America’s system for safeguarding the billions of dollars spent on federal student aid is not up to the task.
Consider, for example, the downfall of the now defunct for-profit behemoth Corinthian Colleges. The abrupt closure of one of the largest college providers accused of defrauding students has already cost taxpayers $350 million in loan-forgiveness costs. The final bill to taxpayers could total as much as $3.5 billion.
After Corinthian’s fall and the failures of other low-quality for-profit colleges, eyes are now turning toward the once-obscure entities tasked with gatekeeping federal money, the accrediting agencies. The federal government charges these private, nonprofit organizations with measuring college quality, and an accreditor must give its stamp of approval that a college meets rigorous standards before it can access federal aid. Time and again, however, accreditors have signed off on colleges that are hurting students.
Why is the accreditation system falling down on the job? Because, as my research shows, by and large accreditors don’t have the budgets or staffing to do their job properly.
Despite the tremendous burden of guarding the roughly $120 billion awarded each year in federal student grants and loans, a review of tax filings shows that the 12 main accreditors spend a shockingly small amount on measuring quality — just $75 million in 2013.
For comparison, Corinthian raked in $1.3 billion in taxpayer money in one year. That is 17 times more than the combined sum that all 12 accrediting agencies spent monitoring quality at nearly 7,000 campuses over the same period.
Accrediting agencies simply weren’t built to do what has become their most important task. Rather, they were created by colleges in the 1800s as membership associations, to establish standards around curriculum, degrees, and transfer of credits. The agencies were sustained by membership fees from the colleges themselves.
Following massive fraud after the federal government’s first infusion of student aid — in the form of the GI Bill — the government eventually co-opted accreditors to serve as a pseudo-regulatory arm to protect federal funds.
Today, even though accreditors must comply with numerous federal laws and regulations, the federal government does not pay agencies for their role. Instead, accreditors remain membership associations at heart, dependent on colleges for revenue.
What agencies charge colleges for membership dues and fees is tiny compared with the stakes of accreditation for colleges and taxpayers alike. For every $1 accreditors spend on monitoring college quality, they provide colleges access to $1,693 in federal financial aid.
Importantly, what a college is charged in annual membership fees is often less than what a college charges for one student’s tuition. For example, Williams College, a small but wealthy nonprofit, charges $50,000 in annual tuition per student, but pays roughly $17,500 in annual membership fees to its accreditor.
Accreditors manage to function on such little revenue because the bulk of the work they do is through peer review, in which unpaid volunteers do most of the oversight. In 2013, accrediting agencies employed just 391 staff members to oversee nearly 7,000 campuses. The number of unpaid volunteers was 18 times greater than the number of paid employees.
When an accreditor is small in both resources and employees, it is vulnerable to colleges that challenge their authority in court. For example, in 2013, when the City College of San Francisco sued its accreditor after the agency attempted to revoke its accreditation, the agency spent nearly a third of its annual revenue on legal fees.
While spending is uniformly too low, accrediting agencies still charge colleges wildly different dues and fees. This means that average spending on measuring quality can vary by tens of thousands of dollars. It is not, however, tied to any tangible measure of performance.
Several reforms would put accreditors in a better position to do their job.
First, accreditors should work together to set minimum fees. Greater alignment of fees would ensure that agencies are charging enough to properly carry out their work.
Second, accreditors should increase fees for poor performers. Colleges that struggle require more attention and resources to help them improve, and that cost should be reflected in what they pay for oversight.
Third, the federal government should enhance legal protection for accreditors. While the Justice Department protects the Department of Education when it’s sued, financial strain from a lawsuit can bleed an accreditor dry and might serve as a disincentive to withdraw accreditation.
When private entities are asked to guard federal funds but lack the money to do it well, it should be no surprise that they fail to protect students. The time is long overdue to rethink the nation’s investment in the agencies tasked with the job of college oversight.
Antoinette Flores is a senior policy analyst at the Center for American Progress.