How to better protect Florida students from for-profit chicanery

For-profit schools enjoy protection of political strength to thwart regulation

When asked about Florida's for-profit schools, state Rep. Daphne Campbell said she knows the issue all too well.

The Miami Democrat said she has fielded dozens of complaints from students. Sometimes, they show up at her office in tears, she said.

Campbell said schools are "popping up just like a gas station, because it's big money and the only one who suffers is the student."

"Something needs to be done," Campbell said.

In Tallahassee and in Congress, the for-profit industry's political strength means any proposed regulations face difficulty. Curtis Austin, executive director of the schools' Florida lobbying group, said he isn't opposed to stronger accountability -- so long as it's applied to public and nonprofit schools as well.

"I don't have a problem with any kind of regulation that you're going to put in there, even stuff that I disagree with. I don't care as long as you apply it to everybody," Austin said. "We forget every kind of school and every sector has their advantages and disadvantages."

At for-profit colleges, one big disadvantage for students is they are often unable to file a lawsuit if they believe they were harmed. Many for-profit schools have a "mandatory arbitration clause" in their enrollment agreement that greatly limits student ability to sue.

Arbitration is a process where consumers and companies settle their disputes through an outside third party instead of a court. Colleges can have ongoing relationships with the arbitrators, leading to criticism the process is stacked in favor of the school. The decisions can't be appealed.

If a for-profit college student does somehow get to court, "they're usually battling a large law firm, because these schools have truckloads of money," said Robyn Smith, a former deputy attorney general in California who now represents the National Consumer Law Center. "It's a huge imbalance in the power that the individual has, versus a large for-profit corporation with good legal counsel."

There are many ideas and proposals on how to better protect students or give them a fighting chance in court -- some of which have already been enacted in other states. They include:

Changes at the state level. Reform the state oversight agency. Consumer advocates say the state panel in charge of policing for-profit colleges, the Commission for Independent Education, should not be dominated by for-profit college executives. In 2012, Kentucky abolished its state oversight agency and created a new one where for-profit college representatives were no longer the majority. The change came after a state audit blasted Kentucky's old agency for inadequate oversight and a failure to understand its role.

Tie financial aid to performance: Florida awards about $15 million a year in financial aid grants to students at for-profit colleges, with no performance standards attached. In 2012, California adopted performance standards for its Cal Grant program, with schools required to have graduation rates above 30 percent and student loan default rates below 15.5 percent. The California standards applied to all types of schools, but it was mostly for-profit colleges that struggled to meet them -- about 80 percent of for-profits no longer qualified.

In the Florida Legislature, two South Florida Democrats, Miami state Rep. José Javier Rodríguez and Parkland state Sen. Jeremy Ring, have filed a more modest proposal this session. It would cut off state funds to schools with loan default rates above 30 percent for three consecutive years, or above 40 percent for a single year. It has gained little traction in the Legislature.

States such as Wisconsin require schools to have a surety bond that "ensures that students can recoup tuition and other costs if the school closes."

Florida has something called a Student Protection Fund, but it's used to pay schools, not students. The Commission for Independent Education pays a second school to finish teaching a student's program if the first school closes.

These "teach-out" programs may not be the best choice for students -- if students walk away after the first school closes, they may get their federal student loans forgiven. Once students accept the teach-out, they are responsible for all their loans and there's no guarantee the second school will do a good job teaching the rest of their program.

"Often I think it's in the student's best interest, at that point, to choose to get his or her money back," Smith said, adding students need time to research their options before being rushed into a second school.

Javier Sanchez, a disabled Iraq War veteran from Hialeah who attended ATI Career Training Center, said he was cheated out of a complete education during his "teach-out." His original school, ATI, shut down amid fraud allegations, and the school Florida allowed to finish teaching ATI students -- Everest University -- was also subsequently accused of widespread fraud.

Sanchez said when Everest took over and had the former ATI students fill out admissions paperwork, students were told, "Don't date it, just sign, and we'll take care of the rest afterward."

Everest promised to invest in new equipment for the ATI students, Sanchez said, but that never happened. The veteran said he graduated from the air conditioning program but was never taught one of the most important subjects: A/C compressors. And employers won't hire someone who went to ATI, he said.

Sanchez said he's currently working in construction, which is the same thing he was doing before enrolling in school.

The longtime parent company of Everest, Corinthian Colleges, declined to comment.

Require a longer cooling-off period: Students at for-profit colleges sometimes complain they were rushed through the enrollment process and didn't realize what they were signing. For those who have second thoughts, the state's "cooling off" period (which allows for cancellation and a full refund) is key.

Florida currently has a three-day cooling off period for contracts in general, but there is no specific mention in state law that makes clear it applies to schools, which is what New Mexico has done. In California, the law says students can cancel all the way up to "attendance at the first class session, or the seventh day after enrollment, whichever is later." A few schools, including the University of Phoenix and Kaplan, voluntarily offer "trial periods" where students can attend classes and still back out without incurring charges.

Give students the right to sue: State law can play a pivotal role in strengthening students' ability to bring lawsuits against schools. California state law used to specifically give students the right to sue, but then that provision was removed in 2009 after heavy lobbying by the industry.

Mandate clearer financial aid information: Under federal law, shoppers at a car dealership get the loan financing information on a standard "Truth-in-Lending" form. Shools aren't required to use a standard form when presenting financial aid information, though a degree can cost four times as much as a new car. In 2013, Connecticut passed a law requiring schools to provide this information using the financial aid "shopping sheet" developed by the Consumer Financial Protection Bureau and the U.S. Department of Education.

Some health care experts are deeply opposed to both laws, and would like to see Florida return to the old rules. Members of the Florida Board of Physical Therapy have raised public safety concerns about unaccredited programs. Ann-Lynn Denker, a former Board of Nursing member, said "the board should have a role in overseeing the approval of these new programs. That's what they're there for. They're a regulatory body. The Legislature is not the regulatory body."

Give the CIE a clear consumer-protection mandate: Florida's Commission for Independent Education, under state law, is supposed to be the watchdog agency on behalf of students, but it's also supposed to be "protecting" for-profit colleges. Critics say that's an inherent conflict-of-interest and that standing up for consumers should be spelled out in state law as the primary mission.

In 2012, The U.S. Senate Health, Education, Labor and Pensions Committee wrapped up a two-year investigation of for-profit colleges. The committee's final report was hundreds of pages long, and the New York Times called it "a voluminous, hard-hitting indictment of almost every aspect of the industry."

After the report made headlines, Congress took no action.

Congress for years has heard tales of for-profit college abuses, but the industry's political clout -- combined with the current gridlock in Washington -- makes it near-impossible to pass federal laws that would better protect consumers.

Still, there are suggestions on how to help students, from the U.S. Senate report and advocacy groups representing consumers and students. Those policy proposals include:

End mandatory arbitration agreements: Most for-profit colleges rely heavily on federal Pell grants and student loans for their bottom line. Federal law allows these schools to get up to 90 percent of their revenue from taxpayer-funded financial aid.

"How can you call yourself a private for-profit company when 80 to 90 percent of your money is coming directly from the federal government?" asked Sen. Dick Durbin, D-Illinois, a frequent critic of the industry, in a March floor speech.

Durbin supports returning to rules that allowed debt from non-governmental student loans to be discharged through a bankruptcy proceeding. Those dollars give the federal government leverage.

If it wanted to prevent schools from forcing students into mandatory arbitration agreements, Congress could prohibit schools that accept federal dollars from doing so -- if they want to retain access to that money. During the U.S. Senate committee investigation, 21 of the 27 enrollment agreements that the industry provided to the committee included an arbitration clause.

The committee's report stated "students should have the right to pursue a class-action lawsuit against their former colleges if the college deceived them about costs, student loans, programs, job placement or salary after college, and not be forced into arbitration as most enrollment contracts currently stipulate."

When dozens or hundreds of students can join together as a "class" in a lawsuit, it's easier to get an attorney to take the case. The court hears all of their complaints at once.

Restore the bankruptcy option for private student loans: Tuition at for-profit colleges is so expensive that, after maxing out on federal loans, students sometimes take out additional private loans to pay for school. These private loans can have double-digit interest rates, and they include fewer consumer protections than federal loans.

With federal loans, for example, borrowers can sign up for income-based repayment that makes payments more manageable. Private loan borrowers typically don't have this option. The Project on Student Debt, an initiative that pushes to make college more affordable, calls private loans "one of the riskiest ways to finance a college education."

In 2005, a law passed by Congress made private loans less desirable as they could no longer be discharged in bankruptcy, except in rare cases. Federal loans had already been made nondischargeable in most cases under a series of laws starting in the late 1970s.

Some are now calling for a return to the pre-2005 rules, where borrowers could use bankruptcy to cancel their private loan debt -- debt that has no impact on taxpayers. Those supporting this change include some in Congress, such as Durbin in the Senate, consumer advocates, and even student loan lender Sallie Mae.

Change the rule for veterans: The 90 percent cap on for-profit colleges accepting federal taxpayer money has a loophole, as GI Bill benefits are not included in this 90 percent figure, and are instead counted toward the 10 percent side. Some for-profit colleges struggle to meet the threshold of 10 percent non-taxpayer revenue. This provision makes military veterans a sought-after group.

For-profit schools are targeting military men and women and their families with high-pressure recruiting tactics in order to meet the 90/10 requirement

Letter signed by more than 20 attorneys general calling on Congress to close the military loophole; Florida Attorney General Pam Bondi did not sign

In practical terms, for every veteran who enrolls, a for-profit can enroll nine other students who pay entirely with Pell grants and loans.