Concern for 'Defrauded and Victimized' Students Spurs Calls for Tighter For-Profit College Oversight

The turmoil in the for-profit college industry has affected California as much as any state, with the closures of major chains leaving thousands of students deeply in debt, their educations on hold. Meanwhile, the state agency in charge of regulating private colleges and vocational schools has struggled to enforce California law.

Now lawmakers and agency officials are seeking to tighten oversight of the troubled sector.

A package of seven bills unveiled Wednesday by Democratic state legislators would make major changes to the standards for-profit colleges must meet to operate in California.

One proposal, Assembly Bill 1340, would bar schools from enrolling California students in programs designed to prepare them for careers if their students’ debt after graduation rises above a certain percentage of their incomes.

It’s based on a “gainful employment” rule adopted by the Obama administration and since delayed by U.S. Education Secretary Betsy DeVos. The rule aimed to hold schools accountable for their promises to provide students with a path to a stable career.

“The story is commonplace — students taking out thousands of dollars of loans to enroll in a career training program they have been led to believe will lead to a job, only to discover they’ve got themselves in a horrible financial hole with no return on their investment,” said the bill’s author, Assemblyman David Chiu of San Francisco.

A previous attempt to enact a California version of the gainful employment rule failed. But that was before California joined 17 other states in suing over the rule’s delay, and DeVos announced her intention to repeal it altogether.

About 160,000 California students attend degree-granting for-profit colleges, with many more studying for a career at one of the state’s for-profit vocational schools. Those numbers include 10 percent of black undergraduates, according to a recent study by the Campaign for College Opportunity.

They also include veterans who use GI bill money to pay for both tuition and living expenses. Another bill by Democratic Assemblywoman Susan Eggman of Stockton would prevent colleges from using GI bill funds to rely more heavily on taxpayer money than federal law otherwise allows.

A third, AB 1344 from Democratic Assemblywoman Rebecca Bauer-Kahan of Orinda, would expand the number of state rules that out-of-state colleges enrolling California students in online programs must comply with.

A staffer at the California Association of Private Postsecondary Schools, which represents many of the state’s for-profit colleges, said no one was available to comment by press time on the legislative push.

Chiu said he was inspired to work with colleagues on the issue after an investigation last fall by CALmatters and The Sacramento Bee that found California’s Bureau for Private Postsecondary Education often failed to enforce state laws designed to prevent predatory recruiting and other abuses at for-profit schools.

The bureau was inspecting schools less than half as often as California law requires, the investigation found, and had a backlog of nearly 1,200 unresolved student complaints, many of which had been pending for years. Some students said their complaints of fraud had been dismissed with little explanation.

This month, the bureau’s parent agency, the Department of Consumer Affairs, announced it had created a special five-member task force of current and retired investigators to reduce the backlog.

The bureau will also be reorganized, with its current enforcement chief transferring to an administrative role and a new special investigator with experience in complex investigations hired to oversee complaints, said spokesperson Matt Woodcheke.

The reorganization “was a long time coming, and we hope that moving forward, the bureau is much more well-positioned to serve the needs of students in California,” he said.

Bureau staff said they had reduced the complaint backlog by about a quarter since November — though it’s unclear whether that was due to staffing changes or to the bureau’s decision to close out pending complaints if a student did not respond quickly to a letter asking if they wished to continue their case.

Attorney Megumi Tsutsui, a member of the bureau’s independent advisory committee who also represents students in fraud cases, said she hoped the new attention to complaints would lead to more thorough investigations.

“It’s great that they’re putting all these resources in place,” she said. “What I wouldn’t want them to do is just find ways to close cases by marking them done and moving on.”

If lawmakers pass AB 1340 and Gov. Gavin Newsom signs it, California would be the first state in the nation to establish its own gainful employment rule. At least some of the responsibility for enforcing the rule would likely fall to the bureau.

Chiu said he and his colleagues would be monitoring the bureau’s evolution closely.

“At this time when our students are being defrauded and victimized, we need the bureau to step up,” he said.

This story and other higher education coverage are supported by the College Futures Foundation.

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