Education Secretary William J. Bennett sent Congress what he termed "extensive evidence" yesterday that many for-profit trade schools are exploiting and deceiving students.
In some cases, Bennett said, they are recruiting young people with little income and academic preparation into expensive training programs that the students have little chance of completing.
Bennett urged Congress to hold hearings and close loopholes that allow schools to misuse federal student aid funds and take advantage of vulnerable students.
Among changes he is seeking is repeal of a law that allows students without a high school diploma or its equivalent to receive federal student aid for training or college.
Describing findings he compiled for Congress, Bennett wrote: "You will find accounts of semiliterate high school dropouts lured to enroll in expensive training programs with false promises of lucrative jobs, only to have their hopes for a better future cruelly dashed. You will read of falsified scores on entrance exams, poor quality training and harsh refund polices."
Material he presented does not indicate what percentage of the nation's nearly 7,000 proprietary schools fall in this category, but Bennett said the evidence indicates "a pattern of abuse at many proprietary schools."
Bennett forwarded the material, including Education Department studies, investigations by its inspector general and reports by the state of New York, to Sen. Edward M. Kennedy (D-Mass.), chairman of the Labor and Human Resources Committee.
Bennett's criticism comes a few months after he ordered a crackdown on institutions, many of them proprietary schools, with high default rates on student loans. That action and his criticism yesterday have turned new attention to for-profit schools, which have enjoyed tremendous enrollment increases in recent years.
According to a report for the Education Department by Pelavin Associates, enrollment at such schools increased 60 percent between 1976 and 1982, and more than half of postsecondary schools are for-profit institutions.
Among the most serious problems, Bennett said, is that of high loan-default rates. He reported that more than 600 proprietary schools had default rates of more than 50 percent in fiscal 1985.
Bennett noted that the pattern of abuse does not extend to all for-profit institutions, but the Pelavin report found that many of the problems were common, including the practice of recruiting students from unemployment lines, guaranteeing financial aid and failing to give them adequate information.
At the Memphis School of Commerce, for example, the Education Department's inspector general reported, more than half of the 270 students reviewed had not properly passed the required entrance test, the school staff helped students on the test and incorrect answers were counted as correct.
While the audit found that the school had a job-placement rate in one quarter of only 13 percent, admissions staff members were instructed to tell students that 90 percent of graduates were placed in jobs.
The school had a withdrawal rate of more than 78 percent, according to the audit.
A representative of the trade-school industry expressed support for Bennett's efforts to get rid of "rotten apples" but expressed concern that the criticism may unfairly tarnish all for-profit schools.
"There are a lot of people out there doing a great job," said Christopher Davis, a spokesman at the National Association of Trade and Technical Schools. "It's unfair for the image of those schools to be tainted because of the images of a few."
Davis also raised a question that has troubled trade-school admission directors: If schools are held accountable for high student-loan default rates, should they be forced to screen out low-income students considered most likely to default?
"If schools are put in a position where they must pass judgment on students and start denying access to students, where do they go?" Davis asked.
Kennedy said that Bennett's report documents serious problems and that "urgent action" is required by Congress and the department. But he cautioned that any steps should "preserve the essential role of these programs in helping needy students."
Bennett proposed several correctives, most of which would tighten student loan regulations to lower defaults. Late last year, he announced rules that could bar institutions from the federally guaranteed student-loan program if they do not bring their default rates below 20 percent over the next three years.
Yesterday, Bennett asked Congress to increase the responsibility of lenders and guarantee agencies in covering defaulted loans and lifting restrictions so institutions can screen for students who have defaulted previously.
His proposals also would bar federal student loans to persons who have dropped out of high school. Current law allows students without high school diplomas to participate in the program if it can be demonstrated that the students have the ability to benefit from the training.