Solomon Moore/EdSource
The shuttered central Oakland campus of ITT Technical Institute.

California faces a reckoning in how it regulates for-profit colleges and trade schools at a time when more students are turning to an educational industry with a long history of fraud allegations.

The Bureau for Private Postsecondary Education, the troubled state agency charged with policing and licensing those schools, is scheduled for what is shaping up as a contentious legislative oversight hearing next week, with lawmakers calling for robust changes in how it operates.

“The bureau is in need of significant improvements at a time when students are suffering immensely” in economic changes brought on by the global pandemic, Assemblyman David Chiu, D-San Francisco, told EdSource. “Everything is on the table.”

California’s for-profit colleges enroll roughly 260,000 students, according to a recent report by the Campaign for College Opportunity, an advocacy group. Many of them are low income and members of underrepresented groups who rely on student loans to pay tuition. The study found that of students who entered a for-profit school in 2004, 43% defaulted on their loans within 12 years.

While oversight of for-profit colleges in California is badly needed, Chiu said, the bureau has been long unable to adequately provide it. He described the bureau as difficult for lawmakers to work with, lacking strong leadership and slow to make regulatory changes the Legislature has passed, including a bill he authored in 2019 designed to ensure students can achieve gainful employment when they graduate.  Lawmakers “are going to have to hold their feet to the fire as we contemplate changes to their authorization legislation.”

The oversight hearing on Tuesday comes at a time when for-profit enrollment is up 3.9% nationally this spring at private for-profit four-year colleges and 4% at graduate programs, according to preliminary data, the National Student Clearinghouse reported Thursday. The group had already reported a 5.3% increase from 2019 to 2020.

At the same time, public undergraduate college enrollment, especially community colleges, continues to decline, the report said.

An analysis by the Brookings Institution released in the fall called the increase in students attending for-profit schools “very troubling” because of the industry’s history of fraud.

While California specific data was not available, Angela Perry, a senior policy analyst with the Institute for College Access and Success, said it is clear that any increase in national enrollment in for-profit colleges means schools in California are also up.

A similar surge was seen during the Great Recession of 2008-2009 that can be related to the current Covid crisis, Perry said.

“We’re seeing a lot of trends that are mirroring from then to now,” she said. “It would make sense that we would see those enrollment numbers rise in California.”

With regulatory responsibility over for-profit colleges, the Bureau for Private Postsecondary Education oversees more than 1,800 schools, from national companies like the University of Phoenix to colleges that train students for specific careers like auto repair, shoeing horses and golf.

A scathing Sacramento Bee and CalMatters investigation in 2018 titled “An ‘F” in oversight” found the bureau badly lagging in investigating student complaints of fraud with 1,200 cases backlogged. The bureau had cut the backlog to 230 by the end of last year, records show.

With enrollment increases and the gutting of federal student protections by former U.S. Education Secretary Betsy DeVos during the Trump administration, the bureau “really needs to show us they can handle the oversight and investigative role that we need them to play in regulating the private, for-profit industry,” Assemblyman Marc Berman, D-Palo Alto told EdSource. He’s a member of the joint panel of the Senate and Assembly business committees conducting the hearing.

“We need to learn our lesson that a change in federal administrations can have a huge impact on oversight,” he said. “To do that we need a strong, competent and functional bureau.”

The California Association of Private Postsecondary Schools, the trade group for the for-profit industry, did not respond to multiple requests for comment.

One of the ways the bureau interacts with students is through the bureau’s Student Tuition Recovery Fund, which is designed to reimburse students for lost tuition when for-profit colleges close. The bureau is now dealing with a backlog in getting refunds to those students.

It’s continuing to work through the aftermath of several large college closures in the last decade, including Corinthian Colleges, which shuttered in 2015. The bureau has received 1,028 claims from former Corinthian students since July 1 alone, state records show. Former students from three of the company’s schools, Heald, WyoTech and Everest colleges, still have claims pending.

The bureau was created in 2009 to oversee the for-profit educational industry. It is part of the state Department of Consumer Affairs, making it subject to review by the Legislature and legislation to reauthorize it. Known as a “sunset hearing,” it is unlikely to result in the bureau’s closure. Instead, reforms and reorganization are likely, Chiu and others said.

A bureau spokesman declined to respond to Chiu’s remarks, calling Tuesday’s hearing “the best forum” to address the concerns of lawmakers.

The chairperson of the bureau’s advisory committee, San Diego lawyer Katherine Lee-Carey, did not respond to multiple interview requests from EdSource. Her law firm represents for-profit schools, according to its website. The firm represented Corinthian Colleges when it closed in 2015.

The bureau “has suffered from weak leadership,” and needs “a stronger leader to … work inside the administration and with the Legislature to identify things that need to be changed,” said former U.S. Deputy Undersecretary of Education Robert Shireman, a senior fellow and director of higher education at The Century Foundation. It has been without a bureau chief since Michael Marion resigned in December.

Shireman also said it’s worth examining whether the advisory committee, “which is weak by nature” and has no direct oversight of the bureau, should be replaced by the stronger board format common elsewhere in the Department of Consumer Affairs like the state Medical Board, which can vote to take away a doctor’s license. The bureau’s advisory board has no direct voting power over regulatory actions, such as disciplining or closing a school.

The bureau’s fiscal 2021 budget is $19.4 million, and it employs 109 people. The budget is funded by licensing and inspection fees paid by schools. Chiu pointed that out as a fundamental flaw in the bureau’s structure, saying it is a disincentive for strong regulatory actions like shutting down poorly performing institutions.

“It creates a counterintuitive incentive to not shut down schools when there’s an obvious reason to do that,” he said. “The bureau has not had enough money to do what it is supposed to do.” The Legislature, he said, should consider an alternative way of funding the bureau.

In a 10-page letter to lawmakers, a coalition of 15 advocacy and legal groups are calling for eight major reforms for the bureau, including allowing it to take proactive steps to stop “a school’s misconduct” before students are harmed. “For many students it is far too late” when the bureau acts after they have lost money and doors have been shut.

The coalition also wants the bureau to require for-profit out-of-state programs to prepare students for state licensure or certification approval when that approval is needed for them to get jobs.

“Schools should not be able to offer programs to Californians unless graduates are eligible for licensure or certification in California when required by the professions for which they are trained,” the coalition of organizations said in the letter.

Its protections like that that make robust oversight of for-profit schools a benefit to the state and a strong oversight agency vital, said Ramond Curtis, the state policy manager of the Washington, D.C.-based advocacy group Veterans Education Success. To do that, state lawmakers should work to strengthen the bureau, he said.

“Keeping the bureau, to us, is a no-brainer,” Curtis said. “The bureau plays a more significant role in California than any other state’s oversight agency,” given the state’s size and number of schools.

“If its critics are saying ‘we need to make sure we’re properly funding and staffing the bureau,’ then I agree with them.”

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  1. Caroline Grannan 7 months ago7 months ago

    Until they shut down the once-respectable, now-predatory Academy of Art University in San Francisco, we will know the oversight entity is non-functioning. This operation, like Corinthian, is ruining people’s lives.

  2. Erik Kengaard 7 months ago7 months ago

    “It creates a counterintuitive incentive to not shut down schools when there’s an obvious reason to do that, . . . . ”
    Are California legislators not able to understand cause and effect?

  3. Timothy Morgan [NOT an offcial comment] 7 months ago7 months ago

    As I recall, this Bureau replaced the form Commission on Post-secondary Education, closed not long before and temporarily replaced by a group of volunteers. This seems to be further evidence that the agency in charge needs more authority and continuity. If not done already, the Legislature should ensure that the agency has power to discipline unlicensed as well as licensed schools.