The Future of the Student Aid Enforcement Unit and Its Reach Beyond For-Profit Schools

Posted By Donna Fuscaldo on March 3, 2016 at 2:19 pm
The Future of the Student Aid Enforcement Unit and Its Reach Beyond For-Profit Schools

Aiming to catch financial aid cheats, the Department of Education announced on February 8, 2016, that it is creating a financial aid enforcement unit to better police higher education institutions that illegally lure financial aid funds their way. Though, the future and scope of this unit may still remain in the balance as the $13.6 million requested for it was part of the 2017 budget presented by President Obama the very next day that has been ignored by Congressional Republicans.

The move is part of the White House’s efforts to protect students from earning worthless degrees. “When Americans invest their time, money and effort to gain new skills, they have a right to expect they’ll actually get an education that leads to a better life for them and their families,” said Acting Secretary of Education John B. King Jr, when announcing the new unit dubbed the Student Aid Enforcement Unit. “When that doesn’t happen we all pay the price. So let me be clear: schools looking to cheat students and taxpayers will be held accountable.”

For-profit schools in the cross hairs of government

While the White House didn’t specifically say which higher education institutions it was targeting with the increased enforcement, if the past is any indication, it certainly will include for-profit colleges. After all, the White House has already gone after Corinthian Colleges and, late last month, the Federal Trade Commission filed suit against DeVry, alleging that the for-profit’s claim that 90 percent of graduates actively seeking employment get a job in their field within six months of graduation was deceptive.

What’s more, the FTC says DeVry’s claim that its graduates had 15 percent higher incomes one year after graduation than graduates of all other colleges and universities is deceptive. One of the big knocks on for-profit schools is that they charge a lot of money but leave many graduates without the necessary skills to get a decent paying job.

“The impetus for the creation of the Student Aid Enforcement Unit to investigate claims of fraudulent activity in higher education was aimed mainly at the for-profit colleges. There were a few recent cases where a for-profit college had financial issues, or went under, and left students stuck with federal loans and no degree,” says Jeff Rossi, founder of Peak Wealth Advisors. “These schools would probably say that government regulations impacted their business, but if you’re getting paid mostly with government dollars, you need to be prepared to be scrutinized.”

According to Rossi, the new enforcement unit would be tasked with looking at inflated claims of student job placements, which should give students more clarity around the return on the investment from their education. After all, it doesn’t matter how cheap or expensive the degree is if it doesn’t prepare the student for the real world and give them marketable skills employers want. “Whether a school is for-profit or not-for-profit, the accreditation process is the same, but students should know that accreditation doesn’t guarantee a quality education and a job after graduating,” says Rossi. “The

“Whether a school is for-profit or not-for-profit, the accreditation process is the same, but students should know that accreditation doesn’t guarantee a quality education and a job after graduating,” says Rossi. “The University of Phoenix is a for-profit organization accredited by the North Central Association of Colleges and Schools, which is the same organization that accredits the University of Chicago.  So accreditation is important, but it’s no guarantee that the quality of the programming is going to be equal.”

Some non-profits need oversight too

When announcing the new enforcement unit, the White House laid out the four divisions that will fall under the unit and will be in charge of identifying potential misconduct, providing legal analysis, support and advice to borrowers of Direct loans that file claims, in addition to imposing administrative actions, such as suspensions and fines. It will also ensure that schools comply with the Jeanne Cleary Disclosure of Campus Security Policy and Campus Crime Statistics Act that requires colleges and universities who get financial aid to disclose statistics about campus crime as well as security information.

And while it appears that the intended focus is on for-profits, Joseph Orsolini of College Aid Planners argues there are a lot of non-profit colleges and universities that are defrauding students as well. “There are just as many bad actors on the traditional non-profit side as there are on the for-profit side,” says Orsolini. “The Chicago State University graduates 2 percent of their kids in four years. That’s just stealing kids’ futures.”

Orsolini says there could be some politics behind the government’s move, potentially to push for-profits out of the marketplace. While there have been abuses in the industry, they do serve a purpose, particularly with non-traditional students looking to get into trades and other fields that don’t require a traditional degree. “It should include non-profits,” says Orsolini of the enforcement unit. “If non-profits can offer aid and some for-profits can’t, it builds a system where you get loans.”

Whether the Student Aid Enforcement Unit will receive sufficient funding for its creation and to cover the areas of oversight laid out for it are still to be seen. And, access to these resources may largely determine the reach of its oversight, extending to not-for-profit institutions or focusing on the for-profit higher education industry.

UPDATE: The graduation rate of 2% cited above, a federally generated metric which comes from the Integrated Postsecondary Education Data System, or IPEDS, does not include transfer students, who make up two-thirds of the student body at Chicago State. Full-time and part-time transfer students in the same cohort had a graduation rate of 51% in 2008. 

Donna Fuscaldo
Donna Fuscaldo is a freelance journalist hailing out of Long Island, New York. She has also written for,,,, Business Insider, Dow Jones Newswires and the Wall Street Journal.

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