Magnifying glass on for-profit institutions

February 23, 2016
  • AACRAO Connect
  • Financial Aid and FAFSA
Person holding a magnifying glass up to a sheet of paper.

Responding to concerns about students who attended for-profit schools and departed with excessive debt and poor job prospects, the Obama administration announced a plan on February 8 to crack down on for-profit colleges that abuse the system. Spearheading the effort is Acting Secretary of Education John King.

A new Student Aid Enforcement Unit is the cornerstone of the administration’s plan.  The group will investigate claims of “potential misconduct or high-risk activity” by colleges and universities, offer legal analysis and advice to borrowers, impose administrative action, and monitor compliance with reporting requirements regarding campus security.  The unit will be headed by Robert Kaye, a former enforcement attorney at the Federal Trade Commission.   The Obama administration is requesting $13.6 million from Congress to pay for the effort.  The administration is targeting for-profit colleges, which are believed to have engaged in deceptive marketing practices by inflating potential job prospects.  As King noted, “When Americans invest their time, money and effort to gain new skills, they have a right to expect they’ll actually get an education that leads to a better life.” 

For-profit colleges can earn up to 90 percent of their revenues from federal student aid.  However, aid originating from the Department of Defense does not count toward the 90 percent cap, allowing the for-profits to skirt the 90 percent threshold in practice.

Concerns about for-profits have been mounting as thousands of students filed claims with the Education Department.  Thus far, the Department has approved payouts of approximately $85 million to more than 1,300 student claims.  In total, there have been more than 8,400 claims against the likes of Corinthian Colleges, Inc., the Art Institute and the University of Phoenix.  The department has been reviewing files and has agreed to cancel some students' loan repayment requirements, with taxpayers absorbing the loss. 

Federal legislation regarding higher education, and particularly financial aid, has had a significant effect on institutional business processes and student services. Mounting compliance requirements affect many departments, including student records.

AACRAO will feature a free webinar on Mar. 3rd and a workshop at the 2016 Annual Meeting in Phoenix, Arizona, March 20-23, addressing "Federal Financial Aid Regulations and the Academic Record." Kristi Wold-McCormick, Registrar at the University of Colorado, Boulder, and James Kennedy, Associate Vice President for University Student Services (USSS), from Indiana University will lead an interactive discussion on current compliance topics.

Click the above links for more information and to register.