Lawmakers Focus Ire on Accreditors for Abuses at For-Profit Colleges

August 04, 2010

Six weeks after vowing to cull the bad apples from the for-profit higher-education sector, some Senate Democrats are asking whether the whole barrel is spoiled, and largely blaming accreditors for the rot.

At a hearing on Wednesday, Sen. Tom Harkin of Iowa, chairman of the education committee, repeatedly referred to "systemic" problems in the sector, asking witnesses whether the fraud and deception uncovered in a recent government investigation into for-profit recruiting is the norm.

"I hear a lot of talk that these are just rogue actors," Mr. Harkin began one question to Gregory D. Kutz, who led the undercover investigation for the Government Accountability Office. "Would you say that misleading and deceptive practices are the exception, or are these more widespread?"

Mr. Kutz responded that while investigators found "good practices" at a handful of colleges, none of the 15 colleges it visited were "completely clean." At each of them, recruiters and admissions officers made deceptive or otherwise questionable statements to investigators posing as applicants.

"It certainly gives the indication that this is more widespread than a few bad actors," he said.

To illustrate, he played a series of video clips that showed recruiters encouraging fictional students to falsify their financial-aid forms and providing misleading information about their colleges' costs and graduates' earning potential.

In one clip, a recruiter tells a prospective student that barbers could earn up to $1,000 a day, even though 90 percent of barbers make less than $43,000 a year, according to the Labor Department. In another, a college representative assures an investigator that students loans aren't like car loans, "where if you don't pay, they come after you." In fact, student loans are one of the only forms of consumer debt that can't be discharged in bankruptcy.

In a third clip, a recruiter tells an investigator that he can't speak to a financial-aid adviser until after enrolling. When the fake student hesitates, the recruiter agrees to get a financial-aid adviser, but returns with his supervisor, who badgers the student and eventually rips up his application.

Scant Oversight and 'Safe Harbors'

The rest of the hearing focused on assigning blame for the abuses. Pressed by lawmakers, Mr. Kutz faulted the Education Department, saying it has failed in its oversight of the sector. While there are regulations in place to protect students from misleading and aggressive sales, they're not being enforced, he said.

"It certainly seemed like a wild, wild West out there," he said, urging government regulators to step up their monitoring of for-profit recruiting and to punish colleges whose employees violate the rules.

"Consistent oversight is going to be necessary," he said. "If you don't make an example of the bad actors, you have a system where people think there are no consequences."

Another witness, David Hawkins, director of public policy and research for the National Association for College Admission Counseling, blamed the abuses on the department's decision, in 2002, to add a series of exemptions, or "safe harbors," to a ban on incentive compensation. That change, which the department is now considering reversing, "chipped away at the law's ability to be enforced," Mr. Hawkins said.

Stripping the safe harbors from the rule, as the department has proposed, "would really put the teeth back in the statute," he said. (See a related item, on Head Count.)

But Joshua Pruyn, a former recruiter for Alta College who testified about unethical practices he observed on the job, said that while eliminating the exemptions would help, "I don't think it would fix the problem." While incentive pay might motivate some recruiters to lie, others are simply uninformed or are repeating lies they've been told by management, he said. Mr. Pruyn said he had been on the job for months before he learned that a paralegal program he'd been promoting wasn't accredited.

Senator Harkin called the department's proposed changes to the incentive compensation ban "a nice first step," but repeated his threat to legislate.

"Another administration could overturn that regulation," he said. "I think where we're headed is clear-cut legislation that can't be overturned by another administration, tightly designed legislation to correct these practice."

Sharp Exchanges With Accreditors

While criticizing the department, Senate Democrats focused most of their ire on accreditors, grilling the head of one national agency about the standards it uses to judge institutions. In one pointed exchange, Sen. Al Franken asked Michale S. McComis, executive director of the Accrediting Commission of Career Schools and Colleges, how that organization could claim to have "rigorous" standards when three of the institutions it accredited had been cited for abuses in the GAO report.

"Do you think maybe your rigorous standards aren't rigorous enough?" asked Senator Franken, of Minnesota.

"I believe the standards themselves are rigorous," Mr. McComis replied. "In these cases, the schools' compliance with the standards fell short."

Asked by Senator Harkin why the accreditor hadn't found problems at the three institutions, Mr. McComis replied that the accreditation process isn't designed to catch "the sort of fraud the GAO has alleged."

"We don't secret shop," he said. "So in the normal course of an evaluation, I'm not sure we'd find those occurrences."

That answer appeared to infuriate Mr. Harkin, who said it was "apparent to me that we need a hearing on accreditation."

"If your process doesn't detect readily apparent fraud, who is protecting students and taxpayers?" he asked. "We rely on accreditation."

Mr. McComis replied that it was up to state and federal regulators, "the other parts of the triad," to root out fraud.

"Accreditation is designed to evaluate the quality of education, not to detect fraud," he said, adding, "Certainly, if we find fraud in the process, we're going to act on it."

"But your on-site evaluations didn't detect it," Senator Harkin said. "It seems like you accept the schools' word on what they're doing."

Mr. Harkin said he planned to "look into" the financing structure of the accrediting system, saying it "seems to be a situation that is rife with conflict."

That plan has implications for nonprofit colleges as well, since all accreditors are financed by the institutions they accredit.

Mr. Harkin also said he planned today to ask 30 companies operating for-profit colleges—15 privately held and 15 publicly traded—for information about their graduation rates, costs, student debt burdens and job-placement rates. The goal, he said, is to gain a better understanding of how the colleges recruit students, set tuition, and handle withdrawals and the return of federal student aid.

Wednesday's hearing was the second in what Mr. Harkin has said will be a series examining the for-profit sector. Mr. Harkin has promised additional hearings in September and possibly November and December.

That should please committee Republicans, who called for a broader investigation into higher education. Sen. Michael B. Enzi of Wyoming, the top Republican on the education panel, said he would ask the GAO to expand its investigation to nonprofit colleges as well.

"Nonprofits are not immune from inappropriate behavior in recruiting," he said. "We should be scrutinizing all sectors of higher education."