Gov. gets heat on schools

SACRAMENTO -- When Gov. Arnold Schwarzenegger struck down a bill last fall that would have extended regulation of California’s for-profit colleges, he promised to deliver real reform of a broken oversight system and to defend the interests of students.

But the governor has released a new plan that would do exactly the opposite, according to advocates for students.

“I want to work with the Legislature to pass legislation early next year so that our students will have the protections they deserve,” Schwarzenegger said in his veto message last September.

However, it wasn’t until late last month, less than three weeks before the end of the legislative session, that his administration produced a proposal. Opponents contend that the plan would actually relax state oversight and benefit the trade schools rather than the 400,000 largely working-class students they serve.

Consumer advocates argue that student protections are vital because the schools -- many of them national chains that are sometimes called “diploma mills” -- owe their loyalties to shareholders. To boost enrollment, some schools mislead applicants about programs, degrees, graduation and job placement rates and earning potential, according to lawsuits and government investigations.

Schwarzenegger’s plan would eliminate minimum graduation and job placement standards for state-licensed schools, leave more of the regulation to regional and national accreditation bodies and impose a higher threshold for students to prevail against the institutions in court.

Since 2005, the trade schools have spent more than $1 million on lobbyists to advance their cause before Schwarzenegger and the Legislature, state records show, while industry regulation has essentially vanished. The state law that governed the schools’ actions and the agency charged with enforcing it expired at the end of June, leaving 2,500 for-profit colleges unmonitored.

“I think it’s telling the students that they’re being forgotten because the trade schools can then do what they want,” said Heather McKeon, an attorney with the Quisenberry Law Firm in Los Angeles.

She represents 100 students in a class-action complaint filed in December that accuses Maric College of enticing them to enroll at its North Hollywood campus by telling them the school was accredited for a national X-ray technician exam, even though it was not.

“The students need protection,” McKeon said. “They’re people who are trying to get careers and pull themselves up, and to a certain extent they are vulnerable to a good sales pitch.”

Michele Mazur, a spokeswoman for Maric, said students were told the school was not yet accredited for that exam. The college issued a statement that said the governor’s plan was “a thoughtful bill that gives students the protection they deserve.”

Kaplan Inc., Maric’s New York City-based parent company, has spent $116,000 lobbying the state since 2005.

Conflicts such as the one at Maric exemplify why for-profit colleges have been rife with controversy. Two years ago, a state monitor concluded that California, most recently through the now-defunct Bureau of Private Postsecondary and Vocational Education, failed miserably in overseeing the industry for two decades.

For the last two years, the administration and the Legislature have debated what to do next. A bill crafted in the state Senate earlier this year was shelved due to criticism that it was too long and too hard on the colleges.

But the schools greeted Schwarzenegger’s 23-page plan warmly.

“It’s a balanced piece of legislation that is actually doable,” said Robert W. Johnson, executive director of the California Assn. of Private Postsecondary Schools.

Betsy Imholz, director of the San Francisco office of Consumers Union, said the plan was “a disaster for students” because it would leave most details of the regulations to be written later and there would be no deadlines for implementing them.

“It leaves everything open-ended,” Imholz said of the governor’s proposal. “The main student protections are just gone.”

Aaron McLear, a Schwarzenegger spokesman, said the administration’s plan was “a good compromise between the two sides -- the students, who absolutely need protection, and these schools that want to do business in California.”

The governor’s plan stands no chance of approval this year, said Legislative and administration officials. They have tentatively agreed on an interim measure under which schools would voluntarily abide by the old law through the middle of next year.

But Laura Zuniga, a deputy director in the state’s Department of Consumer Affairs, said the administration wanted a more practical, streamlined approach.

“Our goal is. . . that students can understand what their rights are, schools can understand the requirements they need to meet, and bureau staff can understand how they need to enforce the act,” Zuniga said.

Previous standards required schools licensed by the state to graduate 60% of their students and to place 70% of graduates in jobs. Schwarzenegger’s new plan has no minimum completion or placement rates. The schools would simply have to report their rates -- high or low -- to students before enrollment.

The proposal would give automatic approval to programs that are federally or regionally accredited; colleges offering degrees for $2,500 or less would be exempt from regulation. The old law exempted programs costing $500 or less from regulation.

The new proposal “is basically a thousand-foot banner headline saying, ‘Diploma Mills Welcome Here,’ ” said Alan Contreras, head regulator of for-profit colleges in Oregon.

Schwarzenegger’s plan would make it harder for students to sue the colleges, requiring them to prove that they were harmed by the schools’ actions in order to collect damages. In the past, students had to prove only that a school violated state law.

The lower standard is important, lawyers for students said, because state enforcement has been so lax that students have had to take their problems to court.

While Zuniga said her agency took input from all concerned parties, lawyers for students said they could not match the colleges’ influence.

“They’re higher up on the food chain,” said Elena Ackel, a lawyer with the Legal Aid Foundation of Los Angeles and an activist for students.

Career Education Corp. has paid one of its lobbyists, Manatt, Phelps & Phillips, more than $100,000 since 2005. The Illinois company’s campuses have been investigated by the federal government and officials in California, New Jersey and Pennsylvania.

Its Brooks College campus in Long Beach was on probation with its accrediting agency in 2004 and 2005 because of its shabby facilities, low academic standards, and misrepresented graduation and job placement rates and starting salaries for graduates.

Santa Ana-based Corinthian Colleges, one of the nation’s largest vocational school chains, employed Manatt as its law firm during an investigation by state Atty. Gen. Jerry Brown into whether the company had overstated its job-placement record, which resulted in a $6.5-million settlement last month.

Manatt and its attorneys contributed a total of $32,000 to Schwarzenegger in 2005 and 2006 as he ran for reelection, records show.

Corinthian has paid a separate state lobbyist $198,000 since 2005. Apollo Group Inc., which owns University of Phoenix, has paid $289,000 since 2005 to Governmental Advocates Inc. in Sacramento.

University of Phoenix reached a $9.8-million settlement three years ago with the U.S. Department of Education, which investigated whether the school illegally gave incentives to recruiters.

The company, which said it did nothing wrong, settled to avoid the cost of litigation.

--

michael.rothfeld@latimes.com