September 28, 2016

Question of the Week: Are Accreditation Agencies the Cause of Education Fraud?

By the C|C Whistleblower Lawyer Team

The spectacular rise and crashing fall of for-profit colleges like Corinthian Colleges and ITT Technical Institute can be blamed on any number of causes—for example, aggressive advertising campaigns by unscrupulous institutions, generous federal loan programs, the move away from middle class manufacturing jobs, and a lack of standards for accrediting these colleges.  That last cause is now getting a lot of attention.

The Department of Education announced last week that the Accrediting Council for Independent Colleges and Schools (ACICS) is so far out of regulatory compliance, it would no longer be recognized as a ratings agency.  The schools accredited by ACICS include the defunct Corinthian and ITT, as well as a host of other questionable institutions such as the Ultimate Medical Academy, run by former Trump University executives, and FastTrain College, whose former head was recently sentenced to eight years in prison.

Accreditation is critical to all higher education facilities, as it is a prerequisite for federal loan program eligibility.  57% of college students receive some form of federal financial aid and that number jumps up to over 75% for students at for-profit institutions.  These for-profit schools have built their entire business model around receiving federal money.  Despite the importance of accreditation to this process, the Department of Education is prohibited by a Bush-era law from setting standards for the agencies.  The agencies are left to determine their own educational standards by which to weigh schools.  The agencies’ objectivity is further comprised by the fact that it is the schools themselves that pay the agencies for their ratings.  In different contexts, these sorts of conflicts contributed to the Enron collapse and the subprime crisis.

Even if it is far from a perfect system, without the ratings agencies, it is not clear what standards will be used to evaluate schools and expose the institutions that do not actually provide an education.  Whistleblowers have traditionally helped expose some of the worst offenders.  Last year, for example, Education Management Corporation settled a False Claims Act case for $90 million after whistleblowers exposed its violations of federal laws controlling student recruitment practices.  Without ACICS and its brethren, the federal government may have to rely even more heavily on whistleblowers to help students and federal loan officers alike evaluate different schools.

What do you think: Are Accreditation Agencies the Cause of Education Fraud?

Are Accreditation Agencies the Cause of Education Fraud?

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