Burzichelli & Jasey Bills to Better Regulate Proprietary Schools Clears Assembly Panel

Aiming to protect students in pursuit of a higher education from being taken advantage of by for-profit colleges, two bills sponsored by Assembly Democrats John Burzichelli and Mila Jasey to provide further oversight and regulation of proprietary schools was approved Thursday by the Assembly Higher Education Committee.

“On the surface, proprietary schools may seem like a viable option for students who cannot go to a traditional college or university. Often times, they are not what they seem to be,” said Burzichelli (D-Cumberland, Gloucester, Salem). “These schools may offer flexible scheduling, online classes, and convenient locations – all appealing to non-traditional students – but there have long been concerns about the quality of education offered by these for-profit institutions and a student’s chance of earning a viable degree from these programs. It’s time we take a closer look at how they operate.”

The first bill (A-5140) would expand the New Jersey College Student and Parent Consumer Information Act to include proprietary schools, thus subjecting them to the same standards related to transparency as four-year public colleges and universities. Each proprietary school would be required to annually disclose on its website student graduation rates, school costs, and student loan indebtedness, among other indicators of school quality.

The institution would also be required to report the student loan default rate of students with loan indebtedness five years after their departure from school.

The Secretary of Higher Education would include the consumer information reports submitted by proprietary schools within a comparative profile that the Secretary already prepares for four-year public institutions of higher education.

The bill would prohibit proprietary school students from receiving State aid if, in the preceding academic year, the school did not meet a minimum graduate rate designated by the Secretary, of at least 30 percent. A student enrolled in a proprietary school would not be eligible to receive any form of student assistance from the State unless the student loan default rate of former students is below a level designated by the Secretary, of no more than 15 percent five years after a former student’s departure from the school.

“For-profit colleges tend to have far higher tuition prices than their public counterparts, forcing students to take on large amounts of debt even though they often graduate with few employable skills,” said Jasey (D-Essex, Morris). “Because most proprietary school students rely on loans, and then move on to jobs that may not pay them enough to repay that loan, many for-profit schools have high loan default rates. This practice is contributing to the student loan debt crisis across the country and it must be addressed.”

Additionally under the bill, the Secretary would be directed to revoke a proprietary school’s license to award degrees if the school failed to meet the minimum graduation rate or maximum student loan default rate in six or more years during a ten-year period.

The second bill (A-5141) would establish the Proprietary Institutions Student Tuition Protection Fund in the Department of the Treasury. The fund would provide for a system of equitable refunds in the event a proprietary school would close.

A private career school which conducts business and maintains facilities within the State would be required to register with the Commissioner of Labor and Workforce Development and receive approval. The school would also be required to obtain a performance bond in an amount determined by the commissioner and made payable to the department.

Each institution would be required to pay the State Treasurer an annual deposit to the fund of an amount set by the commissioner for each enrolled student. Once the balance of the fund reaches $2,500,000, contributions to the fund would cease but would resume if the fund is reduced to an amount less than $2,000,000. The bill would establish procedures to be followed for payments from the fund in the event a proprietary school ceases operation but also stipulates that approved claims for refunds would be paid from an institutions’ performance bond whenever possible. When the bond is insufficient to pay approved claims, a refund check would be issued from the fund and the recipient would assign all rights to the State of any action against the school or its owner for tuition amounts reimbursed.

“Despite high-profile closures of proprietary schools like ITT and Corinthian Colleges, Inc, the industry is still growing and attracting more students who are more likely to be low-income, minorities and part-timers,” said Burzichelli. “When these schools close due to poor operation or other reasons, students might be out of luck to get their money back. This fund would ensure students receive the refunds they rightfully deserve.”

The measure would set parameters for students enrolled in private career schools which cease to operate, become insolvent, or stop all instructional activity, to become eligible for a refund of any tuition which the school has not refunded to the student.

Additionally, the bill would require the department, in consultation which the Higher Education Student Assistance Authority, to identify all students who are pursuing a course or instruction who have paid all or part of the tuition with a State grant of scholarship funds. Any refund amount exceeding the amount of a State grant or scholarship funds must be distributed directly to the student.

“With low graduation and job placement rates, paired with an inability to offer enriching academic experiences, it’s no wonder some proprietary schools fail,” said Jasey. “But at the end of the day, it’s their students who suffer. The safety net established under this bill will put money back in the pockets of students so they can continue to further their education or careers without incurring crushing debt.”

The bills now head to the Assembly Speaker for further consideration.