Pressure Grows to Ease ‘Diploma Mills’ Rules

Not long ago, California was the land of the “diploma mills,” a place where fly-by-night trade schools could prey on unsuspecting consumers, bilking them of federal student loan money in exchange for often worthless vocational classes.

All of that began to change with the creation of the Vocational Educational Reform Act in 1989. The law created a state agency to oversee the industry, the Council for Private Postsecondary and Vocational Education.

Now the future of the council is in doubt after Gov. Pete Wilson’s veto of legislation that would have extended its life to 2002. It may survive, but it is likely to be left with substantially fewer teeth.

While praising the council for shutting down rogue vocational schools, Wilson cited industry complaints in his Sept. 30 veto message. Council staff members, he said, had engaged in a “pattern of reprisals and vindictiveness” against the trade school industry.

The council will go out of existence June 30 unless the Legislature passes an emergency measure to keep it alive. A two-thirds vote of both houses would be required to keep the council funded beyond mid-1997.

Poverty attorneys and trade-school critics say they are mystified by the governor’s veto message and plan to fight to keep the council alive. They note that the bill extending the council’s life was approved by both houses of the Legislature with just one dissenting vote. Even spokesmen for the trade school industry acknowledge that the council has cut fraud.

“It appears there is a small but very vocal group of people in the industry who got to the governor and got him to veto this measure,” said Kenneth W. Babbcock of Public Counsel, a legal aid organization.

The trade school oversight agency consists of 70 employees, with offices in Sacramento and Los Angeles. It monitors about 2,400 schools that offer instruction in subjects as diverse as auto repair, hairdressing and business administration.

The council sends inspectors to review the performance of each private vocational school. It also requires schools to prove financial solvency to assure that students will not be stuck with loans they cannot pay back.

“I think the public in general and the business community benefit from having standards in place,” said Dan Sackheim, a spokesman for the council. “The good schools benefit from having their competitors held to these standards. The overall reputation of [the industry] benefits.”

Industry representatives contend, however, that the council’s regulations are onerous. They say refund standards require too high a proportion of tuition to be paid back to students. And they want to weaken provisions of the law that require a school to place a majority of its students in paying jobs in the skill for which they were trained.

“California is the most regulated state for proprietary schools in the country,” said Bill Clohan, executive director for the California Assn. of Private Post-Secondary Schools. He called the 1989 law a confusing, poorly conceived mishmash of regulations. “It’s the worst-written law I’ve ever read in my life,” he said.

For their part, supporters cite a litany of cases in which the council has come to the aid of students duped by unscrupulous school operators.

Among those who say they were rescued by the council are Araceli Olascuaga. The 45-year-old native of Mexico City said administrators at a now-defunct beauty school duped her into signing up for $6,200 in school loans for a course that was essentially worthless.

“We were almost six months without a teacher,” Olascuaga recalls. “They would give us a mannequin and we would practice the few things they had taught us, over and over again.”

Eventually, Olascuaga and a group of about 20 students at the beauty school filed suit in Small Claims Court, demanding refunds. They won, but the owner refused to pay and the school closed. Eventually, the council intervened and paid the students out of a state fund to which licensed trade schools contribute.

Trade school association official Clohan said most school operators agree that the council’s existence has helped the industry and that no one wants to return to the bad old days of the “diploma mills.” The vocational industry will support the continued existence of the council, he said, as long as its power is cut back.

“None of the recommendations we’re making undermine the consumer protection that is there,” Clohan said. “We’re trying to make it a student-friendly law too.”

Legal aid official Babbcock said shutting down the council and gutting the Vocational Educational Reform Act because there were fewer fly-by-night schools “would be like legalizing homicide just because the murder rate went down.”

“They could weaken the statute,” Babbcock said of the vocational school industry’s efforts. “That’s a very real possibility. Obviously, we hope that doesn’t happen.”