Steps Regulators Should Take in the Wake of ATI’s Job Placement Scandal

As we wrote yesterday, the Texas Workforce Commission (TWC) has announced that it is revoking the license of the for-profit trade school chain ATI Enterprises to operate in the state because it found that the company has engaged in a systematic effort to mislead students and regulators about its record in placing graduates into jobs.

At Higher Ed Watch, we think that the agency’s ruling should prompt the U.S. Department of Education, state regulators, and accreditors to take additional steps to safeguard students and taxpayers, and to ensure that any students who were admitted to the schools under false pretenses are not left in the lurch.

In the wake of the commission’s dramatic decision, here are some steps that need to be taken:

• Regulators in Florida, New Mexico, and Oklahoma should launch their own investigations to determine whether ATI schools in their states have engaged in the kind of violations that the Texas commission found. If so, these states should take appropriate enforcement actions.

• The Department of Education (or its Inspector General) should conduct its own investigation into ATI to determine whether the violations the commission identified were widespread throughout the company’s schools, and how long they have been occurring. Depending on its findings, the  Department should require the schools, which are owned by the private equity firm BC Partners, to return any Title IV federal student aid money they received by making false promises to their students. (Interestingly, several campuses owned by ATI Enterprises received more than 90 percent of their revenue from the government aid programs in violation of federal law, according to the Education Department.)

• The Education Department should also discharge the federal loans of any students who were enrolled at ATI schools under false pretenses. Assuming that TWC’s order stands (ATI has the right to appeal it and can challenge it in court), students who are currently attending the company’s Texas schools should automatically be granted a closed school discharge. Former students who attended these campuses while the alleged violations occurred should also be allowed to escape their debt through a false certification discharge.

• The Education Department should also direct accreditation agencies to strengthen the processes they use for verifying a school’s job placement rates and the enforcement actions they take when they find that a school has reported false data. It shouldn’t take a crack team of journalists to uncover alleged abuses occurring right under the accreditor’s nose, as appears to have happened with the Accrediting Commission of Career Schools and Colleges (ACCSC) in the ATI case.

• State regulatory agencies should also strengthen the standards they require schools to use in calculating job placement rates. According to the news team at WFAA-TV in Dallas that uncovered ATI’s alleged scheme, the Texas Commission considers a graduate to be successfully placed if they work in their field for as little as a day. We don’t understand how this standard — which simply invites abuse — can possibly be justified.

We expect that ATI Enterprises will appeal the commission’s decision and challenge it in court. We also suspect that BC Partners, the company’s owners, will throw all of their weight to trying to stop regulators from taking the steps we have recommended. After all, the private equity firm is extremely well connected in Washington with James Rubin, the son of former Treasury Secretary Robert Rubin, sitting on ATI’s board. Rubin, who was a major fundraiser for President Obama during the 2008 presidential campaign, was active in the company’s fight against the administration’s “Gainful Employment” regulation (see here and here).

But unless ATI officials can prove that the TWC and the independent accounting firm that ATI hired to examine its job placement records were wrong, regulators should make clear that it doesn’t matter who the company sends to lobby them.