Obama Administration Cracks Down on For-Profit Colleges

While Obama administration alumni make a bid for University of Phoenix.

By Lydia Goerner Published on June 29, 2016

Student debt in the United States currently totals over $1.3 million and the Obama administration is battling for-profit colleges in an attempt to ameliorate some of the hardship student debt causes.

The Department of Education released a proposal on June 13 that could cancel debt for students who attended for-profit colleges. According to Politico, “For-profit schools lure students with a high-pressure sales pitch to get them to enroll in sham degree programs. Then they load them up with debts they can never repay.” For-profit universities enroll 10 percent of all students but account for 40 percent of loan defaults.

The Department of Education’s proposal is not final and the rule will be officially released later this year.

According to The Daily Caller, a report issued June 15 by the Department of Education found the Accrediting Council for Independent Colleges and Schools (ACICS) failed to comply with 21 federal standards for accreditors.

This finding has the potential to impact 800,000 students at about 900 different campuses who could lose access to federal student loans, The Daily Caller reported.

Senator Elizabeth Warren recently said ACICS has had a “dismal record of failure.” In light of Department of Education report, Warren said the ACICS has failed “to serve as an effective guarantor of institutional quality and gatekeeper for billions of dollars in federal student funding.”

Politico reported today that three former officials who worked for an investment firm run by President Obama’s friend staged a campaign to get the Education Department to approve a purchase of the University of Phoenix, the biggest for-profit college.

The potential sale of the University of Phoenix has high stakes for taxpayers, students and investors. According to Politico:

“The University of Phoenix’s financial stability may depend on the $1.1 billion acquisition. If the company were to fail, more than 160,000 students could be displaced and the government would be on the hook for hundreds of millions in student loans.”

On June 24, the National Advisory Committee on Institutional Quality and Integrity voted 10-3 to revoke ACICS’s power to accredit schools. The Daily Caller reported:

“The vote came in the wake of a devastating government report that found ACICS routinely failed to adequately police schools under its oversight, allowing many institutions to deceive and defraud students. ACICS was responsible for accrediting Corinthian Colleges (which abruptly failed in 2014 while under investigation), Northwestern Polytechnic University (a degree mill that fabricated students’ grades), and numerous other schools that have been investigated or found responsible for underhanded behavior.”

Two years ago, the Department of Education finalized rules intended to protect students. Their goals included preventing students from being buried in debt, more rigorous accountability, increased transparency about student success and improving student outcomes.

Arne Duncan, the U.S. Secretary of Education, said the regulations were the beginning of making student debt more manageable for students:

“Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable. These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed.”

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