For-Profit Colleges May Lose Student Aid From U.S. Over Recruiting Abuses

[marmar]

Nov. 22 (Bloomberg) -- For-profit colleges that pay recruiters on the basis of the number of students they sign up may lose access to U.S. government student aid, which provided the colleges with $26.5 billion last year and can account for as much as 90 percent of company revenue.

The Department of Education, seeking to strengthen oversight of the for-profit college sector, is considering boosting fines and disqualifying colleges from participating in federal-aid programs when they give bonuses to admissions officers for enrolling more students, said James Kvaal, deputy undersecretary of education, in a telephone interview. For- profit colleges got about 23 percent of all federal student grants and loans that went to U.S. universities in 2008-2009, according to the U.S. Government Accountability Office, while educating about 12 percent of all students.

The Education Department plans, in July, to make incentive compensation for recruiters illegal, removing 12 types of exemptions, or “safe harbors,” that were put into place in 2002 under President George W. Bush. At that time, the department’s enforcement power was reduced to levying fines, Kvaal said. Revoking aid eligibility would be used rarely to punish widespread violations, Kvaal said.

“We take our responsibility to prevent these abuses very seriously,” Kvaal said. “We’re going to look at what tools we need to make sure the law is being followed.” ...........(more)

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