For-profit colleges misleading students

(FOX Providence) - The U.S. Senate Education Committee has spent the summer looking at for-profit colleges with the goal of protecting students from deceptive and fraudulent tactics. Last week, a government report found that recruiters at 15 of these for-profit colleges were misleading students about tuition costs and their potential salaries after graduation. Here to talk about it is Peter Kerwin from the Rhode Island Higher Education Assistance Authority .

For-profit colleges have experienced tremendous growth in the last few years, but some of these findings raise some real concerns, don’t they?

Absolutely. The report from the Government Accountability Office was released along with some video to the Senate Education Committee last week and it was just a horror show. You had investigators posing as potential students and they got an admissions officer from MedVance telling one applicant to load up on financial aid, saying “It’s not like a car note—if you don’t pay it, they won’t come after you.”

They got a Texas admissions officer telling a would-be student not to report savings on a loan application, saying “They don’t need to know how much cash you have.” And they had a representative from the University of Phoenix telling a student to take out thousands in loans even though the student had enough money in savings to pay their tuition in cash.

It’s basically a story of very aggressive marketing tactics, bad advice and inflated promise about the value of a diploma from the school. The Senate’s been looking at this because there has been huge growth in the for-profit college sector and these institutions are largely unregulated. Enrollment at these institutions has grown by 225% in the last 10 years.

These schools enroll less than 10% of American college students, but they account for 23% of all Pell grants and federal student loans in 2008, and 44% of the defaulted students loans in 2007. The Senate is rightfully concerned about federal student aid dollars being wasted through fraud and abuse.

What is the Senate looking to do?

They have to regulate these schools because on top of the abuse of federal aid, we’re in an economy where a number of unemployed people are looking to improve their job skills and they are getting targeted by these schools and lured in by the promise learning a new trade and getting a good job. Sadly, these schools don’t always have good job placement rates and people are left owing big money with no appreciable benefit to show for it.

The U.S. Department of Education has proposed new rules for the for-profits, which would tighten the ban on incentive compensation and set tougher rules for distance education. There also needs to be better tracking of student-loan borrowers all the way through the repayment process, as opposed to just tracking loans for the first two or three years.