Consumer Federation of California

California’s recently formed Bureau for Private Postsecondary Education has significant weaknesses in its oversight of for-profit colleges, advocacy groups told lawmakers at a hearing this week.

The agency’s lax approach limits its ability to police abuses in the for-profit sector, said Jamienne S. Studley, CEO of Public Advocates Inc., a nonprofit law firm and advocacy group in San Francisco.

During the joint information hearing of the Assembly Higher Education Committee and Senate Committee on Business, Professions and Economic Development, Studley recommended that the bureau strengthen its approval process, demand more disclosures from approved institutions, verify information received from colleges and more.

Nationally, for-profit colleges have the highest share of students who default on their student loans. The sector enrolls 1 in 10 college students in California, but receives more Cal Grant dollars from the state than all the community colleges combined.A 2010 report from the College Board shows the six-year graduation rate for first-time, full-time students is 22 percent at four-year for-profit colleges, compared with 55 percent at public four-year institutions and 65 percent at private four-year colleges.

Studley, who has served as president of Skidmore College in New York and was deputy general counsel at the U.S. Education Department in the Clinton administration, compared some for-profit colleges with payday lenders.

"If our goal were to provide low-income neighborhoods and individuals with access to good banking services, we would not count opening more payday lenders as success," Studley said. "And so when our goal is increasing opportunity through educational attainment, the chance to go to institutions that graduate less than a quarter of their students, or that succeed in placing only a small number of students in secure jobs in the field for which they are trained, does not count as success."

The Bureau for Private Postsecondary Education was established in January 2010. Before its creation, the state’s proprietary schools had gone more than two years with no oversight because former Gov. Arnold Schwarzenegger allowed the term of the previous regulator to expire.

The bureau is charged with approving private colleges to operate in the state. It then is supposed to enforce the law by investigating complaints and conducting annual site inspections.

But Studley noted that the bureau’s patchwork jurisdiction leaves many students at risk. Only unaccredited schools are subject to the full scope of the agency’s investigation, complaint and enforcement procedures.

Schools with national accreditation, such as the for-profit Art Institute of California-Los Angeles, for example, are automatically approved to operate by dint of their accreditation. Colleges that are regionally accredited are exempt from nearly all the state requirements. That includes Argosy University-San Francisco Bay Area in Alameda.

Because Argosy, for example, is accredited by the Western Association of Schools and Colleges, it does not have to follow any of the state’s disclosure requirements. Students at the school can’t lodge a complaint with the bureau if they’ve been misled. And the bureau can’t investigate the school or take action against any fraud or abuse, Studley said.

That means hundreds of thousands of California students in private institutions are not protected by the bureau. More than 250,000 students statewide attend regionally accredited private institutions ‘ which includes a mix of private for-profit and nonprofit colleges.

Studley argued that the system leaves students in the cold, in part because accreditors focus on education programs, not on investigating fraud and abuse. She also said California is one of very few states that allow accreditation alone to stand in for any state approval, and the only other large state that does so is Texas.

"We strongly encourage the Legislature to closely examine the risks of relying on an external peer review process to effectively replace the state’s consumer protection oversight for such a large segment of the private postsecondary sector," Studley said.

Aside from the patchwork coverage of the bureau’s jurisdiction, Studley also said the agency relies too heavily on self-reported, unaudited information from the schools themselves. While state regulations require that institutions provide all prospective students with a school performance fact sheet that includes information on completion rates, job placement rates, license exam passage rates and more, the bureau doesn’t verify that this information is accurate.

Studley recommended that the agency implement mandatory audits and independent verification for the fact sheets. She also proposed that the agency better define job placement rates so that the colleges can count only students who land permanent positions in the field in which they trained.

When it comes to investigating complaints and issuing sanctions, Studley said the bureau falls short. The Bay Citizen reported in December that the agency had a backlog of 200 investigations of schools that had been accused of violating state education code. One former student of the for-profit Institute of Medical Education told The Bay Citizen that when she complained to the bureau about the school, she was told the agency lacked the staff to investigate the claim. This week, the bureau announced it would shut down the Institute of Medical Education.

Debbie Cochrane, program director for the Institute for College Access and Success, told lawmakers that for-profit colleges find California to be a ripe market specifically because of the state’s lax system.

"The combination of relatively weak oversight ‘ including virtually no oversight for a few recent years ‘ and an unusually generous state grant program have made the state an attractive place for for-profit colleges to do business," Cochrane said.