Some for-profit colleges may lose access to U.S. government aid as the Department of Education works to improve oversight of the sector.
Colleges that pay recruiters based on how many students they sign up could be disqualified from participating in federal-aid programs, Bloomberg News reported. The student aid is worth $26.5 billion and can account for as much as 90% of company revenue.
The Department of Education would use the authority to withhold aid as a means to punished widespread abuse, Deputy Undersecretary of Education James Kvaal said. The department would use the tool rarely, he said.
"We take our responsibility to prevent these abuses very seriously," Kvaal said. "We're going to look at what tools we need to make sure the law is being followed."
For-profit colleges received 23% of all federal student grants and loans for universities in 2008-2009, but educated only about 12% of the students.
Investing Like Warren Buffett
Learn from one of the world's best investors.View Course »