Let Me Paraphrase Dept ED OIG to Congress, “WTF?”

The Office of Inspector General of the Department of Education was left recently politely scratching their head after reviewing proposed Congressional legislation to roll back protections for students from problematic debt.

Congress is currently salivating to make changes while reauthorizing the Higher Education Act (HEA) and the OIG reviewed the proposals to “promote the efficient and effective use of taxpayer dollars in support of education and to provide independent and objective assistance to assure continuous improvement in program operations and prevent fraud, waste, and abuse.”

Spoiler Alert

Well, it looks like for-profit educators want to rid the system of protections that have attempted to prevent financial harm to students. I don’t even need to go find my shocked face for that.

The OIG Says

The Inspector General states the current federal student loan system is already “vulnerable to fraud, waste, and abuse” so what does Congress what to do, yep, relax the rules further. That’s just nuckin futs.

OIG Recommendations for the Higher Education Act Proposals

As part of the OIG’s feedback, they also looked at the current legislation in Congress, the “Promoting Real Opportunity, Success, and Prosperity through Education Reform Act” (PROSPER Act). As you can imagine the PROSPER Act benefits the business of schooling (which is more than just education) and not the business of learning.

Under the PROSPER Act, Congress wants to remove the differentiation between for-profit and nonprofit schools.

“The HEA has provided a separate definition for proprietary schools since they were first authorized to participate in the HEA programs beginning in 1972 in order to offer programs that must lead to gainful employment. As the OIG has testified before Congress on issues involving proprietary schools over the years, the sector continues to present itself as a high-risk area for the Department. This sector, unlike public and nonprofit schools, must produce profit for owners and stockholders, which can create an incentive to evade compliance with obligations to students and taxpayers. OIG resources devoted to postsecondary school investigations continue to be disproportionately devoted to fraud and abuse in this sector.”

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“We are also concerned with the PROSPER Act’s proposed elimination of other accountability provisions that impact all postsecondary schools. Under the PROSPER Act:

  • All schools would no longer be subject to a loss of Title IV eligibility due to excessive loan cohort default rates (Section 426), and proprietary schools would no longer be required to obtain at least 10 percent of their revenue from sources other than Title IV (Section 491(l)).
  • Proprietary schools and postsecondary vocational schools would no longer be required to prepare students for gainful employment in a recognized occupation. (Section 101).
  • All loan repayment measures would be replaced with a programmatic loan repayment measure for all schools, and current accountability requirements would be replaced with a single metric (Section 482).
  • All schools would no longer be expected to provide regular and substantive interaction with an instructor in distance education programs. (Section 103(b)).”

The Department of Education’s own Inspector General appears to believe it would be ridiculous to remove requirements for “proprietary” schools to not be held accountable for the quality of their education.

“We continue to believe that a school receiving funding for programs designed to provide training for a specific occupation need to be held accountable for the success in securing employment for its students in that occupation. Otherwise, students can be harmed by not being able to pay loan debt which results in default, leaving taxpayers to bear the financial burden associated with increasing default rates.”

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The proposed PROSPER Act would make for-profit schools damn near a money printing enterprise, ss the Inspector General notes.

“The PROSPER Act looks to replace all loan repayment measures with a programmatic loan repayment measure for all schools. The PROSPER Act would replace the various accountability requirements (which address different accountability goals) with a single metric that places extreme pressure to ensure that the metric is well designed to achieve desired accountability goals. The metric would make ineligible any program at an institution that for three consecutive years has a loan repayment rate below 45 percent.3 Since a program would lose eligibility only after three consecutive failures, a school need only ensure compliance once in a three year period to avoid loss of eligibility. Further, “positive repayment status” has a very limited definition. For example, “positive repayment status” includes borrowers who are in repayment status but not actually making payments on their loans. This can include some borrowers who are in a deferment or forbearance status where no payments are due and some borrowers who are enrolled in an IDR (Pay as You Earn, Revised Pay as You Earn) where the calculated monthly payment amount is $0.”

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The system could be so easily gamed by making an effort to enroll all outbound students into deferment, forbearance, or an IDR as part of the exit process. Screw finding them jobs, just get their loans pushed off for another day.

Trust me, the OIG goes on from there and gets even more insane with the proposals to relax the responsibilities of schools receiving federal student loan money.

How about the elimination of distance learning students to communicate with a faculty member with experience in the field the student is studying. Sounds crazy. But wait for it.

“The amendment in the PROSPER Act as proposed would allow schools that provide routine email contact with any member of the “faculty” without subject matter expertise to avoid the limits placed on correspondence schools. We believe Congress should retain the definition of distance education and not replace instructor with faculty. The requirement should remain that a school that offers education programs, which will not qualify as correspondence education, should provide education by an instructor with subject-matter expertise.”

The OIG report goes on. You can read the entire report here.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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