Report: Department of Education considers for-profit colleges 'too big to fail'

By Amy R. Connolly  |  Feb. 18, 2016 at 5:43 PM
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WASHINGTON, Feb. 18 (UPI) -- For-profit colleges will keep wasting billions of taxpayer dollars if the U.S. Department of Education continues to treat them as if they are "too big to fail," a new report said.

Chris Hicks, who formerly led the Debt-Free Future campaign for the advocacy group Jobs With Justice, said the Education Department has refused to use its authority to regulate such colleges, setting up students and taxpayers for massive financial blunders.

He said the department isn't closely monitoring these schools or using the proper metrics as early warning indicators "before an institution is beyond repair."

For-profit colleges largely depend on federal dollars to finance the schools, making student access to educational loans and veterans benefits essential.

"Officials at the department have often seemed paralyzed with fear when faced with taking action against large for-profit institutions in crisis," said Hicks, now a union and advocacy group consultant for student debt issues. "Faced with the prospect of outcomes that could displace and disrupt the educational advancement of tens or hundreds of thousands of students, the department has repeatedly propped up failing institutions or ignored early indicators that an institution was on the brink of failure. This approach has only increased the damage when such struggling institutions eventually failed."

Hicks points out Corinthian Colleges, which abruptly closed in 2014 amid a federal investigation into questionable practices, highlights the failings of the Education Department. Thousands of former Corinthian students are now fighting to get their student loans dismissed after they were left with huge debt and no degree.

Hicks said the department should look to underutilized regulations, including suspending enrollment of new students and letters of credit, to keep a closer eye on the schools. A letter of credit is a written assurance from the school affirming ample funds are available to the department on demand.

Hicks said there are other ways for-profit colleges can be kept on task:

- Colleges should be assigned financial composite scores, which reflect the overall financial health of the institution.

"Ensuring that every college is assigned a financial composite score would render the system far more responsive and transparent," he said.

- The Department of Education should review a school's financial aid programs if it is facing state and federal investigations.

"These investigations should act as triggers for the department to launch program reviews of schools' practices and ability to meet standards to access federal financial aid," Hicks said.

- Students should be notified when their school is facing heightened monitoring of finances, undergoing program reviews or being investigated by federal and state agencies.

"This could help students determine if it's in their best interest to continue at their current school or transfer to another," he noted.

"As long as the department continues to treat these large for-profit colleges as too big to fail, the colleges will continue to cause harm to students and waste billions in taxpayer dollars," Hicks continued. "It is known that the department has the authority and responsibility, to take decisive action when it finds these schools are incapable and not responsible enough to continue to be trusted with billions of dollars from taxpayers and the livelihoods of the thousands of students enrolled at them."

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