Attorneys general across the country are investigating for-profit colleges accused of leaving students with overwhelming loan debt and without marketable job skills. At least 32 states are working together to investigate the schools, and 14 of those have already filed subpoenas for information, while several more are working independently on similar cases.
In cooperation with several of these states, the new federal Consumer Financial Protection Bureau—the agency set up after the financial downturn to regulate financial institutions—has sued ITT Education Services for predatory lending practices, the CFPB’s first such lawsuit.
Corinthian Colleges, which, like ITT, has been accused of abuses, has also noted in regulatory filings that the CFPB was considering legal action against it.
The efforts by the attorneys general and CFPB follow several years of stymied Department of Education attempts to impose new regulations on the private, for-profit higher-education industry and decades of relative inaction by state authorities.
“It’s very important that states have stepped up to the plate,” said Martha Kanter, who, as immediate past U.S. undersecretary of education, was the nation’s top higher education official. “The fact is we need good regulations and good governance in the states.”
The Department of Education declined to answer questions about its oversight of for-profit colleges.
Critics say the industry’s lobbying arm, the Association of Private Sector Colleges and Universities, is a main reason Congress and the White House have not been able to crack down on dubious practices. The group’s president, former Congressman Steve Gunderson, declined through a spokesman to answer questions about its opposition to federal rules or the wave of state actions.
Some larger states have taken on for-profit universities and colleges without waiting for others—or the federal government—to catch up.
California Attorney General Kamala Harris filed suit against Corinthian in October, and New York announced last summer a $10.25 million settlement with industry giant Career Education Corp. over claims it inflated its graduates’ job-placement rates.
“I think you need every arrow in the quiver,” said Margaret Reiter, a former state prosecutor in California who was involved in its earlier efforts to regulate for-profit colleges in the 1980s and ’90s. “You’re talking about huge businesses with lots of money and lots of influence. You really have to get everybody involved or nothing’s going to get done.”
After all, students rely on public aid, including grants paid from state taxes, to attend colleges that leave them ill-prepared for the workforce, said Allison Martin, a spokeswoman for one of the state attorneys general who has led the clampdown on the for-profits, Kentucky’s Jack Conway.
“States are running out of funds to give to students,” Martin said. “There’s a taxpayer-protection issue here.”
(Next page: States need to work together)
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