December 1, 2011

The astronomical growth in for-profit higher education has exposed increasing numbers of students to the rampant fraud in the sector. Federal and state oversight has generally been lax. In a positive sign for students, the federal government has begun to act more aggressively, expanding disclosures for students, strengthening rules on incentive compensation and misrepresentations, and setting minimum standards for programs that are eligible for student loans only if they prepare students for gainful employment.

These are important developments, but not nearly enough to rein in abuses and provide relief for students. For example, none of the federal regulatory changes to date expand relief for students harmed by abusive practices. While some states have also started to take action, too many turn away, assuming that the federal government will take care of the problem.

This report examines the state of state oversight of for-profit (proprietary) schools, focusing on state regulatory structures and the levels of resources devoted to enforcement and oversight. The report also evaluates consumer protection laws, relief funds, and other options available to assist students who are harmed.

The report highlights how only a few states have devoted sufficient resources in recent years to challenge for-profit school abuses and provide relief for students. There are promising signs that other states are starting to pay attention, but much more needs to be done. The last section of the report contains recommendations to improve state oversight and protect students and taxpayers.