States, Federal Government Cracking Down on For-Profit Colleges

March 12, 2014
student loan news
The U.S. Department of Education has attempted to deepen its oversight of for-profit colleges but has been rebuffed by lobbying and legal challenges. States and federal agencies are stepping in to challenge these institutions. Attorneys general across the country are investigating for-profit colleges accused of burdening students with heavy loan debt and no marketable job skills. At least 32 states are cooperating in an investigation, and others are working on independent probes.

Last year, California AG Kamala Harris filed suit against Corinthian Colleges, while New York reached a $10.25 million settlement with Career Education Corp. over claims of inflated job-placement rates. The Consumer Financial Protection Bureau (CFPB), with several states, also recently sued ITT Educational Services for predatory lending practices.

For several years, the Department of Education has sought to impose new regulations on the private, for-profit higher-education industry. Students often depend on public aid, but many states are running out of money.

Some critics blame the Association of Private Sector Colleges and Universities for blocking government efforts to crack down on the industry. Some industry leaders, however, argue that the various state actions have only confused regulation. Massachusetts AG Martha Coakley is pushing for new limits on lending and recruiting practices at for-profit colleges, though some of the proposed rules would conflict with federal regulations and accreditors' requirements, said Catherine Flaherty of the Massachusetts Association of Private Career Schools.

Other federal agencies may join the CFPB in its examination of for-profit colleges. They include the Justice Department; the Securities and Exchange Commission; and the Defense Department, which has objected to the schools' targeting of veterans.

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