Fault a Too-Cozy System for Trade-School Scams : Education: Students are sold on loans for worthless classes; defaults are growing for lack of independent oversight.
Like most of her former classmates, Lillian is a young immigrant. As with so many others, her ambition was to come to Southern California to earn a decent wage. Recruited on a street corner by a hawker speaking in her native Spanish, she enrolled in a trade school that promised she would learn computer skills and earn a good salary.
But now, after completing her so-called course work, she has no marketable skills. In part this is because she spoke almost no English when she was signed up, but nonetheless was enrolled in a computer class taught simultaneously with an “English as a second language” course.
As one might imagine, she found her computer text and instruction nearly inscrutable. So she is unemployed. Unable to repay her student loan, she is being pursued by debt collectors. Her credit is ruined. Because of the default, she is barred from receiving future student loans. She must begin the dream again, this time further behind than when she arrived here.
Vocational schools offering training in fields from computers to personal grooming have become popular attempted points of entry into the work force. Newly arrived immigrants, in particular, turn to trade schools as they seek the skills necessary to realize the American dream. As The Times has reported, however, a vision of effective education culminating in a good job often proves elusive for these students. The result: The reported student loan default rate at Lillian’s alma mater is more than 50%; nationwide, the default rate on federally insured student loans at trade schools is more than 40%.
A dramatic escalation in the rate of student-loan defaults closely tracks burgeoning participation in loan programs by vocational schools. Vocational schools first became eligible to offer these loans, which are guaranteed by federal and state taxpayers, in 1979. Responding to this government-created incentive, in the past decade the number of trade schools tripled--while the number of student-loan defaults increased tenfold.
To protect thousands of prospective students annually from learning the hard way that many of these programs aren’t all they’re cracked up to be--and to prevent the needless expenditure of millions of tax dollars in federal guarantees--key elements of the systems by which trade schools are regulated must be reformed.
The challenge for federal and state authorities is how to confront the soaring default rates without eliminating opportunities for low-income individuals to become productive workers through legitimate trade schools.
California lawmakers have enacted sweeping consumer-protection measures designed to prevent schools from deceiving students. The more fundamental issue, though, is that while only “accredited” trade schools receive federal and state loan aid, the accreditors themselves are private agencies with a monumental conflict of interest--they derive their income from the very schools they accredit. Accredited trade schools pay membership fees to these agencies. Small wonder, then, that schools where two or more of every five graduates default remain accredited. Yet the federal Department of Education, responsible for approving agencies that accredit trade schools, does little to assure that accreditors competently assess trade-school performance on a regular basis.
The situation at the state level is no better. As with so much of California government these days, the agency charged with enforcing the state’s well-conceived regulations--the Council for Private Post-Secondary and Vocational Education--has painfully limited resources. Until recently, statewide it had only one investigator.
Fundamental restructuring is needed at federal and state levels. Federally, we should consider a new loan accreditation system: Either private accreditation should be jettisoned or the financial incentive for easy accreditation should be eliminated by outlawing the practice of schools paying fees to accreditors. Assuming that private accreditation continues, the Department of Education should not permit that industry to be essentially self-regulating. In California, it is shortsighted to pass comprehensive laws to protect students, only to ignore effective enforcement.
Lax enforcement and a deficient accreditation system enable some trade schools to make substantial profits at public expense, despite the fact that half their graduates do not repay student loans. Particularly here in Southern California, it is time we recognize that trade schools are an increasingly important gateway into the economic mainstream and take their effective regulation seriously.
