Every decade or two since World War II, lawmakers have loosened oversight of federal aid to career colleges run by for-profit companies only to be disappointed time and again by rampant abuses. Prior to the Obama administration, this recognition of the hazards of for-profit colleges was bipartisan. Republicans, including those in the White House, frequently took more aggressive steps than Democrats to protect students and taxpayers. This GOP legacy—the insistence on taking college owners to task for exploiting federal aid—should inform the incoming administration, particularly as Betsy DeVos, a longtime advocate of small government and school vouchers, is poised to become the next secretary of education.
President Eisenhower began the GOP tradition of ensuring students and taxpayers got what they paid for, spurring reforms adopted in the wake of major abuses of the original GI Bill after World War II. In January 1955, Eisenhower established a commission to study the issue of veteran benefits and appointed the famed General Omar Bradley as chairman. What came to be known as the Bradley Commission produced a final report in 1956 that indicted for-profit institutions enrolling former service members on the government’s dime. “The Government was overcharged for much of the training in schools below college level, particularly in profit schools,” the commission wrote, “these schools enrolled…many veterans…in courses leading to occupational fields where the employment prospects were far from good.” Though the Commission did not have the exact numbers of veterans enrolled at for-profit institutions, they concluded that “much of the training in profit schools was of poor quality.” When problems started emerging again in the form of college “degrees” offered by mail without educational standards, the administration launched the first federal effort to list and shame “diploma mills,” an effort that has continued to today.
In the wake of the expansion of federal loan programs, a commission established by President Nixon found that misleading advertising, “overly aggressive recruiting,” and “false promises of job placement” were common. To reduce “exploitation of Federal programs and their beneficiaries,” the report called for “centralized complaint handling as an ‘early warning system’ against educational abuses” and argued for federal funding of vocational programs to be contingent upon successful job placement.
The work continued under GOP President Ford, who finalized regulations that triggered a review of a school if the percentage of students using federal loans exceeded 60 percent or the default rate exceeded 10 percent. By July 1975, 340 schools had been removed from participation in the federal loan program. Education Commissioner Terrel Bell (who would later become President Reagan’s first secretary of education) said in April 1975, “there is a place for profit-making schools, some of which provide very good instruction. On the other hand, I personally question the soundness of an institution whose existence is totally derived from signing up students who qualify for Federal aid.” Bell noted that “when there is rapid growth in any sector, there is a danger of malpractice. And, as much as we would like to attribute beneficence to the world of education, it, too, has its charlatans—the seekers of the fast buck.”
To protect Vietnam veterans from being targeted by predatory schools, President Ford urged Congress to expand the so called “85-15”—a rule that barred the Veterans Administration from approving and paying for non-accredited, non-degree courses for veterans at proprietary schools if more than 85 percent of students were veterans—so that the 85 percent could include all students, not just veterans, receiving federal funding. In a report to the Senate, Ford’s veterans agency explained, “It is our position that, if an institution of higher learning cannot attract sufficient nonveteran and nonsubsidized students to its programs it presents a great potential for abuse of our GI educational programs.” The Democratic Congress adopted the recommendation (but reversed the policy in a bill the next year after President Carter was elected).
The 1980s brought another dramatic rise in student loan defaults, prompting President Reagan’s secretary of education, William Bennett, to announce a plan in 1987 to cut off financial aid to schools with high default rates. Asked about the impact of his proposal on the for-profit industry, he said the regulation “won’t close [all] proprietary schools. It will close those [that] deserve to be eliminated based on their irresponsible treatment of students.” Responding to arguments that the crackdown would reduce access for disadvantaged students, Deputy Undersecretary Bruce Carnes said the department’s plans would protect them from wasting their limited loan and grant dollars at predatory for-profit schools. Some schools, he said, were sending “recruiters into unemployment offices to drag people with little chance of succeeding at their school out to go into their academic programs, and sign them up for federal student aid. There are virtually, in many instances, nonexistent standards for admission—if you can read or write, you are in. And these people, it seems to me, are the ones that we are trying to protect.”
Reagan’s secretary of education kept up the pressure, urging Congress to close “legislative loopholes that invite unscrupulous schools to defraud the taxpayer and take advantage of vulnerable students” in 1988. Under current policies, Secretary Bennett complained, “The kids are left without an education and with no job, and the taxpayer ends up holding the bag for a kid who gets cheated.”
Continuing the work that had begun in the Reagan Administration, President George H.W. Bush’s finalized regulations cutting off aid to schools with very high default rates, which were mostly for-profit, and requiring disclosure of job placement rates for vocational programs. The next year Secretary of Education Lauro Cavazos asked Congress to go further in cutting off high default schools. Lamar Alexander, after taking over as secretary, in 1991 proposed a separate accountability system for for-profit schools and vocational programs, in which states would assess performance on measures like completion and job placement rates, under parameters set by the federal government. And in signing the 1992 reauthorization of the Higher Education Act, President Bush emphasized the importance of provisions included in the bill that that would “crack down on sham schools that have defrauded students and the American taxpayer in the past.” The law led hundreds of colleges, mostly for-profit trade schools, to lose access to federal aid.
It is a shared bipartisan goal to facilitate quality training that leads to good jobs.
In the coming weeks, The Century Foundation will publish a series of essays and background papers about the history of scandals involving for-profit colleges, and how policy makers have responded. Some policies never got off the ground; some were enacted, but were quickly reversed. Others remain on the books and are helping to curb even worse abuses. It is a shared bipartisan goal to facilitate quality training that leads to good jobs. All of us, including the education secretary nominee, benefit from learning about the misbehavior and the accountability efforts of the past.