Over 1,000 Colleges Could Lose Access to Federal Student Aid: AEI Report Documents Systemic Failures

The American Enterprise Institute (AEI) has published a report indicating that more than 1,000 U.S. colleges could lose access to federal student aid—if Department of Education standards were enforced as written. While AEI typically promotes market-based approaches, this report draws attention to broader failures in the governance of higher education and student aid.

In "Over 1,000 Colleges Could Lose Access to Federal Student Aid," AEI researcher Beth Akers identifies institutions that would not meet federal financial responsibility and administrative standards. These schools—many of them for-profit or underfunded nonprofits—show high student loan non-payment rates, dependence on Title IV aid, and weak student outcomes. 

According to the report, 1,113 colleges have non-payment rates above 30%, a threshold that can trigger the loss of federal aid. An additional 656 colleges are near that threshold.

Under current policy, such institutions could face sanctions or funding loss. In practice, enforcement is inconsistent. Many of these colleges continue operating with federal funds while offering little evidence of educational or financial benefit for students.

A Pattern of Inaction

This is not a new development. Federal oversight has long been uneven. Accrediting agencies have allowed low-performing schools to remain in good standing. Legislative oversight has been limited and sometimes influenced by lobbying. The result is a system where colleges can access public funds with little accountability.

Students, especially those from low-income and first-generation backgrounds, are often left with debt and limited employment options. The burden also falls on taxpayers who support these institutions through federal programs.

Colleges with High Non-Payment Rates

Some of the institutions listed in AEI’s report have appeared in investigations for years. Examples include:

• American Intercontinental University (~45%)

• Colorado Technical University (~42%)

• United Education Institute / UEI College (~43–44%)

• Florida Career College (~58%) – closed after fraud findings

• Fortis Institute / Fortis College (~41–43%)

• All State Career School (~48%)

• Barber and cosmetology schools such as K&G 5 Star Barber College (TX), GoodFellas Barber College (AR), and Ray J’s College of Hair (LA), with non-payment rates between 60–74%

These schools are part of a larger group that relies heavily on federal aid while producing high loan default and non-payment rates.

A Broader Systemic Problem

The issues identified in the AEI report reflect a larger problem. Colleges are allowed to participate in federal aid programs without meeting consistent standards for financial stability or student outcomes. The aid system rewards enrollment growth but often overlooks quality and results.

The report raises questions about how federal aid is distributed and monitored. It also highlights the limited role of accreditors and the need for more consistent enforcement of existing rules.

Looking Ahead

The AEI report is based on public data and identifies a clear policy problem. Whether it leads to change depends on decisions by federal officials, lawmakers, and the public. Continued support for colleges with poor performance comes at a cost—borne by students and taxpayers.

The Department of Education has tools to limit this harm, but those tools have not been used effectively. The question now is whether they will be.

Sources:

• Akers, Beth. Over 1,000 Colleges Could Lose Access to Federal Student Aid. American Enterprise Institute, July 30, 2025. 

• Republic Report, July 2025

• Business Insider, July 2025

For further information on at-risk institutions or specific regional trends, the Higher Education Inquirer continues to track developments closely.