Proprietary Schools:

Poorer Student Outcomes at Schools That Rely More on Federal Student Aid

HEHS-97-103: Published: Jun 13, 1997. Publicly Released: Jun 13, 1997.

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Carlotta C. Joyner
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Pursuant to a congressional request, GAO reviewed the relationship between school performance and reliance on title IV funds in the proprietary school sector.

GAO noted that: (1) proprietary schools that relied more heavily on title IV funds tended to have poorer student outcomes; (2) GAO's analysis showed that, on average, the higher a school's reliance on title IV, the lower its students' completion and placement rates, and the higher its students' default rates; (3) although reliance on title IV was a significant factor in explaining completion and default rates, it was not significant in explaining placement rates; (4) requiring proprietary schools to obtain a higher percentage of their revenues from non-title-IV sources could save millions in default claims; (5) based on GAO's analysis, however, achieving this result would require a substantial increase to the current 15-percent threshold; (6) this is because, in relative terms, large differences in schools' 85-15 measures are associated with small differences in outcomes; (7) for example, raising the threshold to 45 percent could improve the average default rate of schools currently relying the most on title IV funds to the level of those that rely the least, 3 percentage points lower, for an estimated annual savings of $11 million; and (8) however, a standard this high might cause schools to make changes, such as admitting fewer low-income students, that might compromise student access to postsecondary education.

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