If for-profit colleges commit fraud and abuse federal education funds, as some rogue institutions have been found to do, New York education officials may make them pay for the investigation of their crimes. The state's Department of Education is proposing a tax on for-profit institutions that would help cover the costs of investigations like the one underway at Interboro Institute, accused of falsely enrolling students in order to capture their state financial aid.

The proposal follows a flurry of accusations of the state's for-profit colleges. Across the nation, the for-profit sector has included some schools accused of luring ill-prepared students to their classrooms only to take their financial aid money and flunk them. Other accusations and some confirmed findings involve false advertising, describing and even guaranteeing success for graduates, and assisting applicants in misrepresenting themselves in order to qualify for federal financial assistance.

New York has 41 proprietary colleges, where some 50,000 students were enrolled in 2004, and more than $100 million in state funds help pay their tuition. The state Board of Regents, which oversees all colleges and universities,  was so concerned about abuses among for-profits, it set a moratorium on new programs and, in January, prohibited enrollment increases at Interboro.

The new tax proposal would require New York's for-profits to pay a fee equal to 0.1 percent of the annual state and federal financial aid they receive or $10,000, whichever is greater. Under the proposal, if the fees are not paid, the institution would not be allowed to operate.

Other possibilities under discussion include taxing only those institutions under investigation, and taxing all institutions of higher learning, regardless of whether they are operated for profit. A final proposal report is still being prepared; to become law, it would have to both pass through the state legislature and gain the governor's approval.

AFT is supportive of the proposal. "In New York, this isn't a theoretical issue, it's a real issue, says William Scheuerman, AFT vice president and president of the United University Professions at the State University of New York..  "We support the higher ed leaders in our state legislature, who believe that institutions like Interboro should be held accountable.  Scandals like this hurt students.  And they tarnish the reputation of higher ed in general." [Barbara McKenna]

May 19, 2006