U.S. Pays Millions Every Month to For-Profit Colleges Accused of Fraud

Wednesday, October 14, 2015
(AP graphic)

Being accused of fraud and other illegal practices has not been enough to stop numerous operators of for-profit colleges from collecting millions of taxpayer dollars each month from the U.S. Department of Education.


After legal and media investigations exposing problems with for-profit colleges, the Obama administration promised to crack down on those suspected of bilking thousands of people seeking higher education. But Education Department money has continued to flow to schools accused of illegal acts, predatory behavior and substandard practices, according to The New York Times.


Education officials say they need convictions or clear evidence of wrongdoing before taking steps to stop the funding.


Those still receiving federal monies include the Education Management Corporation, operator of 110 schools for chefs, artists and other trades, which accepted $1.25 billion from the Education Department over the past year. “It has been investigated or sued in recent years by prosecutors in at least 12 states,” the Times’ Patricia Cohen wrote. “The Justice Department has accused the company of illegally using incentives to pay its recruiters. And last year, investors filed a class-action lawsuit, contending that the company engaged in deceptive enrollment practices and manipulated federal student loan and grant programs.”


ITT Educational Services, which has been sued or investigated by 19 states, the Securities and Exchange Commission, the Consumer Financial Protection Bureau and the Justice Department, received more than $592 million in taxpayer support during the 2014-15 fiscal year.


Other suspect for-profit college companies “include tiny beauty schools with staggering loan default rates and online law schools with dismal graduation records and no bar association accreditation. Without government funds, which account for the overwhelming bulk of revenue, few of these institutions could attract students or stay in business,” Cohen wrote.


The Education Department is forced to walk a fine line between fraud prevention and holding up students’ education. “For-profits successfully serve a lot of students, and the department has been very sensitive to having all students suffer for what may only affect some students in some programs,” Kevin Kinser, an associate professor who studies for-profit colleges at the State University of New York at Albany, told the Times. “So they are reluctant to throw the baby out with the bath water.”

-Noel Brinkerhoff


To Learn More:

For-Profit Colleges Accused of Fraud Still Receive U.S. Funds (by Patricia Cohen, New York Times)

Higher-Ed Hustle: For-Profit Colleges Cast Shadow over Presidential Race (by Michael Vasquez and Patricia Mazzei, Miami Herald)

GOP Candidates Compete in For-Profit College Primary (by David Halperin, Huntington Post)

Feds Bar New Students at For-Profit Heald Colleges and Fine Parent Corinthian $30 Million (by Ken Broder, AllGov California)

Wells Fargo Main Investor in Nation’s Worst Private College Company (by Noel Brinkerhoff, AllGov California)

State Sues California’s Largest For-Profit College Company for Fraud (by Ken Broder, AllGov California)


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