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For-profit colleges need more regulation

According to a study by the U.S. Government Accountability Office (GAO), students at for-profit colleges and universities are most likely to default on federal student loans. Many of these proprietary colleges seem to be more concerned with making money than providing quality education at taxpayers’ expense.

The report found that after four years of trying to repay federal loans, 23.3 percent of students at proprietary colleges had defaulted. The rate for students at public colleges was only 9.5 percent, and for private non-profit college students, it was was 6.5 percent.

When students default on federal loans, the government must pay the bill, which will only get higher as proprietary colleges expand. Students at for-profit colleges received more than $16 billion in federal aid for the 2007-08 school year. The government needs to increase regulation of these loans to ensure fewer defaults.

The report points out that students at proprietary colleges are more likely to come from low-income families and have parents with no college degree, which increases the likelihood of defaulting. However, many of these high-risk students would not have qualified for any federal aid if it weren’t for the questionable actions of some colleges.

Among other things, students must pass a basic math and English skills test or have a high school diploma or GED in order to qualify for federal aid. Because these colleges are concerned with making money, some
are willing to break the rules.

GAO analysts posed as prospective students and took a basic skills test at a local proprietary school. Though the test administrator was supposed to be independent, the test takers were given certain answers. The analysts also noticed that the answers on their test forms had been tampered with and changed to correct ones.

GAO also found that officials at two other schools helped students receive invalid high school diplomas from diploma mills to meet the federal loan requirement.

The Department of Education (DOE) is responsible for overseeing these tests, but clearly it has not been doing its job. The GOA report recommended that DOE should improve its monitoring of basic skills tests and improve regulations to prevent this kind of cheating.

When a proprietary school must help students cheat to get federal money, it means those students should not be going to college in the first place. They are unlikely to get a quality education and have a high chance of defaulting, which will hurt taxpayers and take away aid from other students who need it.