US Department of Education gives millions to for-profit colleges accused of fraud
The U.S. Department of Education has not cut off federal funding to schools that have been targeted by state attorneys general, the Consumer Financial Protection Bureau, the Justice Department, or the Securities and Exchange Commission on grounds of suspected fraud. The New York Times reports that officials are wary of stopping the flow of money based on accusations, and for-profits targeted in these investigations do not admit any wrongdoing. Furthermore, the report alleges that for-profit colleges have been manipulating their student outcome data to obscure their worst-performing campuses, and thus going on to receive hundreds of millions of dollars in federal student aid.

And 35 for-profit schools have been subjected to the department’s most stringent financial sanctions, which limit access to federal money in advance. Inclusion on this list can be another signal that there are regulatory problems, sometimes serious, relating to accreditation, financial statements and audits, liabilities or denial of certifications. Last year, these schools received more than $15 million.

Education advocates have also accused the Education Department of not more aggressively policing for-profit schools that convert to nonprofits as a way of sidestepping federal regulations. A report released last week by The Century Foundation concluded: “The owners of some for-profit institutions have sought to switch their schools to nonprofit status, freeing them from the regulatory burdens of for-profit colleges, while continuing to reap the personal financial benefits of for-profit ownership.”

Mr. Mitchell said that a new regulation that went into effect this summer would add a powerful weapon to the agency’s arsenal of sanctions. Known as the gainful employment rule, it measures whether graduates of for-profit vocational programs as well as nondegree programs at community colleges earn enough to pay off student loans.

The Obama administration, which sent officials on the road last month to promote his plan for free community college, has estimated that 99 percent of the 1,400 programs likely to fail under the new rules are run by for-profit schools. The industry has fiercely fought this new regulation; Democrats and Republicans in Congress have introduced legislation to roll it back.

Mr. Mitchell also criticized state accreditation agencies for not more aggressively monitoring substandard institutions.

“The fact that Corinthian was accredited through the day of its bankruptcy,” Mr. Mitchell said, “shows that there’s a lot of work to do through quality assurance.”