Proprietary Schools
Improved Department of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid Gao ID: GAO-10-127T October 14, 2009This testimony discusses the Department of Education's oversight of student eligibility for federal aid at private for-profit schools, also known as proprietary schools. Education's monitoring of eligibility requirements is part of a larger oversight structure governing federal aid to students at all schools. For example, in order to receive federal aid, students must attend schools that are legally authorized to operate in a state, accredited by reliable authorities to help ensure education programs meet acceptable levels of quality, and certified by Education to participate in federal student aid programs. In addition, students attending proprietary, public, or private non-profit schools are also required to demonstrate that they are ready for higher education. Generally, students who do not have a high school diploma or general equivalency diploma (GED) are required to pass an "ability to benefit" (ATB) test of basic math and English skills in order to be eligible for loans, grants, and campus-based aid under Title IV of the Higher Education Act of 1965, as amended. Education's monitoring of ATB tests and high school diploma requirements is critical to protecting students and guarding against potential fraud and abuse of federal student aid funds. When students who do not have the skills needed to succeed in school are fraudulently given passing scores on the ATB test or directed to diploma mills for fake high school degrees, they are at greater risk of dropping out of school, incurring substantial debt, and defaulting on their federal loans. When this happens, students' credit records are tarnished and their long-term financial well-being is jeopardized. In addition, taxpayers and the government, which guarantees the loans, bear the risks associated with federal loans when a student defaults.
In separate investigations at proprietary schools, we, along with other federal and state investigative agencies, found test administrators or school officials violated rules intended to ensure prospective students without high school diplomas pass required ATB tests before obtaining access to Title IV financial aid. For example, when GAO analysts posing as prospective students took the ATB test at a proprietary school, the independent test administrator gave them and all the test takers in the room--about 20 people in total--answers to some of the test questions. In addition, the analysts' test forms were tampered with: their intentionally incorrect answers were crossed out and changed to correct answers to ensure the individuals passed the test. Our work confirmed similar findings by Education's OIG and New York state investigators. These problems result, in part, from key weaknesses in Education's oversight of ATB testing. Under the ATB test program, Education is responsible for overseeing test publishers who, in turn, are responsible for certifying and monitoring test administrators who give the ATB tests to prospective students at schools. Regulations governing the test process require test administrators to be independent of the school where they administer the test and to submit test answer sheets directly to the test publisher for official scoring. The test publishers, in turn, are responsible for analyzing test scores and submitting an analysis of these test scores to Education every 3 years to help identify improper testing.
GAO-10-127T, Proprietary Schools: Improved Department of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid
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Testimony:
Before the Subcommittee on Higher Education, Lifelong Learning and
Competitiveness, Committee on Education and Labor, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Wednesday, October 14, 2009:
Proprietary Schools:
Improved Department of Education Oversight Needed to Help Ensure Only
Eligible Students Receive Federal Student Aid:
Statement of George A. Scott, Director:
Education, Workforce, and Income Security:
GAO-10-127T:
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the Department of Education's
oversight of student eligibility for federal aid at private for-profit
schools, also known as proprietary schools. Education's monitoring of
eligibility requirements is part of a larger oversight structure
governing federal aid to students at all schools. For example, in order
to receive federal aid, students must attend schools that are legally
authorized to operate in a state, accredited by reliable authorities to
help ensure education programs meet acceptable levels of quality, and
certified by Education to participate in federal student aid programs.
[Footnote 1] In addition, students attending proprietary, public, or
private non-profit schools are also required to demonstrate that they
are ready for higher education. Generally, students who do not have a
high school diploma or general equivalency diploma (GED) are required
to pass an "ability to benefit" (ATB) test of basic math and English
skills in order to be eligible for loans, grants, and campus-based aid
under Title IV of the Higher Education Act of 1965, as amended.
[Footnote 2] Education's monitoring of ATB tests and high school
diploma requirements is critical to protecting students and guarding
against potential fraud and abuse of federal student aid funds. When
students who do not have the skills needed to succeed in school are
fraudulently given passing scores on the ATB test or directed to
diploma mills for fake high school degrees, they are at greater risk of
dropping out of school, incurring substantial debt, and defaulting on
their federal loans. When this happens, students' credit records are
tarnished and their long-term financial well-being is jeopardized. In
addition, taxpayers and the government, which guarantees the loans,
bear the risks associated with federal loans when a student defaults.
Today I will discuss the extent to which Education's policies and
procedures for monitoring eligibility requirements for federal aid at
proprietary schools protect students and the investment of Title IV
funds. This testimony is based on a GAO report that we released on
September 21, 2009, titled Proprietary Schools: Stronger Department of
Education Oversight Needed to Help Ensure Only Eligible Students
Receive Federal Student Aid.[Footnote 3] To address Education's
monitoring of federal aid eligibility requirements, we reviewed
Education's policies and procedures for overseeing the administration
of ATB tests and for enforcing high school diploma requirements;
reviewed relevant Department of Education program reviews and
independent audits; and reviewed enforcement actions taken against
schools. We reviewed relevant federal laws and regulations, conducted
interviews with officials from Education, state education licensing
agencies and higher education associations; and gathered information
during school site visits. In addition, GAO anonymously tested
institution compliance with ATB test requirements by sending, on two
separate occasions, analysts posing as prospective students to take and
purposely fail ATB tests at a proprietary institution. We supplemented
this work with a review of investigations conducted by Education's
Office of Inspector General (OIG) and the New York Department of
Education. A more detailed explanation of our methodology is available
in our full report. We conducted our work from October 2007 to August
2009, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
In separate investigations at proprietary schools, we, along with other
federal and state investigative agencies, found test administrators or
school officials violated rules intended to ensure prospective students
without high school diplomas pass required ATB tests before obtaining
access to Title IV financial aid. For example, when GAO analysts posing
as prospective students took the ATB test at a proprietary school, the
independent test administrator gave them and all the test takers in the
room--about 20 people in total--answers to some of the test questions.
In addition, the analysts' test forms were tampered with: their
intentionally incorrect answers were crossed out and changed to correct
answers to ensure the individuals passed the test. Our work confirmed
similar findings by Education's OIG and New York state investigators.
These problems result, in part, from key weaknesses in Education's
oversight of ATB testing. Under the ATB test program, Education is
responsible for overseeing test publishers who, in turn, are
responsible for certifying and monitoring test administrators who give
the ATB tests to prospective students at schools. Regulations governing
the test process require test administrators to be independent of the
school where they administer the test and to submit test answer sheets
directly to the test publisher for official scoring. The test
publishers, in turn, are responsible for analyzing test scores and
submitting an analysis of these test scores to Education every 3 years
to help identify improper testing (see figure 1).
Figure 1: ATB Test Process:
[Refer to PDF for image: illustration]
Department of Education:
* Approves tests submitted by test publishers for ATB use.
Test publishers:
* Send test score analysis to Education every 3 years to identify test
score irregularities suggesting improper test administration;
* Certify independent test administrators; decertify test
administrators who improperly administer tests.
Independent test administrators (ITAs):
* Send test answer sheets to test publisher for official scoring;
* Administer ATB test to prospective students at the school;
Prospective students:
* Take ATB test at school.
Sources: GAO analysis; images, Art Explosion.
[End of figure]
Nevertheless, we found that Education had not followed up with test
publishers to ensure that all comply with these requirements. For
example, as of early 2009, one of the four approved test publishers had
yet to submit test score analyses due in April 2005 and in April 2008
for two of its approved tests. Education officials told us the employee
responsible for test publisher oversight and review of test submissions
had retired in 2008 and no one at Education had followed up with test
publishers to obtain unsubmitted test score analyses until March 2009,
in response to our review. We also learned from OIG and Education
officials that while one test publisher provides thorough analyses that
have led to the identification of possible violations, other test
publishers provide only cursory analyses of test scores. In addition to
problems with Education's monitoring of test publishers, Education
regulations do not allow for the timely identification of improper test
administration. For example, as noted earlier, regulations require test
score analyses to be conducted every 3 years, which may leave improper
testing undetected for years. Furthermore, regulations do not require
test publishers to follow up when irregularities are identified, or to
report corrective actions to Education. Given the risks of potential
fraud and abuse associated with ATB testing, such weaknesses in
Education's monitoring and oversight leave the ATB test program
vulnerable to future violations.
We also identified cases in which recruiters at two separate publicly
traded proprietary schools helped prospective students obtain invalid
high school diplomas from diploma mills--entities that provide invalid
diplomas, usually for a fee and little academic work--so that students
could gain access to federal loans. In one case, representatives of a
student interest group told us a student who dropped out of high school
in the 9th grade was guided by the proprietary school to take an online
test to receive a high school diploma. In another case, a student told
us during a site visit that he was flunking out of high school when a
recruiter at the proprietary school directed him to a place where he
could pay a fee to take a test and obtain a high school diploma. Based
on further review, we confirmed that state and county government
agencies had determined these entities to be diploma mills. Our
findings also confirmed similar problems identified by Education, and
Education regional officials told us the problem may be more widespread
than is known.
Problems with the use of invalid high school diplomas to gain access to
federal student aid are partly attributed to key weaknesses in
Education's policies governing high school diploma requirements, and
the lack of information and guidance on valid high school diplomas. For
example, while senior Education officials told us it is the
department's official policy that high school diplomas from diploma
mills are not acceptable for federal aid eligibility, Education has not
communicated this position in clearly written policies. Without written
and clear communication of its policy, Education staff and external
parties, including schools and independent auditors, lack important
information regarding eligibility and compliance requirements under
Title IV rules.[Footnote 4] Education officials have acknowledged that
the use of high school diploma mills is a problem and that more
guidance would be helpful. In May 2009, Education announced plans to
convene public forums to help inform negotiated rulemaking sessions on,
among other matters, the definition of a high school diploma as a
condition of receiving federal student aid. We also found that
Education provides limited guidance and tools that Education staff,
schools, and independent auditors can use to help identify high school
diploma mills. In its Federal Student Aid Handbook, Education advises
officials to contact state education agencies if they question the
validity of a high school diploma.[Footnote 5] Yet, Education officials
told us that Education staff have no other guidance to help them judge
whether there is a potential problem with a diploma. In addition,
Education officials told us a list of recognized high schools could
help its staff and schools better identify diplomas from diploma mills.
Several states already provide lists of recognized high schools and
make them available to the public on their Web sites. Yet, Education
provides little information on these already available resources. In
contrast, Education does offer information and resources on its Web
site to help individuals identify and avoid higher education diploma
mills by listing colleges and universities that are eligible to
participate in federal student aid programs.[Footnote 6]
Our findings do not represent nor imply widespread problems at all
proprietary schools. Many proprietary schools play an important role in
providing a range of students, including non-traditional and
disadvantaged students, with an opportunity to obtain the education
they need to increase their work skills and find jobs. However, our
work has identified potential fraud at a few proprietary schools and
significant vulnerabilities in Education's oversight of a key aspect of
the federal student financial aid program. In our recently issued
report, we recommended that Education strengthen its monitoring and
oversight of federal aid eligibility requirements to (1) improve its
monitoring of ATB tests and target schools that fail to follow testing
regulations for further review; (2) revise regulations to strengthen
controls over ATB tests; and (3) provide information and guidance on
valid high school diplomas for use in gaining access to federal student
aid. After reviewing the draft report, Education provided comments and
noted the steps it would take to address GAO's recommendations. A
complete discussion of our recommendations, Education's comments, and
our evaluation are provided in the recently issued report.
Mr. Chairman, this concludes my prepared remarks. I would be happy to
answer any questions that you or other members of the subcommittee may
have.
For further information regarding this testimony, please contact George
A. Scott (202) 512-7215 or ScottG@gao.gov. Contact points for our
Office of Congressional Relations and Public Affairs may be found on
the last page of this statement. Individuals who made key contributions
to this testimony include Melissa Emrey-Arras (Assistant Director),
Claudine Pauselli, Jessica Botsford, Susan Aschoff, Mimi Nguyen, and
Paul Desaulniers.
[End of section]
Footnotes:
[1] In addition to these requirements for all schools, proprietary
schools must also comply with the 90/10 rule, which provides that these
schools may not receive more than 90 percent of their revenue from
federal student aid grants and loans.
[2] While there are other ways a student without a high school diploma
or GED can establish eligibility, for the purposes of our testimony we
focus on whether a student has passed an independently administered ATB
test.
[3] [hyperlink, http://www.gao.gov/products/GAO-09-600] (Washington,
D.C.: August 17, 2009).
[4] Education is responsible for overseeing schools' compliance with
Title IV laws and regulations including their role in ensuring that
only eligible students receive federal student aid. As part of its
compliance monitoring, Education relies on department employees and
independent auditors of schools to conduct program reviews and audits
of schools to monitor compliance with eligibility requirements for
Title IV.
[5] The Federal Student Aid Handbook provides guidance to Education
staff, schools, and lenders that offer federal student assistance to
students and borrowers.
[6] The Higher Education Opportunity Act, which reauthorized and
amended the Higher Education Act of 1965, provides that the Secretary
shall maintain information and resources on the Department's Web site
to assist students, families, and employers in understanding what a
college diploma mill is and how to identify and avoid such diploma
mills. Pub. L. No. 110-315, § 109.
[End of section]
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