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Many student welfare organizations have for decades called for strengthening of regulations to prevent unscrupulous trade schools and for-profit colleges from taking advantage of the needy and financially backward students, which were categorically ignored by the Federal policymakers. The education department in fact completely ignored allegations of abuse and fraud against some of the prominent for-profit colleges and proprietary schools in the country.

Good news is in the offing with the Obama administration bringing down the axe on them saying those days are definitely over. Preliminary regulatory proposals were released by the Department of Education to protect the working class and low income students from fraudulent trade schools and for-profit colleges and to enhance and strengthen the Federal student aid program’s integrity. The Obama administration will now tighten its hold and stop institutions from recruiting undeserving students.

The year 1992 saw a crack down on fly-by-night trade schools set up exclusively to reap profits from the bonus, commission and incentive payments based on enrolments to admission officers. This was a bid to control the enrolment of unqualified low income students just to become eligible for the Title IV Federal program funds.

Over a period of time however, this prohibition was weakened by officials in the education department who had a strategic tie up with the for-profit sector. Rules were again revised in November 2002 and they allowed the adjustment of hourly or annual wages twice a year for recruiters not based on the enrolments. The rules also allowed for recruitment that was based on commission for institutions that were a part of the Federal Student aid programs.

These exemptions however resulted in continuation of the predatory practices by the for-profit colleges. In order to enhance their number of enrolments, for-profit colleges indulged publicly in misleading tactics for admission and recruitments. The new regulatory proposals by the Department of Education will categorically eliminate all the 12 safe harbours. In a preliminary draft proposal preamble, the agency officials said that Congressional intent would be best effectuated by eliminating all twelve safe harbours.

Doors to abuse and fraud have been opened due to rules that provide recruiters with compensation incentives so long as their achievement does not depend on student enrolments. Contrary to claims, most of the institutions did base the salaries of enrolment officers on the number of student enrolment.

The negotiated rule making panel will now review the preliminary draft of the Department and move forward in revising the regulations. The panel itself consists of student advocacy groups, for-profit and non-profit colleges and consumer groups and all of them will suggest any alternatives after debating the recommendations of the agency. The Department can move on to put forth its own proposal in case the group does not reach a common consensus.

As we know from experience, certain negotiating panel members will definitely try to negotiate and wangle through these proposals. It is up to the Obama administration to remain tough in their stand and see that the regulations come through. New leaders in the Department do recognize the urgent need to save low income students from unscrupulous colleges and also safeguard the student aid program’s integrity.