Proprietary Schools

Millions Spent to Train Students for Oversupplied Occupations Gao ID: HEHS-97-104 June 10, 1997

Proprietary schools are private, nonprofit institutions primarily offering vocational training. Under the Higher Education Act's title IV programs, the federal government spends billions of dollars each year on job training at proprietary schools, which prepare students for such occupations as automobile mechanic, electronic technician, and cosmetologist. GAO found that the federal government is spending millions of dollars to train students for occupations that already have an oversupply of workers. In the 12 states GAO reviewed, more than 112,000 proprietary school students received more than $273 million in federal funds to be trained in fields with projected labor surpluses. Several major federal job training programs, such as the Job Training Partnership Act, restrict training to fields with favorable job prospects. In passing the Student Right-to-Know Act, Congress recognized the need to improve the quality of information that students receive. The act stops short, however, of requiring schools to report employment outcomes of recent graduates, such as training-related job placements. In addition, no mechanism currently exists to ensure that students get important information on local labor market conditions.

GAO noted that: (1) the federal government spends millions of student financial aid dollars to train students for occupations that already have a surplus of workers; (2) for fiscal year 1995, $273 million in title IV funds subsidized over 112,000 proprietary school students to train in fields with projected labor supply surpluses in the 12 states GAO reviewed; (3) in some cases, proprietary school students received training in occupations with projected labor supply surpluses in several states; (4) for example, 28,000 proprietary school students were trained in electrical/electronic technology in seven states that each had a labor supply surplus; (5) several major federal job training programs restrict training to fields with favorable job demand projections; (6) the Job Training Partnership Act Program, the largest federal employment training program, specifies that participants may train only for occupations of which sufficient job demand exists; (7) in addition, the federal Carl D. Perkins Vocational Education Act requires that state plans describe how training funds will be used for occupations with available or projected job openings; (8) also, until recent welfare legislation passed on responsibility to states under block grants, the federal Job Opportunities and Basic Skills program had similar requirements that compelled welfare agencies to work with private industry councils to ensure that programs provided training for jobs likely to become available in an area; (9) although government officials did not support using labor market data to regulate title IV participation, they and experts GAO interviewed advocated providing prospective students of occupation-specific training programs access to labor supply and demand projections; (10) in agreeing that such information would help these students make more informed training decisions, these interviewees also noted the need to supplement the data with other labor market information, such as training-related placement and wage rates of recent program graduates; (11) using labor market projections provides a rational basis for making training investment decisions, which was a noted advantage; and (12) as a disadvantage, the interviewees cautioned that such data are inherently imprecise.


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