ED 332 631 HE 024 594 - ERIC

DOCUMENT RESUME

ED 332 631

HE 024 594

TITLE

INSTITUTION REPORT NO PUB DATE NOTE PUB TYPE

Abuses in Federal Student Aid Programs. Report Made by the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs United States Senate. Congress of the U.S., Washington, D.C. Senate Committee on Governmental Affairs. Senate-R-102-58

91 44p.

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IDENTIFIERS

MF01/PCO2 Plus Postage. Accreditation (Institutions); Administrative Problems; *Federal Aid; *Federal Programs; *Financial Aid Applicants; Government Role; Hearings; Income; Loan Repaymer.; Postsecondary Education; *Student Loan Programs *Department of Education; Fraud; *Guaranteed Student Loan Program

ABSTRACT

This report on abuses in federal student aid

programs, particularly the Guaranteed Student Loan Program (GSLP), is based on information gathered by the Senate Permanent Subcommittee on Investigations in the course of its overall investigation and the testimony and exhibits received during the course of hearings held between February and October, 1990. The hearings, taking place over 8 days, involving nearly 50 witnesses, and dealing with the overall GSLP status, were organized around case studies, specifically: The American Career Training Corporation of :'ompano Beach, Florida; The Culinary School of Washington, D.C.; and the collapse of the First Independent Trust Company of Sacramento, California. This investigation was prompted by a :arge volume increase in the program, a dramatic increase in loan defaults, and reports of waste, fraud and abuse within the GSLP. Ih four sections the following topics are addressed: the nature and extent of the program (GSLP growth, business over education, industry profits, problem schools, students as victims); the existence of serious problems at all levels (school practices, state licensure, accreditation, financial players); the dismal record of the U.S. Department of Education (failures to monitor eligibility and certification, accrediting agency recognition, financial player regulation/oversight,

administration/management, e:Iforcement). A final section offers findings, conclusions, and recommendations. (JB)

*********************************************************************** Reproductions supplied by EDRS are the best that can be made from the original document.

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102D CONGRESS

1st Session

ABUSES IN FEDERAL STUDENT AID

PROGRAMS

REPORT

MADE BY THE

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

OF THE

COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE

U.S. DEPARTMENT OF (DUCATION Office of Educationsi Research am) Improvement

EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC)

7 This document has been reproduced as receivbd from me person or organization originating it

7 Moor changes nave been made to improve reproduction quality

Points of view or opinions stated in thiS dOcu ment do nOr necessarily represent official OERI Position Or OOlicy

MAY 17 (legislative day, Amur. 25), 1991.Ordered to be printed

41-908

U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1991

BEST COPY AVAILABLE

COMMITTEE ON GOVERNMENTAL AFFAIRS

JOHN GLENN, Ohio, Chairman

SAM NUNN, Georgia CARL LEVIN, Michigan JIM SASSER, Tennessee DAVID PRYOR, Arkansas HERBERT KOHL, Wisconsin JOSEPH I. LIEBERMAN, Connecticut DANIEL K. AKAKA, Hawaii

WILLIAM V. ROTH. JR., Delaware TED STEVENS, Alaska WILLIAM S. COHEN. Maine WARREN B. RUDMAN, New Hampahire JOHN HEINZ, Pennsylvania

JOHN SEYMOUR, California

LEONARD WEISS, Staff Director FR.ANICLIN G. Pout. Minority Staff Director and Chief Counsel

MICHAL SUZ PROSBRIL Chief Clerk

PERMANENT SUBCOMMITIME ON INVESTIGATIONS

SAM NUNN, Georgia, Chairman JOHN GLENN. Ohio, Vice Chairman

CARL LEVIN, Michigan JIM SASSER, Tennessee DAVID PRYOR, Arkanaas

HERBERT KOHL, Wisconsin JOSEPH I. LIEBERMAN, Connecticut

WILLIAM V. RCM, JR., Delaware TED STEVENS, Alaska WILLIAM S. COHEN, Maine WARREN B. RUDMAN, New Hampshire JOHN SEYMOUR. California

ELLANORE HILL, Chief Counsel DANIEL F. RINZEL, Counsel to the Minority

MARY D. ROBERTSON, Chief Clerk

(ID

3

CONTENTS

1. II.

Introduction The Guaranteed

Student

Loan

Program

A. What It Is

B. How It Works III. The Nature and Extent of the Program

A. GSLP Growth 1. Changes in the program

2. Statistical indicators

B. Business Over Education

C. Industry Profits

D. Problem Schools

E. Students as Victims

IV. Serious Problems at Every Level

A. School Practices

1. Branching

2. Course length

3. Admissions/recruitment

4. Refunds

B.

State Licensure 1. No uniform

standards/fragmented

responsibility

2. Inadequate staff/resources

3. Political considerations 4. Due process constraints and weak enforcement

C. Accreditation 1. A mismatched self-regulatory concept 2. Differing expectations of accreditations' role

3. Inadequate policies and procedures

4. Conflicts of interest/abuse of position

D. Financial Players

1. Problematic business practices

V.

The

2. Pattern of Role of the U.S.

Dabeupsaer/timneefnfteoctfivEeduocvaetrisoing:hAt

Dismal

Record

A. Eligibility and Certification

B. Accrediting AgencrteRgeucognition

C. Financial Players lation/Oversight

D. Administration/Management

E. Enforcement

VI. Findings, Conclusions and Recommendations

Page 2 3

3

4

6 7

7

7 8

9 10 11 12 12 12 12 13 14 14 14 15 15 16 16 17 17 18 21 22 22 23 25 25 27 28 30 32 33

102D CONGRESS

1st Session

SENATE

REPORT

102-58

ABUSES IN FEDERAL STUDENT AID PROGRAMS

MAY 17 (legislative day, APRIL 25), 1991.Ordered to be printed

Mr. GLENN, from the Committee on Governmental Affairs submitted the following

REPORT

I. INTRODUCTION

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