Declining Government Aid Puts Trade Schools in Vise : Jobs: Critics say system is stacked against the needy as loans for such training become harder to obtain.

Georgia Doty left an alcoholic husband in Minnesota, took her four kids and headed by train for Los Angeles. She found a job as a respiratory therapist and, on the side, created a makeshift medical trade school to train unskilled poor people.

Within four years Doty was dead. She left a teetering nonprofit school and a deathbed demand to her children to keep it alive.

Fourteen years later, Technical Health Careers School in South Los Angeles is alive and still teetering.

Its up-and-down existence is a textbook course in the dilemma of how to lift poor people into the economic mainstream, an issue that has received prominence after the Los Angeles riots.

Hidden next to a K mart at Western Avenue and Imperial Highway, recruiting by word of mouth with nary a newspaper or broadcast ad, Technical Health Careers School each year pumps hundreds of graduates--many of them former welfare mothers--into entry-level jobs at medical clinics and hospitals. Many have advanced to management positions.

“By and large, their people who stick with us are of very good quality,” said Robert Galchus, manager of cardiopulmonary services at California Medical Center, an inner-city hospital.

In an American economic system that lacks a network of apprenticeship programs for non-college-educated workers--long a hallmark of most Western European economies--such a trade school would figure to expand to fill the void.

Instead, due largely to changes in government policy, it is shrinking.

As federal funds to subsidize job-training were trimmed and education grant funds remained relatively stagnant in the 1980s, a greater percentage of Technical Health’s students had to rely on federally guaranteed student loans to pay part of their tuitions.

Nearly half who borrowed money failed to pay the government back. They became part of a national epidemic. Defaults in the Education Department’s student loan program increased 507% from 1983 to 1991, to $2.7 billion. More than a quarter of all trade school loans are not paid back.

As a result, many banks have become reluctant to make student loans, even with the federal guarantee, particularly after 1989 congressional hearings that portrayed profit-hungry, fraudulent trade schools as a national scandal.

Today, Georgia Doty’s daughter, Sharon Hughes, who runs Technical Health Careers School, estimates that about 70% of the school’s low-income applicants--people who until a couple years ago automatically qualified for student loans--do not get in the door because they cannot pass a new credit check demanded by the school’s bank.

As a result, the school, which at its peak trained 400 students at a time, now has 125, even though hospitals in the region report staffing shortages as high as 20% among support personnel. In reports to the federal government, Technical Health says that about 90% of its graduates find employment.

“A significant number of our students have lost access to financial aid,” said Hughes, who said she has not drawn a salary for the past six months because the school cannot afford to pay her. “These are people who don’t have cars and have to go to a school near their homes.”

To many advocates of limited federal spending, the restrictions faced by the school are appropriate, particularly in light of widespread evidence that many private trade schools offer weak courses with little relevance to the changing economy.

To Technical Health’s supporters--who cite its long track record and its commitment to one of the few segments of the U.S. economy that is growing--the school’s skidding enrollment is another example of how the system is stacked against the most needy. A commitment to training the poor requires a more liberal system of financial support, they insist.

“The survival of the school is extremely important,” said Dr. Richard A. Williams, a clinical professor of medicine and cardiology at the UCLA Medical Center and president of the 4-year-old Minority Health Institute. “What’s different about it is not the curriculum, but where it’s located and who it’s training.”

Ideally, the kind of training that costs thousands of dollars at Technical Health would be available more cheaply at a community college. But Southwest College, across the street, offers no medical trade courses, only nursing.

The Los Angeles Community College District, which last week slashed its 1992-93 budget by $30 million, does not offer courses in Technical Health’s four specialties: pharmacy assistant, blood-lab assistant, electrocardiogram assistant or general medical assistant, a district spokeswoman said.

Technical Health’s broadest appeal is to a layer of the underclass who went through high school aimlessly and then drifted off track into pregnancy or welfare or a string of dead-end, minimum-wage jobs. The vast majority of the student body is female.

Students, who pay about $4,000 for six to nine months of training, reflect the varied ethnic, social and economic rhythms of Los Angeles.

There is Sonia Mata, a 26-year-old Salvadoran immigrant who makes $6.23 an hour as a hotel maid and also puts in seven hours a day at the school, hoping to make between $8- and $11-an-hour as a medical assistant.

There is Faith Williams, a 40-year-old single mother of four who has been on welfare since she had her first child at 19. Williams, who did not finish high school, is studying to be a blood-lab assistant. “My goal is to not be sitting at home waiting on the county to hand me something,” said Williams, who lives in a Watts apartment without a telephone.

There is Bernard McGee, 40, a recovering heroin addict who served jail time for a burglary in Los Angeles, went home to Detroit, kicked his habit and returned here. McGee, who has numerous bullet wounds from his days in the drug world, is also studying to become a blood-lab assistant. “It’s like learning Hebrew in six easy lessons,” he joked.

There is Sandra Berry, 44, of Carson, who lost a $16.70-an-hour job as a plastics fabricator at McDonnell Douglas’ Torrance plant in a mass layoff this year. Even with the training, it will take Berry years as a medical assistant to regain her old wage level.

The layoff was the type of economic disaster that is reshaping Southern California’s economy and changing the composition of ghetto institutions like Technical Health: Well-paying industrial jobs disappear, and most of the service sector jobs that remain pay significantly less. Displaced middle-class workers, desperate for technical retraining, wind up competing with the chronically unemployed for limited job-training slots.

Unlike most of Technical Health’s students, Berry did not have to pay or borrow funds to finance her training. It is free. The bill is being paid by the city of Carson’s Private Industry Council with funds from the federal Job Training Partnership Act.

During the Carter Administration, in the late 1970s, federal job funds were disbursed under the Comprehensive Employment Training Act, which paid for job training, and provided low-income people with a stipend while they were trained. Virtually all of Technical Health’s students qualified, and did not have to apply for student loans.

The Reagan Administration abolished CETA in 1982 and replaced it with the Job Training Partnership Act, a smaller program that relies on coalitions of local business leaders to distribute federal funds to training programs.

Federal funding for JTPA is less than half of what CETA received. In addition, studies have shown that JTPA programs tend to provide training to better-educated, higher-skilled unemployed people--people such as Sandra Berry, rather than welfare mothers such as Faith Williams. The technique is known as “creaming,” selecting the cream of the unemployed.

Defenders of JTPA say the program’s workers tend to last longer on their jobs than those who were trained under CETA. Critics say it does too little to prepare the chronically unemployed to enter the mainstream.

Regardless, the number of job-training slots funded by the Labor Department fell to 1.3 million in 1990 from 1.7 million in 1980.

Technical Health was born during the boom years for the private trade school industry. In the late 1970s and the early 1980s, the government amended the guaranteed student loan program to allow students without a high school diploma to borrow money.

Schools began to aggressively recruit, some bilking the government by luring students, obtaining their loan money and then providing inadequate education. In the past year, the Bush Administration has vowed to reorganize the student loan system.

Last month, a House-Senate conference committee approved legislation to disqualify a greater number of trade schools from the student loan program. A school is disqualified if the proportion of its students who default on their loans exceeds 35% in three consecutive years. The new legislation tightens the cutoff to a 25% default rate by 1994.

Two years ago, when federal records showed that 64% of Technical Health’s students had defaulted on their loans in one year, the school’s bank stopped issuing loans. It took another year before the school could find another bank, which agreed to process federally guaranteed loans. The new bank added the requirement of a credit check, even though the school had trimmed its default rate to 28%.

Despite the obstacles, Dr. James Mays, who runs several inner-city medical clinics as well as a private “adopt-a-family” foundation and has hired some Technical Health graduates, said he believes that the school will survive.

“I think it’s going to make it because it’s made it so far,” said Mays, who said school founder Georgia Doty pleaded with him during the final days of her life to help her children maintain the school. “It will make it just by (the thin margin of) a spider’s web.”