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Senate Panel Would Limit Commercial Trade School Aid

May 20, 1991

WASHINGTON (AP) _ A Senate panel on Monday recommended sharper limits on federal financial assistance to students of commercial trade schools, including a ban of grants or loans for correspondence courses.

The Senate Governmental Affairs subcommittee on investigations said the program for helping poor and minority students of proprietary schools ″is in shambles and in dire need for reform to restore its effectiveness and credibility.″

The subcommittee, headed by Sen. Sam Nunn, D-Ga., said taxpayer money has been wasted ″on relatively worthless training in ‘glutted’ career fields,″ and should be limited to helping students at institutions which demonstrate that their programs offer students marketable skills.

The subcommittee’s report, ″Abuses in Federal Student Aid Programs,″ also echoed past criticism of the Education Department’s overall Guaranteed Student Loan Program, saying it was still ″riddled with fraud and abuse and suffers from severe management and oversight deficiencies.″

The guaranteed loan program is one of seven major student financial aid programs administered by the department. Program losses due to loan defaults increased 507 percent, from $444.8 million in 1983 to an estimated $2.7 billion in 1991, the report said.

Aggregate default losses in that period amounted to nearly $13 billion - a ″sum of money that could have helped support the education and-or training of tens of thousands of our nation’s youth,″ said the report.

″I am deeply troubled by the extensive fraud, abuse, and mismanagement in the program,″ said Nunn. ″In order to salvage the program’s integrity and return it to its intended purpose of serving the students’ interests, nothing less than a comprehensive, sustained, and intensive reform effort is needed.″

Recently, Education Secretary Lamar Alexander appointed Michael Farrell, a former New Hampshire businessman, to take charge of student aid programs as a deputy assistant secretary.

Stephen Blair, president of the National Association of Trade and Technical Schools, and Stephen Friedheim, chairman of the Association of Independent Colleges and Schools, said they fully support the recommendation that student aid programs be reformed, but did not discuss details.

″The report shows, for the first time, how complicated student aid programs are and how difficult it is for schools to deal with poorly administered programs,″ said Friedheim. ″As the report noted, some students don’t even know their loans have been sold, and thus who holds the loans. Schools cannot be held responsible for those deficient administrative practices.″

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