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⚫A GAO report on the 1980-81 academic year found that more than half of the proprietary schools it studied admitted students who did not meet minimum requirements and that 74 percent of these students dropped out.

• The New York City Human Resources Administration in 1989 conducted a preliminary review of 169 welfare recipients who had attended proprietary schools. Almost 80 percent of them were still on welfare, and only 4 percent of the cases were closed because clients had become employed, even though they had been scheduled to complete their training in June 1988.

●A 1987 study by the Hartford Courant found that only about a third of the students who had taken out loans since January 1981 to attend the Wilfred Beauty Academy had become licensed hairdressers in Connecticut.

A Colorado Springs newspaper in 1988 reported on a construction school for plumbers that charged $5,150 in tuition, which provided training only to the plumber's helper position paying $4.50 to $5 per hour and not the higherpaying apprentice positions. The article also reported a 27 percent placement rate, as opposed to 90 percent promised by paid recruiters.

While New Jersey requires a GED for a cosmetologist's license, no such credential was required of the thousands of people who borrowed money to attend beauty schools in that state. It was found that the only jobs students could reliably get upon graduation were wash and prep jobs, for which, a New Jersey higher education official reported, “you don't need to go to school and get $2,500 in debt.”

Proprietary school representatives vigorously dispute the retention and placement data of outside evaluators. The trade and technical schools association reports an overall retention rate of 74 percent and a placement rate of 73 percent at its institutions. Industry research concludes that, overall, trade school retention rates appear to be higher than community college retention rates, and the industry contends that low retention rates are more a function of a low-income, minority student body than improper educational practices. A researcher for the proprietary schools, reviewing a national survey of high school seniors from the class of 1980 and comparing their status six years later, found that 61 percent of the students who attended private career schools graduated, the same figure as for those who attended four-year institutions and 20 percent higher than community colleges. He found the career school placement rate to be 81 percent.

Placement rates are the subject of continuous dispute because there is no uniform method of measuring them. For example, the 1984 GAO study found that 46 percent of its proprietary school sample quoted job-placement rates higher than the records indicated because the schools included jobs students obtained outside the field of training or those only remotely related to training, as well as jobs obtained before training or part-time employment consisting of a few hours per week. In another study,

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schools achieved higher percentages by not counting graduates who were "not seeking employment," without an objective means of measuring that status.

FINANCIAL PRACTICES

High Tuitions: Because proprietary schools must make a profit on the tuition they charge and because such a large proportion of proprietary school students depend on federal aid to pay that tuition, it is often charged - though it has never been conclusively demonstrated — that proprietary schools charge too much in general and raise their tuition to accommodate increases in federal student aid.

It is difficult to confirm or deny these charges because the financial information submitted by proprietary schools to accrediting agencies and the federal government is not made public. An upcoming study reports, however, that in 1987-88, the average tuition for proprietary schools applying for campus-based aid was within $100 of the maximum Pell Grant and that total attendance costs reported by these schools was between $4,000 and $4,500, when the combined Pell Grant and Guaranteed Student Loan maximum was about $4,500.

Tuition Refund Policies: Less obscure is the concern that proprietary schools, while securing full payment from students up front, often have refund policies that do not permit students to recover much of their tuition if they drop out early. Neither the law nor accrediting agencies have required schools to provide refunds based pro rata on the number of classes attended. The general accrediting agency standard is to refund a declining percent of tuition that ranges from 90 percent during the first week of classes to 10 percent during the third quarter of the course, after which no refund is given.

Although accrediting agency standards are themselves favorable to the schools, the 1984 GAO report found that about 20 percent of the proprietary schools sampled had refund policies that not did meet these conditions, that about 40 percent under refunded monies at first, and that 40 percent were untimely in paying refunds. Again, horror stories began to appear in the press. For example, after two days at the Illinois School of Commerce in 1987, it was reported that a student assumed a loan on which she still owed $1,300. With refunds lower than they should be, and with new students continually replacing dropouts, schools lack a strong enough financial incentive to encourage retention, it is argued.

Other Practices: Two other practices that have caused concern are proprietary school branching and proprietary school closings. More and more proprietary schools are establishing branch campuses, sometimes far removed from the main campus, sometimes even in different states. A new school normally has to be in business two years to receive federal funds, but a branch campus can receive funding as soon as it is accredited, and that accreditation can be fairly automatic. The two largest accrediting agencies have written standards with regard to branches, but these often allow auto

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matic accreditation after site visits. Branching among cosmetology schools has not generally been regulated.

On the other side of the coin, when a proprietary school closes or goes bankrupt, students are not automatically entitled to refunds. In fact, student tuitions can be used to pay back the creditors of a school in bankruptcy, while students are left having to pay back loans they incurred for education they never received. This happened not long ago at the Adelphi Business Schools in New York.

INADEQUATE REGULATION

Critics argue further that the triad of agencies created to regulate proprietary school activities-state licensing agencies, private accrediting agencies and the federal government — is not doing an adequate job.

State Licensing Agencies: State licensing agencies have been criticized for failing to employ adequate staff to monitor schools, for not seeking sufficient legal authority to prosecute shady operators and for relying too heavily on self-regulation by the proprietary schools. For example, in New York, 11 employees monitor 413 proprietary schools; in Ohio, four part-time consultants oversee 360 schools. Prompted by unfavorable press and from pressure by their own state loan guaranty agencies, many states are taking on greater responsibility in licensing. California, Texas and New York have been prominent in this regard.

Accrediting Agencies: As we have seen, both the federal government and state regulatory agencies rely heavily on proprietary school accrediting agencies to certify the educational quality of their members. However, these accrediting commissions may be, in effect, arms of the national proprietary school associations, and are run by proprietary school operators with proprietary school operators dominating most site review teams. It is not surprising, then, that critics see the process as insufficient.

The 1988 Pelavin Associates report found that current accreditation practices are flawed and that the process is being progressively weakened. Reasons: (1) an increasing number of institutions are opening branch campuses; (2) the threat of litigation by affected schools deters effective legal action; and (3) competition among agencies limits their incentive to enforce standards. Schools are permitted, in effect, to shop around for accreditation agencies, switching from one agency to another if they lose the credential or are unhappy with the degree of scrutiny.

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Such criticisms are reinforced by press accounts of unethical standards. For example, a trucking school operator sued by the Education Department in 1988 for $366 million in fraudulent student aid claims was a member of the board of the National Home Study Council, the accrediting agency for correspondence schools. In another case, state auditors in West Virginia reported that the business school accrediting agency permitted Century College, part of a chain of schools, to maintain a bookkeeping system under which obligations did not appear on the schools' balance sheet.

Some proprietary school accrediting agencies counter that accreditation is a voluntary, collegial process aimed only at evaluating the educational efficacy of an institution and helping it improve its offerings. They contend that it is wrong for states and the federal government to impose the wrongheaded role of fraud and abuse policeman on an accrediting agency and then bash the agency for not fulfilling that role.

Accrediting agencies also maintain that they frequently take action against the same schools that the government is investigating but that confidentiality and due-process requirements prevent them from disclosing many of their activities. Proprietary school lobbyists maintain that each of the major accrediting commissions rejects roughly 10 percent of applicants annually, and court battles with rejected schools have become nearly constant.

The Federal Government: In the mid- and late-1980s, the Education Department came under heavy criticism for, on the one hand, decrying proprietary school abuses, and, on the other, weakening oversight authority. In 1981, the Department of Education conducted 1,058 program reviews and assessed fines and liabilities of $16.4 million. By 1987, these totals had plummeted to 372 program reviews and $2 million in recoveries. Where proprietary schools used to be evaluated every three to five years, an Education Department spokesperson in 1988 admitted that schools were being checked no more frequently than every six to eight years.

THE POLITICS OF PROPRIETARY
SCHOOL REFORM

By 1987, as proprietary school defaults and educational practices received increasing publicity and as student aid monies dried up under budgetary restraints and high default costs, the proprietary school industry had cause for concern about stricter regulation or even removal from eligibility for higher education act student aid programs. These concerns were mitigated, however, by the continued support shown the schools.

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A strong base of support was found in the education authorization committees on Capitol Hill that write higher education legislation. These committes had traditionally been very protective of trade school participation in the student aid programs and supportive of the utilitarian nature of proprietary school education, especially for low-income, underprepared, noncollege-bound students.

This support was strengthened by the advent of proprietary school political action committees, which contributed heavily to authorization committee members campaigns. In the last election, for example, proprietary school PACs and individuals contributed more than $160,000 to key members of Congress.

Proprietary school interests also benefitted from an uneasy marriage of convenience with elements of the higher education lobby, some of which joined the proprietary schools in fearing greater regulation of their internal policies (in areas like tuition refunds) and some of which feared greater federal scrutiny of defaults, retention and placement rates.

These sources of support, however, have weakened considerably since 1987, and the stage now seems to be set for serious discussion of proprietary school regulation in the next higher education act reauthorization process, which will be completed in 1992, as well as other legislation.

The Bennett Default Regulations: The first important salvo against proprietary practices was a 1987 proprosal by Education Secretary Bennett to impose sanctions, including removal from federal loan programs, to any school with a default rate above 20 percent. Bennett singled out proprietary schools for special criticism and, with his flair for publicity, newspaper articles sprang up across the country detailing proprietary school default rates and allegedly shady practices.

Bennett's plan received considerable attention in Congress, and parts of it were incorporated in a Senate bill. Because the Bennett plan would have devastated most colleges that serve a low-income clientele, however, it was ultimately withdrawn under an agreement with the House authorization committee. At the same time, it became clear that Bennett had put the proprietary school issue on the front burner and its advocates on the defensive.

State Action: As noted earlier, prompted by the federal initiative, newspaper exposes and their own loan guaranty agencies, state officials became increasingly active in seeking staff and legal authority to "go after" proprietary school abuses, and this process seems to be accelerating.

Associations' Turnaround: Convinced that the growth of proprietary school participation in federal aid programs and the attendant bad publicity would increasingly limit