Panel OKs Restrictions on Trade Schools

In the wake of allegations that unscrupulous trade and vocational schools continue to bilk disadvantaged and immigrant students out of millions of dollars statewide, the Senate Education Committee unanimously approved a bill Wednesday that would place new restrictions on the institutions.

The bill, sponsored by Assemblywoman Maxine Waters (D-Los Angeles), would strengthen provisions in the law that requires schools to place a substantial number of their students in jobs. California already has one of the most comprehensive vocational school laws in the nation, and more than a dozen other states are considering similar measures.

Federal officials have said that trade school fraud has cost taxpayers more than $1 billion as students default on their government-guaranteed student loans. In California alone, vocational school students have defaulted on about $265 million in federal loans, the assemblywoman said.

“This looms as a disaster for this country as serious as the S&L; (savings and loan) crisis,” Waters told the committee. “The nation is watching California and how it reforms what has become a national scandal.”

About 500,000 students enrolled in 2,000 private, for-profit schools across the state would be affected by the proposed legislation, which also loosens some requirements contained in the current vocational-school reform law that were considered a financial burden to law-abiding schools.

The state attorney general’s office currently is investigating cases of alleged fraud involving about one in five of the state’s vocational students. Typically, the students pay about $5,000 for courses in computer literacy, auto repair and other fields but receive little or no instruction.

The law currently allows the state to close a vocational school if fewer than 60% of the students fail to complete course work. In addition, schools are required to place at least 70% of their graduating students, within six months of receiving diplomas, in jobs for which they have been trained.

Earlier this year, groups representing the vocational-school industry threatened to file suit to block enforcement of the law, which went into effect Jan. 1. The groups said the law would drive many schools out of business.

In a concession to the industry, the new bill would exempt many smaller, low-cost schools from these requirements, as well as schools in the performing and fine arts. Nonprofit religious schools would be exempted. The bill would also make enforcement of the law more flexible.

But the bill, AB 1401, would strengthen the current law by requiring that students be employed in their new jobs for at least 60 days. Now, trade schools can meet the employment requirement even if the students are fired after only one day of work.

Trade schools would also be required to contribute more to a state-operated tuition-recovery fund, designed to provide financial relief to students if their schools shut down.

The proposed legislation also prohibits schools from offering jobs to students as an inducement to signing a school contract. Many students have been recruited to the vocational schools by such promises, only to discover later the jobs do not exist.

The California Assn. of Private Post-Secondary Schools had initially opposed the bill, but then agreed to remain “neutral” at Wednesday’s committee hearing as the result of a last-minute compromise with Waters.

Stan DiOrio, senior assistant to Waters, said the assemblywoman agreed to drop a provision of the bill aimed at preventing abuse in the calculation of course credits.

Negotiations between the trade schools, Waters’ office and public-interest law firms are likely to continue as the bill goes before the full Senate sometime next month.

Waters’ bill has been endorsed by the attorney general’s office, the California Student Aid Commission and various public-interest law firms.

But the assemblywoman said she was concerned that industry groups may try to block its passage. Although the industry representatives had agreed not to oppose the bill in the committee, they declined to sign an agreement that said they would not block its passage in the full Senate.

Bob Wilson, a lobbyist for the vocational schools, said he was confident that a compromise could be reached.