US NEWS: Preventing the Next Corinthian

Career College Central Summary:

  • In a breathtaking acknowledgement the federal government bears some responsibility for college quality, the Obama administration announced this week that it will forgive the federal student loan debt of up to 350,000 Corinthian College students at a taxpayer cost of as much as $3.5 billion. Corinthian, the for-profit corporate parent to Heald College and Everest Institutes, was forced to shut down last month amid widespread charges of misrepresentation and fraud.
  • Education Secretary Arne Duncan went even further and said his agency would consider additional taxpayer-financed student loan debt forgiveness claims of those who went to other colleges – beyond Corinthian-owned – that may have defrauded their students. It's a move against what he secretary described as "the ethics of payday lending in higher education."
  • While bold, this latest student loan debt forgiveness move is in keeping with the deeper Obama higher education policy legacy. Throughout his tenure, the president has coupled massive increases in federal spending for college access and affordability with a groundbreaking insistence on quality results out of colleges. The increased investment was smart and the accountability tough, but more is required to assure the federal higher education investment and quality college programs.
  • We need hard-headed decisions going forward in terms of which colleges should be eligible for additional federal aid. There should be heightened minimum responsibility requirements of colleges on the front end so taxpayers don't have to pay for poor quality and predatory lending practices on the back.
  • What kind of minimum responsibility requirements? There are roughly 105 four-year colleges – for-profit and non-profit – that have first-time, full-time student graduation rates below 15 percent. There are another 94 that have student loan default rates in excess of 28 percent. These four-year colleges rank in the bottom 5 percent in those categories nationally and enroll approximately 600,000 students.
  • As with K-12 schools, under-resourced low-performing colleges in the bottom five percent should get increased federal financial assistance to deliver better-quality results. But if they don't improve, then eventually they should lose out on eligibility to receive federal financial aid. Otherwise, it's just a matter of time before more students are harmed, more default and more seek taxpayer forgiveness for being defrauded.
  • The financial stakes associated with the federal investment in student aid are enormous. President Barack Obama nearly doubled Pell Grant funding to some $34 billion a year. He tripled spending on higher education tax benefits. Add in federal student loan volume and Washington, D.C. invests some $180 billion a year in student aid.

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