Regulatory Oversight of Student Financial Aid through Accreditation of Institutions of Higher Education

By Lindgrensavage, Cerin | Journal of Law and Education, Summer 2016 | Go to article overview

Regulatory Oversight of Student Financial Aid through Accreditation of Institutions of Higher Education


Lindgrensavage, Cerin, Journal of Law and Education


The Department of Education ("ED") oversaw the distribution of $136 billion in federal funding in fiscal year 2013 to help more than 14 million students go to colleges, universities, and career education schools.' Accreditors, and the review of their work by ED, help form the regulatory system that aims to ensure this funding is well spent.

The rise in enrollment in for-profit higher educational institutions increased more than 225 percent between 1998 and 2008.* 1 2 3 This rise in enrollment has stimulated legislative, regulatory and enforcement efforts, as well as a robust debate over the appropriate role of federal oversight in higher education.2 Much of this debate has focused on the best way to ensure the integrity of federal student financial aid programs, supporting students taking on debt, completing programs, and then finding employment that enables them to repay the debt they have taken on.

These oversight efforts are often driven by concerns that for-profit higher education institutions are serving a large number of low-income students and federal student aid recipients, but have a profit motive that incentivizes them to enroll more students regardless of whether they can offer those students a high quality education that puts the students on a path to success.4

Many of the issues raised by advocates for these students are intrinsically tied to the question of whether or not the education provided by these for-profit institutions meets minimum standards of quality, and how ED could enforce such standards as a condition of these schools receiving federal student financial aid funds.5 Although students who receive federal student financial aid might assume that if a for-profit school is accredited then it has been found to meet a minimum standard of quality, unfortunately that is sometimes not the case.

This paper will explore the current state of for-profit education, the history of accreditation, the current accreditation process, and ED oversight of that process. In order to evaluate whether accreditation acts as an effective gatekeeper for federal funding, the paper first looks at strengths and weaknesses of third-party programs in general and then how the accreditation process and ED oversight over accreditors compares to other programs. Finally, this paper suggests ways to make federal oversight over the accreditation process more effective.6

I. CURRENT STATE OF FOR PROFIT EDUCATION

Originally, federal student financial aid funding, such as that authorized by the Higher Education Act ("HEA"), could only be used for education at public or private non-profit schools.7 For-profit colleges and universities did not get access to HEA student loan funds until the law was amended in 1972.8 Since then, the for-profit education industry has developed from "loosely affiliated, independently operated vocational schools to ... [a] streamlined, highly sophisticated, and investor-focused" industry.9

For-profit institutions have taken on an increasing role serving students that have been underrepresented in higher education, and such as "students who are older, women, Black, Hispanic, or with low incomes . . . [sjingle parents, students with a certificate of high school equivalency, and students with lower family incomes."'H For-profit institutions argue that they are helping achieve the goal of the HEA, to expand access to higher education, by educating students that were not being served by more traditional schools."

For-profit colleges have not only dramatically increased enrollment over the last decade, they have also disproportionately increased their share of federal student financial aid funding. From 2000 to 2009, the share of Pell grants going to for profit colleges rose from $1.1 billion to $7.5 billion, and by 2009 for profit schools received 25 percent of student aid funding distributed by ED..12 About thirteen percent of all people pursuing higher education attend for-profit schools, but those students take out about thirty-one percent of all student loans. …

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