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New York Career-School 'Scandal' Said To Hurt Students, Taxpayers

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Fraud and abuse run rampant among New York State trade schools, which do little to help their students and cost taxpayers millions of dollars a year, a new report argues.

The indictment of virtually every aspect of the proprietary-school business--and of government efforts to regulate it--was prepared by the New York interface Development Project Inc., a research group.

"The scandal of the proprietary-school industry stems not only from the activities of the unscrupulous ... but also from the seeming impunity with which many schools defraud the city's poor," states the report, entitled "Unfair At Any Price."

Release of the report is likely to provide further support for federal and state efforts to crack down on abuses at for-profit training schools, which are consuming an increasing share of student aid.

With some exceptions, the training provided by the schools in such fields as cosmetology and computer-data entry is largely worthless for preparing students for the job market, the report maintained. Classes are crowded, equipment is inadequate, and teachers are frequently unqualified, it said.

Using the schools' own data, the report calculated that an average of only 35 percent of students complete the programs. Among graduates, 64 percent find work in a field related to their training--for an effective job-placement rate of just 22 percent of all enrollees, it said.

Such inadequate programs come at a heavy cost to both taxpayers and students, the report indicated. Since most students are from low-income backgrounds, they are eligible for large amounts of government aid--federal Pell grants and guaranteed student loans and state tuition-assistance payments--to cover the cost of the programs, which can run to $10,000 or more.

In the 1987-88 school year, the report found, proprietary schools in New York received on behalf of some 150,000 students a total of $36.2 million in state grants, $111 million in Pell grants, and $438 million in federally backed student loans.

Governments spend an average of $17,600 for each trade-school stu8dent placed in a job, the report said.

The training programs also put a heavy financial burden on the students, the report noted.

$27.6 Million in Defaults

Trade-school students frequently are unable to repay their loans after dropping out or being unable to find a job in their field, and thus are forced to default on guaranteed loans at a rate three times that of other students, the report said.

Loan defaults by proprietary students were found to total $27.6 million--60 percent of all delinquent student loans in the state.

The spiraling costs of trade-school aid may grow even larger as a result of last year's federal welfare-reform law, the report predicted. The new work and job-training requirements of that law may push many more welfare recipients into the hands of school operators, it warned.

Regulation Faulted

The report also was sharply critical of attempts to regulate the industry by federal and state agencies and private accrediting organizations.Despite a 1986 state law aimed at strengthening controls, oversight of the schools is fragmented and inadequately staffed, it said, and often easily evaded by the schools.

To improve oversight, the report called for basing schools' eligibility for government funds on their success in training students; strengthening measures to reimburse students and governments when schools close; increasing coordination between regulatory agencies; toughening licensing requirements; and making greater efforts to publicize nonprofit training programs.

Responding to the report and other criticisms, trade-school officials pointed both to their success in placing 50,000 New York students in jobs each year and to problems caused by current regulation.

"Ask our graduates what their quality of life would now be had private career schools not provided them with the training that led them to their present employment," urged Carolyn R. Palzer, executive director of the New York State Association of Career Schools, at a state legislative hearing March 2.--hd

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