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Congressional investigators, a General Accounting Office official, and the Education Department's inspector general agreed last week that fraud is rampant in federal student-aid programs and that the department does not have the staff or the authority to curtail the abuses.

A report released at a Congressional hearing describes a system in which owners of proprietary schools get rich at the expense of taxpayers and students, often in collusion with dishonest auditors, lenders, and guarantee agencies. Staff members of the Senate Government Affairs Subcommittee on Investigations prepared the report.

"To date, we have not found one area that we have examined in federal student-aid programs that is operating efficiently or effectively," the report states. "Every individual we have spoken to, without exception, has told us that despite recent changes in program administration, the system is severely broken and that major changes must be made immediately to save the taxpayers' money."

The investigators found that state licensing agencies and accrediting organizations do little to ensure the legitimacy of schools and that the Education Department lacks the4manpower to investigate on its own.

The department's inspector general, James B. Thomas Jr., agreed that the department does not sufficiently screen schools applying for eligibility or claims made about their programs. He suggested that eligibility rules be tightened.

Proposed legislation aimed at reversing recent U.S. Supreme Court rulings narrowing civil-rights protections for employees may cause the Bush Administration to withdraw its support for another bill seeking to prohibit bias against the disabled, a Justice Department official said last week.

In testimony before a Senate committee, Deputy Attorney General Donald B. Ayer said the Administration is opposed to allowing disabled people to sue for damages in employment-discrimination cases.

The Administration supports parts of the proposed "civil-rights act of 1990" that would allow employees to seek damages for on-the-job discrimination and to challenge discriminatory employment practices after they are actually affected by them, but opposes other provisions. (See Education Week, Feb. 14, 1990.)

Mr. Ayer did not take a position on a proposal to allow women and ethnic and religious minorities to seek the same damages available to members of racial minorities in job-bias cases.

But if the available remedies are expanded, he said, the Administration would withdraw its support for the proposed "Americans with dis8abilities act," which would extend to the disabled the same anti-discrimination laws.

"It was very clear at the time of our discussions that the fact that these remedies were limited to injunctions, back pay, and other equitable relief that can be obtained without triggering the Constitution's civil-jury requirement was critical to the Administration's agreement," Mr. Ayer said.

The disability-rights bill, which would bar discrimination by nonreligious private schools, has been approved by the Senate and is working its way through the House. (See Education Week, Nov. 22, 1989.)

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