Fearing that President Trump will ease up on regulating for-profits schools, consumer advocates and Massachusetts Attorney General Maura Healey urged legislators on Tuesday to create a state fund that protects students who have lost money attending troubled institutions.
Under aggressive enforcement by the Obama administration education department and state prosecutors, the roster of for-profit schools that shut down or were accused of violating consumer laws grew in recent years. In Massachusetts, for-profit chains, including Corinthian Colleges Inc., American Career Institute, and ITT Technical Institute, were targets of investigations for their questionable practices and eventually closed.
But students have few ways of recovering the thousands of dollars that they have sunk into their education at these schools, Healey said.
The US Department of Education can forgive some federal student loans, but many students have been waiting months for that relief, and under the Trump administration it may be less generous.
“It’s left students with worthless degrees and little to show for their efforts except boatloads of unaffordable debt,” Healey said.
Under bills that state legislators are considering, for-profits schools would contribute $2,500 and 0.25 percent of their total previous year’s tuition and fees to finance the fund, up to $5 million. Students who attended for-profit schools that suddenly shut down or were accused of defrauding students or breaking state and federal laws could qualify for relief for private loans and out-of-pocket expenses for their education. Students who weren’t able to get relief from the federal government could also qualify.
Twenty other states, including California, Arizona, and Ohio, have similar funds.
Catherine Flaherty, executive director of the New England Private Career School Association, called the recovery fund unnecessary.
The tuition assessments are expensive and unfair, and could force some career schools to close or curb any expansion plans, she said.
“It is another overreach and adds unnecessary expenses to schools,” Flaherty said.
Many of the schools have to provide a surety bond to operate in Massachusetts that can be tapped if a school shuts down and students have paid their tuition, she said.
But student advocates said the bond doesn’t provide enough protection and fails to cover all for-profit institutions.
Many of the students who attend for-profit schools are minority, low-income, or veterans, who borrow thousands of dollars to attend these programs. If the schools make false promises about post-graduation job prospects or collapse before providing students with an education, many of those students can fall further behind financially, said Kevin Fudge, director of consumer advocacy at American Student Assistance.
“These student are in a worse position than if they had not sought post-secondary educational opportunities in the first place,” Fudge said.
In the past three years, state and federal authorities under the Obama administration cracked down on for-profit schools and some of their troubling practices.
Last year, the now defunct American Career Institute, or ACI, admitted in a consent judgment with the state’s attorney general that it lied about its graduates’ success rates, falsified records, and admitted unqualified applicants.
Nearly 4,500 ACI students in Massachusetts qualified for federal loan forgiveness of $30 million of debt. Separately, 2,000 Massachusetts students who attended Corinthian Colleges, a for-profit chain that went bankrupt in 2015 after running afoul of state and federal regulators, also were eligible for loan discharges.
More than a year out, many of these students are still waiting for that relief.
Nationwide about 27,000 students who have been approved for loan forgiveness have yet to see their loans discharged by the education department, according to Healey.
Earlier this week, Healey and 18 other state attorneys general sent a letter to Education Secretary Betsy DeVos urging her to shrink the backlog of applications and approve some of the discharges automatically in groups, instead of conducting time-consuming, individual reviews.
DeVos last month told federal legislators that for-profit-school students who were promised loan forgiveness will receive it, although she didn’t provide a timeline. She also indicated that the education department plans to outline its approach to loan forgiveness going forward. Given the president’s own history with for-profit schools, many consumer advocates fear that regulators will take a more industry-friendly approach to overseeing the market.
President Trump operated a for-profit school, Trump University, which taught real estate seminars and was at the center of a long-running lawsuit brought by students who claimed they were defrauded. Earlier this year, a judge approved a $25 million settlement between the president and students.
If the federal government provides students with less help, the state needs to fill in the gap, Healey said.Deirdre Fernandes can be reached at deirdre.fernandes
@globe.com. Follow her on Twitter @fernandesglobe.