Dejà vu hit when I heard that the Senate Health, Education, Labor and Pensions Committee was holding hearings in August on alleged fraud by for-profit post-secondary trade schools. The alleged frauds, uncovered in a Government Accountability Office report, were remarkably similar to the frauds underlying cases I handled on behalf of the U.S. Department of Education in the late 1980s and early 1990s.
Providing recruiter incentives for securing enrollments and coaching “prospectives” to provide false information on Federal student financial assistance program applications to obtain maximum funding have long been tools of the trade for the unscrupulous.
In what might be the worst example ever of a trade school fraudulently inflating enrollments, a recruiter once “enrolled” into a beauty school hairdressing program and signed up for SFA funding a prospective student with no hands.
As long as there is profit involved, there’s an unfortunate built-in incentive to maximize enrollments, regardless of the interests of the “prospectives” involved and the taxpayers footing the bill.
Some of the schools cited in the GAO report are pledging to change their admissions process to eliminate the link between recruitment and pay. This would seem less a bona fide effort to improve the recruitment process than a survival tactic. Without FSA funds, the majority of for-profit trade schools would not exist.
The beauty school that enrolled the student with no hands made belated promises to reform when it was charged with fraud just as the schools stung by GAO are doing now. As did many others whose frauds were only somewhat less atrocious. Schools pledging reform under Congressional scrutiny will maintain the reforms until Congress re-adjusts its thermostat. The reforms will most likely dwindle away when the schools think it’s safe to maximize profits by any means again.
Does the GAO report suggest that every for-profit trade school program is fraudulent? No. In fact, the GAO investigators were very careful to point out that some for-profit trade schools it investigated used ethical recruiting practices. But asking about the fraud rate of for-profit trade schools is asking the wrong question. A more salient inquiry is whether it’s in the public interest to commit taxpayer dollars to funding enrollment in these systemically overly costly and under-productive programs.
When a for-profit trade school charges more than $14,000 for a massage therapist training program substantially identical to one offered by public colleges for just over $500, it’s natural to wonder what benefit there is to a student choosing the for-profit trade school program, particularly when the end result of success in either program is likely a part time job with median wages including gratuities of $16.78 per hour, according to BLS data (5/08).
The student financial assistance programs are designed to help students pay for post-secondary education, not to benefit schools, be they for-profit or non-profit. Student choice in educational programs is essential, but it doesn’t mean the choices have to be unlimited when the public funds are facilitating the education. American taxpayers should decide whether they want Federal dollars used to allow students to attend a category of post-secondary schools long associated with fraud, high tuition rates, low graduation rates, and low job placement rates.
If students had to pay out of pocket or assume unsubsidized loans to attend for-profit trade school programs, $14,000 massage programs no doubt would cease to exist. Ditto for the for-profit trade schools with laughably low graduation and placement rates. If you knew that 7 out of ten students enrolled in a program to learn a trade did not graduate from the program and 9 out of ten did not obtain jobs in the trade, would you spend your own money to enroll?
But introducing Federal money into the equation means prospective students can be lulled into signing up by the real parties in interest- the schools that pocket Federal funds regardless of what happens to the students. The funds are no small potatoes. 2,000 for-profit trade schools collectively received $24 billion in SFA funds in the 2008-2009 school year alone. In a speech to the National Press Club earlier this year, Senator Dick Durbin (D-IL) noted that the largest for-profit trade chain, University of Phoenix, received $4.3 billion, or more than one-sixth of the total. By the University of Phoenix’s own admission, 90.1 percent of its first time undergraduates and 63.67 percent of its certificate program enrollees overall fail to graduate.
Interestingly, you don’t see high school and college students clamoring for their “right” to spend public money to attend for-profit trade schools. The proponents of these programs’ participation in SFA programs are the schools themselves, schools which systemically take in far more public money than their graduation and placement rates could ever justify were the statutory entitlement for the category of institution to participate in FSA programs decided based on virtually any reasonable criteria rather than on politics.