most critical among them were inconsistent federal and state enforcement practices, weak program administration by the Education Department’s regional offices, and a lack of guidance from the department’s headquarters. Also complicating matters were inconsistent state licensing and evaluation standards; and some regional accreditation agencies’ lack of meaningful and consistent standards for program length.

“We don’t want to go back to those days” before the 90-10 rule, Carter told the committee. The 90-10 rule’s purpose “is to stop  abuses and to avoid abuses.”

“For-profits are different than not-for-profit colleges and universities in that each student registered represents dollars,” committee member Mike Castle, R-Del., said at the hearing. “We need to focus on enforcement … We must be sure students are getting their money’s worth, and that the federal government is not being ripped off.”

In contrast, Boehner said in his closing remarks, “The 90-10 rule penalizes low-income students by denying access … Our goal is to give access to kids who need it.” He said the granting of accreditation, as approved by the Education Department, is “what’s important” in evaluating a college’s performance.

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