Proprietary Schools Said To Violate Student-Aid Rules

By Thomas Toch — September 26, 1984 3 min read

Many of the nation’s postsecondary proprietary schools are violating the regulations of the federal student-aid program popularly known as Pell Grants, according to a report released last week by the General Accounting Office, the investigative arm of the Congress.

The schools’ conduct, the gao concludes, “is not in the best interests of the students” and is “costing the federal government millions of dollars.”

The gao based its conclusions on a study of 34 of the generally private, for-profit vocational institutions in 15 states that contained a high proportion of recipients of Pell Grants. The agency found that:

Nearly one in five of the students in such schools in the 15 states studied did not meet admissions standards set by the U.S. Education Department for students receiving Pell Grants.

Three-fourths of those who did not meet the standards in the states studied either dropped out or were expelled before finishing their studies. These students received $13 million in federal student aid. One-half of those who met the admissions standards dropped out or were expelled before graduation.

Nearly one-quarter of the postsecondary proprietary-school students in the 15 states were in school in violation of a federal regulation requiring students who receive Pell funds to make “satisfactory academic progress.” Those students received $63 million in Pell Grants. Eighty-three percent of the schools investigated were cited for failing to enforce the standard.

Approximately 60 percent of the schools were found to misrepresent themselves to prospective students by overstating job-placement rates, misrepresenting scholarships, and advertising falsely.

More than 75 percent of the schools in the 15 states studied were in violation of an Education Department regulation requiring schools to return Pell funds when students fail to complete training.

Pell Grant funds are used at postsecondary proprietary schools to help financially needy students obtain training that will prepare them for employment, according to the gao The gao investigation was conducted at the request of Representative Paul Simon, Democrat of Illinois and chairman of the House Subcommittee on Postsecondary Education, and Representative Richard A. Gephardt, Democrat of Missouri.

Practices Reviewed

According to the agency, postsecondary proprietary schools received and administered $278 million in Pell Grants between July 1, 1980, and June 30, 1981. That year, the gao said in its report, was the most recent for which figures were available.

It added, “gao has no reason to believe the sampling results are materially different than would have occurred had more recent data been used because, since gao’s review, program requirements for admissions and administration have not materially changed.”

The agency sought comments from the Education Department during its investigation and later disputed portions of the department’s responses. Specifically, it wrote in its report, “With respect to e.d.'s view that self-regulation by institutions and accrediting agencies will be a more cost-effective way of solving the problem [of the admission of unqualified students], gao’s review indicates otherwise.”

“The problems discussed in this report arose in part because no one--the schools, the accrediting agencies, or e.d.--has developed criteria which will better ensure that students without a high-school diploma or ged [General Education Development] have a reasonable probability of benefiting from the training that the Pell Grant program supports.” The Education Department’s regulations require that students seeking admission to postsecondary proprietary schools have a high-school diploma or a ged certificate, or be judged “able to benefit” from such study.

The gao recommended in its report that the Education Department “explore the feasibility of developing criteria that would provide schools a better indication that students admitted on the basis of ability to benefit have a reasonable likelihood of completing training.”

It also urged the Education Department to scrutinize more closely independent audits conducted for proprietary schools. Department regulations require such audits every two years as a condition of participation in the Pell Grant program.

The report is titled “Many Proprietary Schools Do Not Comply With Department of Education’s Pell Grant Program Requirements.” Copies may be obtained for $3.25 each, prepaid, from the General Accounting Office, Documentary Handling and Information Services Facility, P.O. Box 6015, Gaithersburg, Md. 20760.

A version of this article appeared in the September 26, 1984 edition of Education Week as Proprietary Schools Said To Violate Student-Aid Rules