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Exclusive: How the Widening Job Placement Rate Scandal Could Have Been Avoided

Published:  November 15, 2011
Issues:  

[Over the last several months, Higher Ed Watch has examined how many for-profit colleges cook the books on the job placement rates they disclose to prospective students and regulators. In prior posts, we have looked at how the manipulation of these rates is a widespread problem throughout the industry; revealed some of the most common tricks of the trade for-profit schools have used to inflate these numbers; showed how accreditors and regulators have been asleep at the switch as these abuses have been occurring; reported on the Obama administration's unsuccessful effort to curb these practices; and examined how the drive to manipulate these rates comes straight from corporate headquarters and not rogue employees (see here and here). Today, we finish up this series by going back in history to see how this all could have been avoided.]

The origins of the widening job placement rate scandal in the for-profit higher education sector go back nearly 20 years. Had the Clinton administration officials who ran the Department of Education at the time heeded the warnings of Congressional investigators, the Government Accountability Office, and its own Inspector General, the abuses that are being unearthed today could have been rooted out long ago.

The story begins in the early 1990s when a Senate oversight committee headed by Sam Nunn (D-GA) conducted an investigation that uncovered widespread fraud and abuse in the for-profit higher education sector. The Nunn Committee revealed that scores of unscrupulous schools were reaping profits from the federal student aid programs by enrolling people straight off the welfare lines and pressuring them to sign up for student loans they had little hope of ever repaying. Many of these individuals were lured into the schools with false promises about the lucrative jobs they would be able to get after attending these institutions.

When it came to assigning blame for the federal government’s failure to stop these schools from ripping off students and taxpayers, the committee found that there was plenty to go around. However, the panel reserved some of its harshest criticism for the accrediting agencies that had failed to weed out these institutions or even to detect that anything was amiss.

In its final report in May 1991, the committee urged the Education Department to work with the accreditors to strengthen their ability to carry out their oversight responsibilities or strip them of their gatekeeping role entirely. As part of this effort, the committee recommended that the Education Department be required to “develop minimum uniform quality assurance standards” that accreditors would use to evaluate for-profit schools -- including establishing a single methodology for calculating job placement rates. According to the report:

The Department should be responsible not only for formulating those standards, but also for developing and carrying out a meaningful review and verification process designed to enforce compliance with those standards. If the Secretary determines that an accrediting body does not or cannot meet these requirements, recognition should be terminated.

In 1992, as part of legislation reauthorizing the Higher Education Act (HEA), Congress followed up on this recommendation by requiring the Education Department to put in place standards it expected accreditors to meet as part of its evaluation process. Lawmakers also required the accrediting bodies have standards in place for judging a school’s “success with respect to student achievement in relation to its mission, including, as appropriate, consideration of course completion, State licensing examination, and job placement rates.”

When the time came for the Clinton administration officials in charge of the Education Department to write the rules for carrying out the Higher Education Act revisions, they took a very narrow reading of these requirements. Noting that Congress had not explicitly mandated the establishment of uniform standards, they gave accreditors wide latitude to develop their own criteria for judging a school’s “success with respect to student achievement” and for verifying the information that schools would provide them. Department officials explained in the preamble to the regulations that they had to stick “closely to the law” to avoid “regulation driven management.”

Both the Government Accountability Office and the Education Department’s own Inspector General Thomas Bloom objected to the final rules. In blistering testimony Bloom delivered to a House Government Oversight subcommittee in 1996, he accused the Department’s leaders of misinterpreting the intent of Congress:

By requiring the Department to ‘set standards’ for evaluating accrediting agencies in specified areas, Congress was directing the Department to put meat on the bare-bones statutory language in order to ensure that the agencies had meaningful, quantifiable, and enforceable standards for their member schools…the Department’s regulations are not what the 1992 HEA amendments contemplate.

The failure of the Department to set standards and require vigorous enforcement would only lead to more fraud and abuse, Bloom argued:

Without enforceable standards, schools that fall short of their own accrediting agency standards -- even in such basic areas as graduation and job placement -- may continue to be accredited and continue to participate in the SFA [student financial aid] programs. Since what you measure you get, without measurement and enforcement of even these basic standards for student achievement, we cannot assure that vocational trade schools in the SFA program will consistently graduate and place the bulk of their student in jobs for which they were trained.

Bloom’s testimony was prescient. As we’ve previously written, the job placement rates that for-profit colleges are required to disclose to prospective students and report to accreditors are fundamentally flawed. The methodology that career colleges use to calculate the rates vary accreditor by accreditor, making them impossible to compare. And because neither accreditors, state regulators, nor the federal government make much of an effort to verify these rates, schools have found them easy to game (see here for some of the most common tricks of the trade).

At Higher Ed Watch, we believe that the Nunn Committee and the Inspector General were right and that federal officials should develop a single, national standard that for-profit colleges would be required to use when calculating their job placement rates. It would be accompanied by a strict regulatory regime that would more closely monitor schools to ensure that these numbers are not rigged.

The Obama administration tried to move forward with such an effort but bungled it. However, as evidence of widespread abuses mount, we believe that policymakers won’t have any other choice but to revisit this issue.

It’s just a shame that all the damage that has been done to unsuspecting students and taxpayers could have been avoided.

 

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