A couple sites have picked up on a story coming out of Portland, Ore., about a lawsuit involving former students at Business Computer Training Institute (BCTI), a for-profit institution that is about to pay out $200,000 to students who allege that they were ripped off by receiving a poor quality education and lousy job prospects. This is not the first time the now-defunct school (it closed in 2005) has had to open up its checkbook—in 2007 it paid $13.25 million to the state of Washington and is expected to fork over an additional $3 million in additional payments to students.

Student Lending Analytics, which first picked up the Associated Press story about the settlement noticed the juiciest part of the story:

The school recruited students outside welfare and unemployment offices while promising training and high-paying jobs in computer fields. Students say they received substandard training and got low-paying jobs at fast-food restaurants, retailers, convenience stores and telemarketing firms.

This goes back to a point I made last week—just as with other colleges, students end up at for-profit schools through more than coincidence. BCTI intentionally sought out to market students that clearly were facing some financial hardship. Not surprisingly, the mixture of aggressive recruitment and an allegedly poor education produced cohort default rates of 30, 28, and 25 percent in fiscal years 1992, 1991, and 1990, respectively. Even by the end of that decade, BCTI’s cohort default rate hovered north of 15 percent.

But this is also a story about how just establishing an accountability mechanism is insufficient to ensure its effectiveness. In his writeup of the story, Tim Ranzetta at Student Lending Analytics makes the point that students would have been better served by a one-page disclosure warning them of the school’s high debt levels and poor success outcomes. I agree that certainly would be beneficial. But the fact of the matter is, the U.S. Department of Education already had the authority to identify and shut down these problem schools years before this lawsuit even arose. And it even worked in this case… that is until the U.S. Congress got involved.

According to an earlier story from the Oregonian (scroll down to Degrees of Risk), the U.S. Department of Education had already kicked BCTI out of the federal student loan program—the lifeblood of for-profit institutions—in 1996. It was well within its rights to do this because the school had exceeded 25 percent on its cohort default rate measure for three consecutive years.

But this apparently was not a clear-cut decision. In response to the Department’s decision, the school organized a big Congressional letter-writing campaign. And with that, as the rest of the Oregonian story shows, the wheels of salvation were set in motion:

“It was a big to-do,” said Erin Wellnitz, a BCTI admissions representative from December 1993 and November 1997. “They passed out envelopes with stamps and paper. They gave us a list of who to write for each state. They gave us everything.”

Calls for expediency

Within days, federal education officials began receiving inquiries from then-U.S. Reps. and Sens. Ron Wyden, D-Ore.; Patty Murray, D-Wash.; Randy Tate, R-Wash; Linda Smith, R-Wash.; and Norm Dicks, D-Wash.

“There are presently 300 employees and 1,400 students that are being directly affected by the loss of this Title IV funding, so expediency is truly in order,” Murray wrote in an Oct. 4, 1996, letter to Hicks, the deputy assistant secretary.

BCTI also hired retired U.S. Sen. Alan Dixon, R-Ill., then an attorney with Bryan Cave, one of the nation’s largest law firms, to lobby the department.

Dixon phoned Education Secretary Richard Riley’s chief of staff, Frank Holleman, about the matter, according to a letter he sent the department. He also faxed a letter to Mary Ann Phelps, director of the department’s institutional participation and oversight service, asking to meet to reconsider the school’s appeal.

So what happened? The Department eventually caved to the pressure and removed enough borrowers from one default rate calculation to drop the figure below 25 percent—allowing it to stay in the program and continue reaping millions of dollars in profit and aid while unknowing students kept getting shortchanged. In effect, spending enough money and exerting sufficient influence on the right people made it possible for BCTI to go completely around the entire accountability structure in place to shut down bad actors.

We spend a lot of time here talking about the need for better oversight and accountability in higher education. That is certainly true. But as BCTI’s experience shows, just implementing the system is not enough. Finding ways to protect it against political pressure is an entirely different beast.