The Manicurist Subsidy

February 11, 1994

If the federal government wants to cut back on the $3 billion to $4 billion it loses yearly to fraud, waste and defaults in student aid programs, it could start by cracking down on the trade schools that are operating almost exclusively at the courtesy of American taxpayers.

More than 100 schools are approved to offer "career training" in Maryland. They receive nearly $40 million yearly from the federal government, divided about equally between loans and grants. Tuition at many of the schools is suspiciously similar to the maximum amount a student can obtain with a federal loan and Pell grant. Indeed, some schools force students to take a loan as a condition of obtaining a grant. Little wonder default rates at these schools are five and six times higher than those at public colleges.

In 1991 the Education Department was granted authority to deny loans to students at schools with heavy default rates, and defaults began to decline dramatically. But last fall Congress diluted that authority, giving the schools the right to challenge default rates even before they are published. Meanwhile, the trade school lobby is working feverishly to water down a rule scheduled to go into effect this fall that specifies that no more than 85 percent of a school's operating funds can come from Uncle Sam.

This seems more than reasonable. Surely respectable career schools -- and there are a number of them in Maryland -- should be able to survive with but 15 percent of their income deriving from tuition. After all, the rule was sponsored by Rep. Maxine Waters, whose Los Angeles district is one of the nation's poorest. Ms. Waters has seen too many "graduates" of trade schools without the skills for any but low-wage jobs but with staggering repayment obligations.

The career school lobby maintains that the "85-15" rule will force many urban schools -- schools attended by students with little or no money for tuition -- to close. That might not be a tragedy. Thirty-eight of Maryland's 104 trade schools turn out cosmetologists and manicurists, enough to do the nails of thousands of Free Staters. Taxpayers ought not to be footing the entire bill for these and other career students. There are ample opportunities for them at two- and four-year colleges that do a better job of stewardship with the federal dollar.

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