Experts focus on ways to strengthen college financial supervision

Through a public process called negotiated regulation, the US Department of Education (ED) will begin debating with stakeholders next week on how to tighten college financial regulations.

A recent article by the Century Foundation (TCF), a non-partisan think tank, presented several suggestions to ED to better protect students and taxpayers at colleges, especially for-profit ones, which risk shutting down abruptly. Such sudden closings leave students in a difficult position and can cost taxpayers millions of federal dollars.

“There has been a model of schools, especially for-profit, schooling thousands of students and then closing their doors without warning,” said Carolyn Fast, principal researcher at TCF and author of the article titled “Revise better college financial oversight Protect students and taxpayers. “The question is, why does this keep happening? And what can the Department do differently to prevent these closures and the harm they cause? “

One of the recommendations of the document is that ED should change the way it identifies financially unstable schools and how often schools should report as well as update their financial health to ED. Fast said there can be a big time lag between when ED gets details about a school’s financial situation and when that school is struggling.

“Part of the problem is that the ministry seems to be identifying the problem when it is already too late,” Fast said. “So by the time they know the school may have a problem, it may be too late for the department to take action, and the school has received federal funding in the meantime.”

For example, the paper notes that despite the onset of the pandemic almost two years ago, ED currently relies on college financial composite scores based on data from 2018 and 2019. A financial composite score is a unique number intended for to indicate the financial health of a higher education institution. But in a fast-paced economy, if this score is coming from old data, Fast asked how this number can show an accurate picture.

“I think the article really fits the call for more information,” said Matthew Bruckner, associate professor of law at Howard University School of Law. Bruckner is an expert in higher education bankruptcy law. “The Ministry makes decisions with big impacts using old information. If you are on the financial barrier, they should instead ask themselves, what steps are you taking today to deal with what you know is coming? “

In contrast, Bruckner pointed out that the United States Securities and Exchange Commission (SEC) receives quarterly updates on the financial health of companies. He added that the SEC receives even more frequent updates when a company undergoes a major financial change. Yet the ED does not require such a timely report.

Fast’s article added that ED can do a better job of empowering colleges, especially for-profit organizations. who have often been found to deploy predatory lending and recruiting practices on some of the country’s most underserved students.

Dr William Tierney, University Professor Emeritus at the University of Southern California (USC), researches for-profit colleges and added that many of the country’s poorest students are in debt or without a degree when schools suddenly close. And if a student cannot transfer their credits to another school to complete their studies, their loans are canceled and the taxpayer foots the bill.

“We’ve had enough cases of this now to know what the problem is: it’s either the consumer or the citizen who gets screwed,” Tierney said of the abrupt shutdowns of several for-profit colleges in recent years. , including Corinthian Colleges and ITT Tech. “There has to be accountability on the front-end, not the back-end. I’m not comfortable with ‘the buyer be careful.’

Daniel Zibel, vice president and chief counsel as well as co-founder of the National Student Legal Defense Network, endorsed the call for upstream changes. The National Student Legal Defense Network is a non-partisan, non-profit organization focused on the rights of students to educational opportunities using litigation and advocacy.

“When people enroll in college they’re looking for a head start, a chance for economic mobility, and when a school closes while you’re in the middle of your studies, it’s incredibly disturbing,” said Zibel. “I think the department should do everything it can upstream to make sure the students are protected.”

Still, Tierney noted that for-profit college regulations have been “a yo-yo” between presidential administrations in recent years.

“When you have somebody running an illegitimate for-profit college, which is Trump, and they’re trying to get rid of all the regulations, then Biden comes in, well, we can do something now, ”Tierney said. “But we are not doing enough. It is a problem.”

Bruckner pointed out that state regulators also have a responsibility “to ensure that the education provided is good education and that students are not likely to relocate or lose credits midway through their degree.”

Still, Fast said she was hopeful for next week’s negotiated rules development and the changes ED may make. Fast will be one of the negotiators when making the rules. Another item she will keep an eye on is whether ED will work on “clear line rules” or on actions the ministry should take when a college is found to be very unstable financially. These “clear line rules” could push ED to take more preventative action.

“I am optimistic,” said Fast. “I think the Department is committed to working hard on this problem and finding practical solutions. “

Rebecca Kelliher can be reached at [email protected]

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