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Five Things to Know about the Students First Act

Published:  March 13, 2013

As I wrote on Tuesday at Higher Ed Watch, the recently introduced “Students First Act” would require the U.S. Department of Education to automatically conduct program reviews of colleges that are most at risk of violating federal law. But this is only one way in which the bill, which was sponsored by Democratic Senators Frank Lautenberg of New Jersey and Tom Harkin of Iowa, would strengthen the tools that the Education Department employs to protect the integrity of the federal student aid programs and safeguard students from unscrupulous schools. Here are some key features that would greatly enhance the Department’s oversight and enforcement authority and provide relief to students who have been harmed.

The bill would:

  • Hold School Executives Accountable for Compliance

Under the measure, college presidents, chief executive officers, and chief financial officers would personally sign the student aid program participation agreements that the Education Department enters with their schools. They then would be held liable if their schools “knowingly and willfully” violated the agreements, or engaged in “gross negligence.” In such cases, these officials would be fined an amount equal to their yearly compensation, and they would be barred from working at another college that participates in the federal financial aid programs for at least five years.

This would be a major change from current law, which holds institutions – but not their leaders—accountable for compliance, and could serve as a significant deterrent to wrongdoing. It also addresses what has been a perennial problem in the federal student aid programs -- the revolving door of officials who go from one bad school to the next. For example, before founding Career Education Corporation in 1994, John Larson served as a senior executive at Phillips Colleges, a chain of trade schools that was, in effect, shut down by the Education Department amid allegations that it had defrauded the federal government and consumers.

  • Establish a Complaint Tracking System at the Education Department

The legislation would create an office at the Education Department in charge of collecting, monitoring, and responding to student and staff complaints “regarding federal student financial aid, educational practices and services, and recruiting and marketing practices” at their colleges. The Department would then be required to examine these complaints when conducting program reviews of schools. Those colleges that generate the highest volume of complaints would automatically come under the Department’s scrutiny. The new office would also be required to publish an annual report analyzing the complaints it receives.

Requiring program reviewers to examine student and staff complaints is a major step forward as it will provide them with a perspective they may not normally get simply by visiting a campus and examining its operations and financial records. These complaints may not just alert Department officials to wrongdoing at individual colleges but also to larger, systemic problems that they may not have discovered otherwise.

  • Demand Better Coordination and Communication Among the Members of the Regulatory Triad

The legislation would require the Education Department, state regulators, and accrediting agencies (which together make up the regulatory TRIAD responsible for monitoring schools) to work closer together in carrying out their oversight responsibilities. The Department would, for example, be automatically mandated to carry out program reviews of schools that have been sanctioned by states and accreditors.

While this requirement may seem like a no-brainer, this type of coordination has been sorely lacking. All too often, the separate branches of the TRIAD  have acted as if they were operating in a vacuum – reaching settlements with schools that generally protect these institutions from further scrutiny.  

  • Require Colleges to Publicize Program Reviews and Sanctions

Under the bill, if a school is subject to a mandatory program review, it would be required to disclose this information and provide an explanation of what triggered the review on its website’s home page and to prospective students. In addition, institutions that are found to have violated the law “knowingly and willfully or with gross negligence” would have to disclose this on its home page and in all of its communications with potential students.

This may also seem obvious, but all too often students are left in the dark when abuses are found. For example, while Career Education Corporation officials revealed to investors in the fall of 2011 that a number of the company’s schools had cooked the books on their job placement rates, they didn't alert their students. Instead, they simply updated their website with revised job placement rate data.

  • Provide Financial Relief to Victims of Unscrupulous Schools

The legislation would establish a Student Relief Fund that would provide tuition reimbursements or partial or full federal loan forgiveness to students who attend colleges that have been found to commit abuses. Money for the fund would primarily come from penalties that the Department assesses the institutions that it sanctions.

Currently, the Education Department has the authority to discharge the federal loans of students who attend schools that shut down unexpectedly and of those who were falsely certified for enrollment. But the Department has taken a very narrow reading of the law, and only provides relief to students in very rare circumstances. As consumer lawyer Deanne Loonin has written here, “None of these programs provides general remedies for borrowers who attended schools that engaged in fraudulent practices.” This bill would provide those remedies. And it would bring much-needed help to students who, through no fault of their own, enrolled in unscrupulous schools that were designed to take advantage of them.

As I wrote in my previous post, it’s unlikely that Congress will move forward with this legislation anytime soon in the current political environment. Even so, these provisions deserve special consideration as they would dramatically improve the Education Department’s ability to protect students and taxpayers alike.

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