This has been a bad year for for-profit colleges. Once touted as the wave of the future, they’ve come under fire for their aggressive – and deceptive – admissions recruitment strategies.

In April, Corinthian Colleges was fined $30 million by the federal government for allegedly lying about its graduates’ success. Last month, the Defense Department barred the University of Phoenix from recruiting on military bases. And on Monday, we learned that Education Management Corp. has agreed to pay over $80 million to settle claims of improper recruitment tactics.

But that puts Education Management on the hook for less than 1 percent of the federal student aid that the company is accused of fraudulently claiming. Meanwhile, thousands of former students there have to repay billions in federal loans that they were deceived into obtaining. Agreements like the one announced this week won’t go far to help the real victims unless they inflict real penalties, too.

Compared to their peers at public and nonprofit schools, those who attend for-profit colleges tend to be older and have lower incomes. So as they strive to better their life prospects through higher education, they’re a natural target for pitches by recruiters who, in the worst-case scenario, dupe students into borrowing lots of money by exaggerating job placement rates and future salaries.

Education Management, which operates over 100 campuses nationwide, is accused of securing $11 billion in federal student aid between 2003 and 2011 – nearly all of its revenue – by illegally paying recruiters to lure students and inflate enrollment numbers. (John McKernan, governor of Maine from 1987 to 1995, is a former Education Management CEO and board chairman; he later left the board.)

Under the recent settlement, the school agreed to forgive about $100 million in loans that it made to up to 80,000 former students. (The 244 in Maine will share $230,000.)

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The Chronicle for Higher Education has pointed out, however, that a lot of others who used to attend Education Management schools are still expected to pay. They’re the ones who were pressured to enroll and took out federal loans to meet their expenses.

A 1993 law gives borrowers the right to have their debts canceled if they were defrauded into taking out federal student loans. But the U.S. Education Department hasn’t used this opportunity to fast-track relief for former Education Management students. Instead, students who believe they qualify for debt forgiveness because they were deceived have to submit claims to the federal government, said Education Secretary Arne Duncan.

Federal law allows the U.S. government to press Education Management for the entire $11 billion that it fraudulently claimed. Instead, the company was allowed to deny any wrongdoing, while those who were victimized get pennies on the dollar at best – and have to fight for reparations at worst.

There’s a lesson in here, but those who are most in need of learning it aren’t paying attention.


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