‘We may be listening’: Dept of Ed to send undercover federal agents to monitor colleges' financial conduct

The Department of Education (DOEd) announced on Tuesday that the Enforcement Office of Federal Student Aid (FSA) “will use secret shoppers as an additional tool to monitor postsecondary institutions’ compliance” with rules relating to the acceptance of federal student loans.

“Specifically,” the press release clarifies, “secret shoppers will look for misrepresentations regarding the transferability of credits, job placement rates, completion and withdrawal rates, graduates’ future earning potential, career services, the cost of attendance, the amount of federal student aid, and accreditation status,” among other potential legal violations.

The Enforcement Office of FSA was initially established in 2016 and re-established in 2021 after it was “deprioritized” by the Trump Administration, according to the DOEd.

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FSA’s Chief Enforcement Officer, Kristen Donoghue, is quoted in Tuesday’s announcement as saying, “Schools that engage in fraud or misconduct are on notice that we may be listening, and they should clean up accordingly …. But schools that treat current and prospective students fairly and act lawfully have nothing to fear from secret shopping.”

The FSA also stipulates, “If an investigation or other review demonstrates that an institution is engaging in deception, substantial misrepresentation, or other predatory recruitment and enrollment practices in violation of the [student loan] regulations, FSA will consider all appropriate corrective actions and sanctions.”

 Such sanctions may include utilizing new DOEd guidance that allows the FSA to hold “individuals who exercise substantial control” over private colleges and universities personally liable for unpaid federal student loan debt, as Campus Reform previously reported.

Some critics of the secret shopper policy worry that it will be exploited for political means.

Nicholas Kent of Career Education Colleges and Universities (CECU)—an association representing for-profit higher education institutions—issued a statement saying, “We support reasonable practices that hold all institutions accountable for misrepresentations that financially harm students and taxpayers; however, the federal government has a track record of using secret shopper investigations to malign politically unfavored institutions with distorted findings.”

Kent is specifically referring to the Government Accountability Office’s (GAO) use of secret shoppers to collect data on for-profit colleges in 2010. The original GAO report was published in August 2010, but an amended version of the report was released three months later that revised 16 of the 28 findings, according to Inside Higher Ed.

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“More interesting,” reads the Inside Higher Ed opinion piece, “is the fact that all 16 of the errors run in the same direction—casting for-profits in the worst possible light. The odds of all 16 pointing in the same direction by chance? A cool 1 in 65,536.”

Regarding FSA secret shoppers, Kent and CECU is “concerned this self-proclaimed ‘tool’ will be used as a weapon to inflict further damage upon private career schools and limit student choice.”

The DOEd’s announcement calls the program, “some of the latest progress on the Biden-Harris Administration’s ongoing commitment to improving student outcomes.”

The DOEd, CECU, and GAO have been contacted with request for comment. This story will be updated accordingly.

Follow Gabrielle M. Etzel on Twitter.