Proprietary Schools: Improved Department of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid

This testimony discusses the Department of Education's oversight of student eligibility for federal aid at private for-profit schools, also known as proprietary schools. Education's monitoring of eligibility requirements is part of a larger oversight structure governing federal aid to students at all schools. For example, in order to receive federal aid, students must attend schools that are legally authorized to operate in a state, accredited by reliable authorities to help ensure education programs meet acceptable levels of quality, and certified by Education to participate in federal student aid programs. In addition, students attending proprietary, public, or private non-profit schools are also required to demonstrate that they are ready for higher education. Generally, students who do not have a high school diploma or general equivalency diploma (GED) are required to pass an "ability to benefit" (ATB) test of basic math and English skills in order to be eligible for loans, grants, and campus-based aid under Title IV of the Higher Education Act of 1965, as amended. Education's monitoring of ATB tests and high school diploma requirements is critical to protecting students and guarding against potential fraud and abuse of federal student aid funds. When students who do not have the skills needed to succeed in school are fraudulently given passing scores on the ATB test or directed to diploma mills for fake high school degrees, they are at greater risk of dropping out of school, incurring substantial debt, and defaulting on their federal loans. When this happens, students' credit records are tarnished and their long-term financial well-being is jeopardized. In addition, taxpayers and the government, which guarantees the loans, bear the risks associated with federal loans when a student defaults.