September 2, 2014

By Rigel Massaro

For-profit education businesses have been in the news a lot recently, and it’s not good news. Education giant Corinthian Colleges now faces bankruptcy for flouting federal regulations, leaving tens of thousands of California students hoping for refunds and wondering if their coursework or degree will be worth anything as they try to find a job to pay off their crippling debt. According to the Center for Investigative Reporting, over the last five years, “more than $600 million in college assistance for Iraq and Afghanistan veterans has been spent on California schools so substandard that they have failed to qualify for state financial aid.”The biggest beneficiary of these funds has been the University of Phoenix’s San Diego campus. Smaller local schools like Intercoast College are graduating students without preparing them for the exams required for their future careers in nursing.


These education businesses receive most of their revenue from federal loans and grants, including CalGrants, which are funded by taxpayer dollars. Yet students at for-profit colleges are twice as likely to default on their student loans because of high tuition costs and low educational quality that leave many without the hoped-for careers they were promised.


At Public Advocates, we’ve been working hard to strengthen state oversight of for-profit education businesses to stop them from harming California’s most vulnerable citizens: low-income people of color, veterans, and former foster youth. We’re helping to lead a dynamic coalition of consumer and student advocacy groups to reauthorize the current law, California’s Private Postsecondary Education Act (the Act), which will otherwise sunset with the New Year. And while for-profit education interests are very strong in Sacramento, we’ve made progress.


Before September ends, we expect Governor Brown to sign SB 1247. The bill does at least three positive things for students:

  1. Any institution that receives GI Bill funds must be accountable to California’s Bureau for Private Postsecondary Education. Over two million veterans currently reside in California, the highest of any state in the country. Veterans looking to make a new life after their military service will now have access to these businesses’ performance information prior to enrollment and to a complaint process for redress short of litigation.
  2. The Bureau must focus monitoring and enforcement activities on those schools and complaints that appear to pose the highest risk to students. For instance, under SB 1247, the Bureau should prioritize monitoring an institution that enrolls students with limited or no English language proficiency but offers no remedial English classes, and it should prioritize complaints from students “alleging unlawful, unfair or fraudulent business acts or practices.” Current law does not specify Bureau priorities, and the California State Auditor found that the Bureau failed to “prioritize complaints based on their severity so as to ensure that institutions quickly resolved the most serious violations that put students at risk.”We’ll be watching to ensure the Bureau goes after the most egregious offenders.
  3. Students have increased access to the Student Tuition Recovery Fund. SB 1247 ensures that all California students enrolled in institutions regulated by the Bureau may file a claim for tuition relief due to the declining quality of the student’s program and that there will be sufficient money in the fund to make them whole.

These are important changes that will force bad actors to become better, but much more must be done to protect students in California. In our coalition advocacy letter submitted last week to the Senate Committee on Business, Professions and Economic Development, we outline huge gaps that remain under the current law:

  • Through approval by accreditation, for-profit education businesses escape Bureau oversight to ensure they meet minimum standards and consumer protections before they can operate.As the National Consumer Law Center finds, “accreditation does not provide any guaranty that for-profit schools will refrain from misleading students.”If SB 1247 passes, all students at regionally accredited for-profit schools (like the University of Phoenix and some Corinthian schools) will have access to a complaint process once the school is operating because these schools accept GI Bill financial aid. But the ability to complain after the fact is not enough, the state should eliminate the practice of automatically approving accredited education businesses for operation. The Bureau should first verify these institutions meet minimum standards and consumer protections. Such oversight would prohibit education businesses from enrolling students in programs with known impediments to employment, for example, by failing to provide the required coursework to qualify for certification in their chosen field.
  • Students should have access to the courts when they are harmed.California’s old law contained a private right of action for students—the ability to take schools to court and not rely on the state. This right was stripped from the current law, and it is not part of SB 1247, as it was argued that the Bureau would have sufficient authority to protect students. The Auditor’s report and recent news show that is clearly not the case.

We’ve made great progress, and the fight continues. We must continue to push the legislature and the Bureau to enact laws and regulations that protect the futures of our most vulnerable students and the rest of us from the misuse of public dollars.

Aaron Glantz, GI Bill Funds Flow to For-Profit Colleges that Fail State Aid Standards, THE CENTER FOR INVESTIGATIVE REPORTING ONLINE (June 28, 2014),

2 California State Auditor, Bureau for Private Postsecondary Education: It Has Consistently Failed to Meet Its Responsibility to Protect the Public’s Interests(March 2014),

3 Ensuring Educational Integrity: 10 Steps to Improve State Oversight of For-Profit Schools, NATIONAL CONSUMER LAW CENTER, 16 (June 2014)

4 See Nanette Asimov, SF Wins $4.4 M Settlement with For-Profit Art School, SAN FRANCISCO CHRONICLE. (June 17, 2014), also Nanette Asimov & Stephanie M. Lee, For-Profit Colleges’ Alumni Often in Debt and Out of Work, SAN FRANCISCO CHRONICLE. (July 26, 2014), (Former nursing student at a for-profit institution, unable to pass her licensing exam or make her loan payments, says “‘I want to get a lawyer’” because “she said the company won’t release her diploma or transcripts until her debt is paid off.”).

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