Curbing Fraud And Abuse

The AFT is committed to ensuring taxpayer dollars intended to help students gain access to a high quality, affordable higher education through federal student aid programs are spent appropriately. Working with a broad coalition of student, consumer advocacy, civil rights, and other progressive policy groups, the AFT has pushed for sensible legislation and regulation to curb fraud and abuse of federal student aid programs. We communicate with Congress, the Department of Education, and other agencies regularly about these issues.

Education With A Profit Motive

A two year investigation by the Senate Health, Education, Labor and Pensions (HELP) Committee of the for-profit college industry raised significant concerns about the quality of the education provided by this sector. Cases of fraud an abuse in the recruitment and retention of students continue to be regularly reported. Though only enrolling 13 percent of the postsecondary student population 25 percent of federal student aid dollars flow to these schools, a price tag of about $32 billion per year. The for-profit sector also accounts for about half of all student loan defaults.

Ensuring Program Integrity

Following the HELP Committee investigation the US Department of Education engaged in a lengthy negotiated rulemaking process throughout 2009 and 2010 intending to guard program integrity and protect students from fraud and abuse. These regulations apply to all schools receiving federal aid funding for their students. Some of the issues addressed during this negotiated rulemaking were incentive pay of college recruiters based on the number of students they enroll, state authorization of online higher education institutions, and misrepresentation. Misleading and deceptive sales and advertisement practices are tragically common in the for-profit sector. The AFT supports both regulatory and statutory remedies to end misrepresentation and ensure program integrity.

Proper Stewardship Of Public Funds

Federal regulations state that no institution of higher education can receive more than 90 percent of their funds from federal student aid dollars. Most colleges come nowhere near this threshold but for-profit institutions receive an average of 76 percent of their revenue from federal aid sources. The fifteen largest publically traded for profit colleges receive an average of 86 percent.

Those figures do not include military or veteran’s benefits though for-profit colleges now take one-third of all GI Bill funds and half of all Department of Defense tuition assistance. As the Consumer Financial Protection Bureau’s Holly Petraeus has said, “This gives for-profit colleges an incentive to see service members as nothing more than dollar signs in uniform.”

Just like Title IV financial aid funds, GI Bill benefits and tuition assistance are publically funded programs intended to provide a quality higher education. The AFT and a growing coalition of veterans groups, civil rights groups, and higher education policy organizations has advocated for a strong 90/10 rule that ensures federal student aid goes to education as intended. The military and veteran’s benefits loophole should be closed. The AFT also supports regulations that would require non-education related expenses such as advertising be paid for non-federal dollars, as in from the 10 percent and not from the 90 percent.

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