It is often said, and quite correctly too, that the United States has the finest institutions of higher learning in the world. Equally true, but less publicly acknowledged, is the fact that the United States is also home to the largest number of the world’s worst postsecondary institutions. And oddly enough, both types of schools are the products of governmental intervention: the former through generous federal policies to promote research and scholarship, and the latter, consisting mostly of predatory for-profit institutions, through a profligate publicly funded voucher system with minimal gatekeeping and little oversight and enforcement.
Evidence of mass victimization of students—particularly low-income, first-generation, and at-risk populations—is fresh in the public eye in the aftermath of the collapse or closure of multiple for-profit colleges. Unfortunately, widespread waste, fraud and abuse in the sector are as old as federal student aid programs themselves. From their very inception, the aid programs have operated on a caveat emptor principle in which the students have been held responsible for bad outcomes—especially loan defaults—even where they were clearly ripped off or defrauded.
The implosion of Corinthian Colleges and the enormity of the costs to students and to taxpayers, however, may finally be registering with policymakers. It is amply clear that without adequate safeguards, students will continue to be victimized by unscrupulous providers and taxpayers will continue to foot the bill.
As Congress and the administration contemplate policy changes, the following five steps would go a long way to ensure better outcomes and greater program integrity.
1. Transform Accreditation
We must overhaul accreditation and narrow its focus on programmatic quality. Over the years, the scope of demands on accreditors has increased to include a long list of bureaucratic requirements.
As the laundry list of accreditor responsibilities has increased, the ability of accreditors to do a decent job on any of them has diminished. This narrowing of focus should be accompanied with additional administrative reforms to break the schools’ stranglehold on the accreditation process. Every facet of accreditation—NACIQI itself, accrediting boards, and accrediting teams—evinces the dominance of the very entities that accreditation is supposed to oversee. Ending this regulatory capture would go a long way in restoring credibility to the non-governmental quality assurance regime that accreditation ideally represents.
In addition, there are other structural changes that would induce greater seriousness of purpose and more effective quality assurance from accrediting bodies.
2. Better Articulate the Responsibilities of Gatekeepers
The second step we need to take is to ensure that the gatekeeping system’s state authorization mandate is not a mere pro forma step—as it is in some states—and articulate the nature of the particular aspects of an institution’s operations that the state must inspect and authorize.
The practices of states where state authorization is a particularly robust process—states like Oregon and New York—provide some insights as to how the states can be important partners in promoting good outcomes for students and for the federal student aid programs. Beyond the core issue of the minimum requirements that any state’s authorization process should satisfy, the question of dealing with distance-delivery across state lines needs to be better thought through.
On July 22, the Department of Education took a half-step in the right direction with proposed regulations on this latter front. For reasons that likely boil down to the lateness of the hour and underlying statutory language, the Department limited some of its most important new provisions—having to do with occupation-specific licensing and certification requirements—to disclosures.
A more effective authorization approach would mandate that programs failing to satisfy state licensing and certification requirements should not be authorized at all.
3. Better Control Title IV Eligibility
The third step we must take is changing the federal certification of eligibility to participate in the aid programs from an exercise in filling out forms into a more meaningful assessment and assurance of institutional integrity and capacity to deliver. Over the decades, a tacit assumption has turned the logic of program participation on its head, almost transforming institutional access to federal funds into a right as opposed to privilege.
Weak financial responsibility standards allow poorly capitalized and shaky institutions to leverage enormous sums of federal aid, which in Corinthian’s case was 100 times the company’s market capitalization near the end. A strong and sensible set of changes to the terms of the program participation agreement could significantly tamp down fraud and better protect students and the taxpayers.
4. Focus on Student Outcomes at Every Level
We need to create outcomes-based mechanisms to catch gatekeeping failures and simultaneously serve as an incentive against fraud by creating systems for disgorgement of ill-gotten gains through risk sharing. Although quite meek and substantively ineffective in its current regulatory form, the Gainful Employment construct provides an example of the genre of policy regime that would be particularly well suited for this purpose.
Assessment of educational investments is challenging because their promised benefits lag their upfront costs by years if not decades. Approaches that, like gainful employment, track repayment and outcomes over the years can best deal with this problem of the temporal lag. Furthermore, the gainful employment framework could be fortified to actively discourage fraud if it went beyond mere loss of eligibility and were tied to institutional risk sharing. Poor repayment patterns would, under such a proposal, subject profits and excessive salaries to claw-back by the government.
5. Enforce Regulations
Finally, regardless of whether any of the above is actually implemented or not, it would make a tremendous difference if the Department of Education actually enforced its regulations in a targeted, risk-based manner. As it is, the department spends as much time and effort to catch a minor paperwork violation as it does going after systemic and large-scale fraud. What’s worse, sometimes it simply fails to take note of its own evolving compliance requirements, and fails to adequately enforce the law.
A more vigilant agency, less sensitive to the lobbying campaigns of bad actors and more focused on protecting students, could, even with no additional statutory authority or regulatory improvements, do a far better job than the it has done in pursuit of its mission. Let’s all hope for an agency transformation in that direction, so that perhaps we can avoid repeating the Corinthian debacle.
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