California & For-Profit Schools[1]

The Department of Veterans Affairs is working to strip California of its contract to regulate GI Bill benefits, denying the state the ability to investigate alleged abuses by for-profit colleges and to penalize for such abuses.

The federal VA and California have been at odds over how the state has used its authority to regulate a federal program that sends billions of dollars every year to veterans for career training and higher education.

California needs to catch up on compliance surveys that track whether schools are paid accurately, according to letters that the VA, which also fault California for failing to conduct enough of them. However, California wants to focus on visiting campuses to investigate whether institutions are misleading veterans.

Earlier this year, California developed a regulation that riled up the VA and for-profit schools who feared it would make many programs ineligible for GI Bill benefits. California has not yet adopted the rule, although it is under active consideration.

The VA distributed $5.5 billion in GI Bill benefits to cover tuition and fees for some 800,000 veterans, last year. Approving agencies run by states are tasked with ensuring that education programs are eligible for funding.

California has a reputation as a tough regulator of for-profit colleges that market to veterans with GI Bill benefits.

New Federal Bill Impacting For-Profit Schools[2]

A bipartisan bill announced Thursday in the U.S. House of Representatives would raise the bar for accreditors to prevent college closures and lessen the damage to students when they happen.

The bill, co-sponsored by Representatives Donna Shalala (D-FL), Peter King (R-NY), and Sean Casten (D-IL), would require accreditors to ask for a teach-out plan or agreement when a college fails to meet required financial standards, further stipulating that they must report complaints about institutions to the U.S. Department of Education, as well as state agencies.

The bill calls on accreditors to require that a college submit a teach-out plan if:

  • The college fails to meet financial responsibility requirements.
  • An independent audit finds financial weakness or an inability to operate as a going concern.
  • The college is placed on probation, show-cause or similar status.
  • It is participating in Title IV under a provisional program participation agreement.
  • For more dire cases, the bill notes, a full teach-out agreement is required and must be approved by the accreditor.

Though not specific to for-profit colleges, this bill comes as the for-profit sector has come under inquiry from state and federal agencies and lawmakers, sparked by a series of sudden closures and bankruptcies in recent years. The legislators look to include the bill in the House’s reauthorization of the Higher Education Act.

More than 330 colleges and universities closed between the 2008-09 and 2016-17 academic years, according to data from the National Center for Education Statistics. Of that number, nearly 80% were for-profit colleges and 20% were private nonprofits.

The closures have continued into the 2018-19 academic year with three successive for-profit system closures. Questions have been raised over whether the “financial responsibility composite score”, used to evaluate an institutions’ health, is enough – with lag times in reporting and misrepresentation.

Regulation & Investigation Into For-Profit Schools[3]

  • The House, led by Representative Donna Shalala (D-FL), passed legislation that would require the U.S. Department of Defense to audit for-profit colleges with weak financials that enroll military members and keep a public list of how much Tuition Assistance funding institutions receive. The bill was passed in July.
  • Legislators also recently asked six private equity firms with investments in for-profit colleges to detail their financial practices. These included fees, marketing, and returns at those institutions. Private equity buyouts of for-profit colleges have been linked to higher student borrowing and lower graduation rates. Two of the three major for-profit closures in the 2018-19 academic year were backed by private equity.
  • Massachusetts’s House approved a bill that would penalize colleges for not meeting financial transparency measures. New England has been home to a large chunk of independent institutions that closed in the last few years.

Betsy Devos & For-Profit Schools[4]

US Secretary of Education Betsy DeVos violated the law when a judge found that her department has been collecting debt from former students of a bankrupt, for-profit college. This debt collection violated a 2018 court ruling ordering the department not to do so.

The court order results from the Corinthian College case. Corinthian College was one of the nation’s largest for-profit colleges and filed for bankruptcy in 2015. The federal government ruled that up to 335,000 former students could erase their loan debt by checking a box and signing their names on a form. Possibly even receiving a refund for past payments.

When lawyers for the US Department of Education filed paperwork to show compliance with the court order, they revealed the department had continued to collect the debt from at least 1,808 students.





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