Editorial: Do more to stop predatory for-profit schools

Last year, federal officials sued ITT Educational Services, which has campuses in Clive and Cedar Rapids, and accused the for-profit school of predatory student lending.

That case is still pending, but several months ago, the Securities and Exchange Commission decided to go after ITT, one of the nation’s largest technical schools, from an entirely different angle. The SEC is now charging the school and its two top executives with fraud for allegedly concealing from investors massive losses the company was incurring through two student-loan programs backed by the company.

The SEC, the U.S. Consumer Financial Protection Bureau and various state attorneys general are all cracking down on for-profit colleges that churn out graduates who have little or no prospect of landing a job in their chosen field. The Iowa Attorney General’s Office is suing Fort Dodge-based La’ James International College for consumer fraud, alleging the cosmetology school has engaged in deceptive and unfair practices.

For years, private schools have relied heavily on federal financial aid, targeting veterans and single mothers with their marketing campaigns, and then burdening them with massive debts while failing to provide the education that might enable them to secure jobs and repay their student loans.

The costs are staggering, and students aren’t the only victims. Regulators estimate that for-profit colleges receive more than $30 billion every year in federal financial loans and grants for students. The Government Accountability Office says these for-profit colleges often charge considerably more for the same degrees offered by nonprofit schools, and yet the graduation rate at the for-profit colleges is about half that of other schools.

So it’s encouraging to see that in addition to the lawsuits that seek to halt predatory lending practices, federal officials are also trying to help former students already mired in debt.

The U.S. Department of Education announced last week that it was expanding its program to forgive federal student loan debt to thousands of students who attended Corinthian Colleges, which was once of the nation’s premier for-profit schools.  One of the company’s automotive technology programs boasted a 100 percent job-placement rate, but according to investigators that actual rate was zero percent. At another Corinthian Colleges school, students in an accounting program were told there was a 92 percent job-placement rate, when the actual rate was only 12 percent.

In a separate matter, the Justice Department recently negotiated a $95 million settlement with another for-profit college, Education Management Corp., which runs 110 schools. As part of a separate agreement the company entered into with state attorneys general, about 80,000 former EMC students will be forgiven private company loans worth $103 million.

The federal government’s multi-pronged attack against predatory for-profit schools seems to be working. And thanks to new rules imposed by the Obama administration, for-profit colleges will now have to limit the amount of debt students can accumulate in career-training programs or face cuts in federal funding.

But more can be done. As the New York Times reported last month, the Department of Education continues to funnel tens of millions of dollars into for-profit schools accused of predatory behavior. EMC, for example, has long been accused of illegally using incentives to pay student recruiters and with using deceptive enrollment practices. Even so, the company received more than $1 billion in federal money over the last school year.

Until these schools lose their spot at the federal trough, they will always have an incentive to cut corners. The fraud and deception will stop only when the flow of federal money stops.