In the past week I’ve had the occasion to do some quick research on a number of institutions that had students take out federal loans in the past academic year but do not show up in the Integrated Postsecondary Education Data System—a U.S. Department of Education database with information on graduation rates, tuition, fees, and a host of other useful data. In general, this appears to be because these schools only recently received accreditation and so only just became eligible to participate in the federal student aid programs. Within that group, the majority of these institutions are proprietary schools focused on teaching cosmetology and aesthetics (basically hair, makeup, and skin care).

Of course there is going to be some lag time between a school opening and its appearance in federal databases, but it is worth noting that this is not an insignificant amount of loan volume we are talking about—the 48 or so beauty/cosmetology schools in this category had their students take out upwards of $16 billion in federal student loans last year. That’s a lot of money going to institutions that we know absolutely nothing about except from looking at their Web sites (if they have one).

And not surprisingly, some of these schools look a little fishy. My personal favorite is Oxford Academy of Hair Design, which is located in Seymour, Conn. I highly recommend looking at their site. For full effect, turn on the sound, though I warn you, it’s very loud at first.

Garish design and incorrect wage statistics aside, it’s entirely possible that this school provides a quality education. (These people certainly liked it.) But I personally find it somewhat troubling that this institution is already taking in federal aid subsidized by taxpayers—$33,458 in Pell Grants and $14,250 of loans in the first quarter of this academic year—but there’s absolutely no information about it anywhere. It’s accreditor lists the owner’s name and e-mail, but it does not even disclose when the school received its accreditation. (You have to search for Oxford Academy here.)

In  many respects, the institutions described above are the most dangerous participants in the federal student aid programs. They’ve already received accreditation, which puts them inside the system and allows their students to take out thousands of dollars in loan and grant aid. But at the same time, they’ve yet to actually report or disclose any of the information—such as cohort default rates—that serve as a limited check on quality or at least help students get a better sense of what they are getting into. It’s basically a sanctioned Wild West where the sheriff is on his lunch break for the first two or three years.

Given the amounts of money involved, it certainly seems like it would be in everyone’s interest to subject institutions that recently joined the federal student aid programs to stricter upfront reporting requirements. This could range from disclosure of  retention, enrollment, and graduation information on Web sites to a special report that must be filed by the institution and published by the U.S. Department of Education for any school that joined the aid programs in the last five years. Without better safeguards, we have no idea where the millions of dollars worth of financial aid are actually going.