Government Steps Up Scrutiny of For-Profit College Abuses

Prosecutors in 10 states, including Kentucky, Florida, and Illinois, have launched a multi-state investigation into allegations that for-profit colleges are using fraudulent methods to recruit students to attend their schools.

For-profit colleges have come under fire over the past year for their recruiting practices – which often target low-income and minority students – and failing to educate students for “gainful employment,” leaving students with a mountain of student-loan debt (while the schools themselves make billions). Some universities resort to recruiting in homeless shelters and halfway houses to find students who are eligible for federal financial aid, which make up the bulk of these colleges’ income.

Students enrolled in for-profit schools represent a little more than 10 percent of all college students in the United States but account for 44 percent of all student-loan defaults. These institutions get more than 80 percent of their revenues from federal student aid.

The multi-state investigation comes just days after the Department of Justice joined a lawsuit alleging that Education Management Corporation, a company that operates a number of for-profit schools, illegally paid its recruiters based on the number of students they convinced to attend its schools.

Civil rights groups have been concerned about the fact that these institutions are taking advantage of low-income and minority students who often do not have other options for post-secondary education.  In February, a group of civil rights, education, labor, and consumer organizations, including The Leadership Conference on Civil and Human Rights, sent a letter in February to the Department of Education in support of a proposed regulation of for-profit colleges that will spare millions of students “entry into a proven dead-end educational track.”

Under the rule, for-profit colleges that fail to demonstrate that their programs are preparing students for “gainful employment” would risk losing their eligibility to participate in federal education grant and loan programs. 

The Department of Education is expected to release the rule in the coming weeks.