Agency Urges Crackdown on For-Profit Schools, Test Administrators

A federal watchdog agency has called on the Education Department to crack down on for-profit colleges and test administrators after an investigation showed high default rates on student loans and cheating on some exams.

The problem lies with an Education Department that has "significant vulnerabilities" in its oversight, the Government Accountability Office told Congress in a recent report.

The GAO called on the department to take several steps, including monitoring for-profit schools and testing programs more closely and ensuring that students don’t get high school diplomas from diploma mills — another problem that was identified. Students can qualify for federal student loans and other aid if they have diplomas or pass these tests. If they default on the loans, federal taxpayers must pick up the cost.

In response, Education Department officials said they expect to implement new rules."We kind of knew we had this issue, and we began to tighten up on our monitoring and test-publishing before the GAO report," said Jeff Baker with the department’s office of federal student aid.

The Career College Association in Washington, D.C., a national group that represents career and for-profit schools, said in a statement that "we share the government’s interest in eliminating any form of fraud and abuse associated with" the federal financial aid program. But the report should be taken in context, the association said.

"Nothing in the GAO report suggests that the practice of admitting unqualified students is widespread or indicative of the sector as a whole," the statement said.
D-FW cases

North Texas has become a for-profit-school flash point. In April, the Justice Department announced that Westwood College and its parent company, Alta Colleges of Denver, agreed to pay $7 million to settle a lawsuit initiated by former employees. Texas Westwood officials were accused of falsifying financial aid forms, encouraging students to cheat on placement exams and lying about job placement rates.

Alta Colleges responded that "we believe that we have always acted lawfully and ethically."

In August, 13 former students sued Everest College, saying it had misrepresented job placement rates and the ability to transfer credits to nonprofit universities. The students also complained about the quality of education.

Other lawsuits have been filed by former students against Argosy University, Iverson Business School and Westwood in recent years.

The GAO began its investigation in October 2007, said George Scott, the agency’s director of education, work force and income security issues. Students at for-profit schools received more than $16 billion in federal loans, grants and other aid during the 2007-08 school year, the most recent for which data are available.

Their loan default rate four years after repayments were to begin was 23.3 percent in 2004, compared with 9.5 percent at public schools and 6.5 percent at nonprofit private schools. The rate can be explained in part because for-profit schools have a higher percentage of students from low-income families and those whose parents never attended college — typically greater-risk groups.

But weak standards also create problems because those who don’t succeed in school are also more likely to default, the report states.

Harris Miller, president of Career College Association, said his organization has been working with the Education Department since 2003 to improve loan repayment rates.

Steps include having member colleges counsel students about repaying loans, teaching money management and explaining how students can defer payments if needed. Some colleges have default rates of less than 1 percent, he said.

"We do everything possible from Day One to work with the students to minimize the chances of ever defaulting on a loan," he said.


  • To receive federal financial aid, students must have a high school diploma or GED certificate or pass a test of basic math and English skills called an "ability to benefit," or ATB. The test measures whether students have the skills to succeed in college.
  • When GAO analysts posing as prospective students took an ATB test in 2008 at a Washington-area proprietary school, the independent test administrator provided answers to some questions. The analysts still deliberately failed the test, only to find that their answers were changed so they would pass, said Scott, who declined to name the school. GAO investigators also identified cases at two proprietary schools where students got high school diplomas at diploma mills.
  • Federal education officials require test publishers to analyze test scores only every three years. Improperly administered tests can go undetected during that time, "resulting in increased risk of fraud and abuse," the GAO reported. And test publishers are not required to follow up on testing irregularities, the report said.

The "findings do not represent nor imply widespread problems at all proprietary schools," the report noted.

Baker said federal education officials will look at new rules to better monitor test-taking, the awarding of diplomas and general oversight. The department will also contract with experts to review ATB tests, Baker said.


  • The federal Government Accountability Office recommended that the Education Department:
  • Strengthen its monitoring of for-profit schools and the ability-to-benefit test program. Officials should look at data where test administrators improperly oversaw tests and use that data to identify potential future abuses.
  • Require test publishers to conduct an analysis about every 18 months of ATB tests in addition to the current three-year analysis to help better identify irregularities.
  • Have an action plan to prevent test administrators who allow cheating from getting additional work from the exam’s publishers.
  • Have easily accessible information available — for example on a Web site — that lists state-approved high schools. Officials can then more easily identify diploma mills.


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