A Quandary

“For-profits successfully serve a lot of students, and the department has been very sensitive to having all students suffer for what may only affect some students in some programs,” said Kevin Kinser, an associate professor who studies for-profit colleges at the State University of New York at Albany. “So they are reluctant to throw the baby out with the bath water.”

Mr. Kinser pointed out that the Education Department had little flexibility under the law when it came to cutting off federal student loan and grant money to potential abusers. “There are individual triggers in place for financial viability, institutional integrity, et cetera,” he said, “but no three-strikes-and-you’re-out rule.”

Education officials say they have clamped down on many for-profit schools, restricting their ability to expand their programs or the number of campuses, capping the number of students eligible for student loans, or requiring schools like Education Management to post a letter of credit to gain access to federal student loans and grants. The letter is meant to protect students and taxpayers if the company is unable to cover federal student-aid liabilities.

“What’s clear to all of us is that the best way to solve this problem is at the front end and not to let bad schools operate,” said Ted Mitchell, the under secretary of education. The agency’s “more aggressive stance,” he said, helped contribute to an 18 percent drop in enrollment at for-profits from 2011 to 2013.

Still, critics say that even schools with egregious violations have become adept at exploiting loopholes, sidestepping rules or taking advantage of yearslong appeals processes. Companies with several campuses can pool graduation, financial, enrollment, staffing and other statistics to mask weak performers, experts say.

“Bright-line standards are good, but they can also be managed,” said Ben Miller, senior director for postsecondary education at the Center for American Progress, a liberal research and advocacy group. “It’s why almost nobody gets caught. The big schools know how to work the numbers to avoid failing.”