The rise of trade schools: Why did the gov't let many trade schools turn into diploma mills?

Economic Indicators Associated Press

How did trade schools go from being mom-and-pop shops that trained mechanics and hair stylists to making billions on Wall Street? And if the industry is as predatory as the Education Department and many lawmakers suggest, why didn't they stop it?

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In 1990, there wasn't a single publicly traded college. Now, there are more than a dozen with most of them being investigated by state and federal regulators for fraud or deceptive business practices. Among the allegations is that many of these schools enrolled unqualified students, taught bogus coursework, and encouraged prospective students to lie on financial aid forms so they could access federal dollars.

Several consumer advocates interviewed by The Associated Press point to 2002 as the beginning of a dangerous rise of for-profit colleges. That's when an Education Department memo written under President George W. Bush suggested colleges wouldn't be severely penalized if they compensated college recruiters for getting students in the door. The memo became a tacit endorsement for the kinds of high-pressured sales tactics that emerged.

The next big change, they say, came in 2006, when Congress passed legislation backed by the Bush administration that erased a requirement that colleges deliver at least half their courses on a campus.

The top regulator on higher education at the Education Department during this time was Sally Stroup, now general counsel for the for-profit's chief lobbying arm, the Association of Private Sector Colleges and Universities.

"That's when these guys took off," said Tom Harkin, a former Democratic senator from Iowa who led a 2012 investigation into the for-profit industry. He said moving everything online made it easier for private investors to snap up failing schools and hide from regulators. Meanwhile, the schools invested heavily in lobbyists and making political connections that guaranteed access to federal student aid would be protected, he said.

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"These schools went out and ran wild with government money," Harkin said.

Consumer advocates also blame fear of litigation and a culture at the Education Department that views itself as a partner with schools, rather than a regulator working on behalf of students. In a statement provided to the AP, Education Secretary Arne Duncan denies this, saying the administration "put students first in everything we do."

Perhaps the biggest obstacle to reform, however, has been Congress, which has been lobbied heavily by the industry to leave it alone. House and Senate Republicans are pushing legislation that would block the latest regulatory plan by the Education Department.

Republican Rep. Tom Cole of Oklahoma, who chairs the House appropriations subcommittee that oversees education spending, says the administration's new rules will make it "much more difficult for institutions to serve their students" and "is likely to cause programs to cease operations, preventing students from benefiting from the valuable job training."