In March 2019, a team of investigators from the U.S. Department of Education’s fraud-prevention team arrived at a Houston trade school for what was supposed to be a routine inspection. Several of the students the team wanted to interview, however, were nowhere to be found. At the end of a long and frustrating day, the investigators headed back to their car. That’s when two of the missing students appeared in the parking lot. They wanted to talk in a place where school administrators couldn’t overhear them.
That conversation led to the unraveling of a years-long scheme designed to steal from the American taxpayer. The trade school, called the Professional Career Training Institute, had been recruiting homeless people from a local nonprofit. Many were high-school dropouts, some of them functionally illiterate with histories of petty crime and drug abuse. Enroll in college, they were told, and we’ll pay your rent while federal grants take care of tuition, books, and all the rest. The school fabricated diplomas from an unaccredited, possibly nonexistent high school, then set up federal financial-aid accounts and passwords for the students before secretly taking out large loans on their behalf.
Colleges collectively receive more than $140 billion in federal student aid every year. At the beginning of this year, the Department of Education employed about 220 people to make sure that money actually went toward paying for students to attend legitimate educational institutions. But no such investigations are being conducted today. That’s because, in March, the newly confirmed secretary of education, Linda McMahon, fired more than 80 percent of the fraud-prevention and quality-assurance team, according to an official who was involved in many fraud causes, and who spoke on condition of anonymity for fear of retribution. The move was one part of a massive series of layoffs that cut employment at the department by nearly 50 percent compared with the beginning of the year—all in service of President Donald Trump’s directive to shut down a federal agency that was created by an act of Congress in 1979. This month, the Supreme Court ruled, without explanation, that those layoffs could go into effect while a lawsuit challenging them works through the courts.
The Trump administration has justified its dismantling of the federal government under the banner of cutting “waste, fraud, and abuse.” The cuts to the Department of Education’s anti-fraud team are likely to have exactly the opposite effect. For every dollar the government spends investigating frauds like the Houston student-loan scheme, it saves more in the form of recovered funds and prevented crime. Trump promised to trim the federal bureaucracy. In this case, he has instead defunded the police.
Even before the latest layoffs, the Department of Education employed the fewest workers of any Cabinet-level agency. Because education is mostly funded and regulated by state and local governments, the department’s role has historically been limited, but still important. Among other things, it administers the $1.7 trillion federal-student-loan portfolio and distributes $31 billion in Pell Grants to low-income college students every year.
The point of federal student loans is to give students access to credit that they can’t get in the private market. Unlike the requirements for, say, a mortgage, people don’t need to have financial assets or a job to borrow for college. On top of loans, Pell Grants are available to anyone from a family of modest means. The system helps people earn degrees when they otherwise can’t afford to. It also makes higher education vulnerable to fraud. Without any regulations, I could hang a sign on my door that says Kevin Carey University, charge tuition equal to the value of a Pell Grant, scrawl diploma on a napkin, and split the proceeds with my “students.”
To prevent such behavior, Congress wrote specific provisions into the federal Higher Education Act, defining the terms under which colleges can receive tuition paid with federal aid. Before students enroll in college, they must graduate from high school or pass the GED. Colleges must be approved by an independent accrediting body that sets standards for quality. They have to sign a legal agreement with the Education Department that lays out additional conditions, and submit annual financial statements to certify that they’re not about to go bankrupt and leave students out to dry mid-semester.
These are not especially rigorous standards. The Education Department has little say in what colleges teach or whether they do a good job teaching it. In the same way local health departments enforce food-safety standards but allow restaurants to sell flavorless burgers and soggy fries if the market demands them, the goal is a minimum level of consumer protection in an otherwise open market.
Even that standard requires enforcement. Investigators first visited the Professional Career Training Institute, the Houston trade school, during a routine inspection. After getting tipped off by the students in the parking lot and being contacted by an internal whistleblower who had a video recording of diplomas being forged, they returned with a bigger team of lawyers and accountants.
Many students learned during interviews with Education Department inspectors that they owed tens of thousands of dollars in student loans. A federal accountant discovered two sets of books: a fake one that the school showed students, which didn’t include their hidden loan balances, and a real set of financial records, which did. One student tried to enroll in a different college, only to learn that PCTI had already applied for and received her aid money for the upcoming year.
News of the inspection set off a panic inside PCTI. The school’s leaders got to work doctoring records and coaching students to lie. PCTI’s founder and CEO, Carrie Poole—feted by a local marketing company as one of the “top 30 most influential women in Houston” in 2014—personally handed one student a check for $910 as payment for her to stay home on the day of the inspection and not “rat her out,” according to the Education Department. Confronted with these and other allegations, PCTI claimed that much of the testimony from students with criminal records was unreliable. These were, of course, students whom the school had gone out of its way to recruit. (This account is drawn from Department of Education documents, including records from administrative proceedings. Poole did not respond to requests for comment.)
When it came to federal regulations, PCTI lied about seemingly everything. School officials pretended that married students were single so their household income would drop and they would receive more need-based aid. The school inflated the number of hours students were taught. Attendance records were falsified, instructors went missing, and necessary equipment never arrived.
Colleges accused of malfeasance are legally required to receive due process. PCTI lawyered up and mounted a vigorous defense. After hearings before an administrative-law judge and an appeal, the college was officially stripped of eligibility for federal financial aid in December 2021.
PCTI is not an isolated case. In 2005, fraud inspectors caught a large mid-Atlantic trade school that, according to the department, sold students laptops at a 125 percent markup and handed out credentials in “surgical technology” to a student whose real-world training consisted of working for two weeks in a hospital storage room. A student studying phlebotomy testified that “the practice arms were so filled with holes that the fake blood would spurt out when students attempted to practice their sticks.”
In another case, a Florida woman created an independent “sports academy” that, according to fraud investigators, sold young men on the false promise of being recruited by Division I schools. Upon arriving, students and their parents were pressured into taking out federal loans to enroll in a barbering-and-cosmetology program. According to the government, the school falsely claimed that the football players were studying cosmetology for 10 to 12 hours a day, including on weekends. (One student at that school was allegedly told to do something like “curl your hair, take a video, and turn it in.”) The owner received more than $800,000 in federal-loan disbursements before the Education Department shut her down. From 2021 to August 2024, the department sanctioned 85 colleges, levied $61.7 million in fines for misconduct, and cut off 35 schools from receiving federal financial aid.
When Trump took office in January, the Education Department’s quality-assurance team was organized into five groups. One processed requests from new colleges to become eligible for federal student aid and recertified existing colleges on a six-year schedule. Another group conducted yearly audits, and a third made sure that schools were financially healthy and complying with rules designed to crack down on predatory for-profit colleges. A group of 10 regional offices conducted site visits and program reviews like the one that uncovered the PCTI scheme. A special fraud-investigation unit focused on the worst actors. All of these activities were mandated and funded by Congress.
As soon as Linda McMahon was confirmed as education secretary, most of the team was fired. Add in DOGE-induced retirements, and the headcount went down from about 220 to fewer than 40. The fraud-investigations unit is gone. Eight of the 10 regional offices have been closed. The financial-analysis group is no more. Most of the lawyers who prosecuted cases were also let go or reassigned to other tasks. The only thing the remaining skeleton crew can do is rubber-stamp paperwork to keep federal dollars flowing.
This is incredibly frustrating for the public servants who have made safeguarding the higher-education system their life’s work. The official who helped enforce fraud cases told me, “The team doing this work put a lot of bad schools out of business. I feel good about it.” The department, they noted, had recovered tens of millions of dollars from fraudulent colleges. With the system now defenseless against criminality, they say, the message to would-be scammers is “Back up your truck to the ATM machine.”
Ellen Keast, the deputy press secretary at the Department of Education, told me in an email that staff “continue to carry out all of their roles and responsibilities under law, including clearing the backlog of nearly two thousand program reviews, program certifications, and other oversight activities neglected by the Biden administration because it was too distracted by their loan bailouts and politically motivated witch hunts targeting career- and faith-based institutions.” She did not, however, elaborate on how the department is managing to execute its obligations without employing the human beings who would actually perform them. Indeed, in granting an injunction suspending the layoffs, a federal judge found that by eliminating “entire offices and programs,” McMahon had “made it effectively impossible for the Department to carry out its statutorily mandated functions.”
The Supreme Court later stayed that injunction, allowing the layoffs to go into effect as the case moves forward. Even if the lawsuit eventually succeeds and the administration is forced to rehire the fraud investigators, it’s hard to imagine the McMahon regime aggressively enforcing the law. The Trump higher-education agenda is far more focused on persecuting elite research universities. The dismantling of the fraud-enforcement unit is the Trump approach to governance in microcosm: chaotic, seemingly illegal, and the reverse of what someone who truly cared about protecting taxpayer money would do. It’s now open season on students who are susceptible to false promises about college—something that the president, whose Trump University real-estate-seminar business paid a $25 million settlement to former students, knows a great deal about.
The layoffs have come as the Trump administration has begun executing the One Big Beautiful Bill Act. Notably, the law does not abolish the U.S. Department of Education. In fact, it includes new provisions that the department will have to implement. It allows students, for the first time, to use their Pell Grants to pay for job-training courses as short as eight weeks, start to finish. These kinds of classes, which tend to get advertised at bus stops and on late-night basic cable, have already been rife with abuse. Extending Pell Grant eligibility for them now, after terminating the people in charge of preventing that abuse, is all but guaranteed to have ugly results.
The law also penalizes colleges that offer programs whose graduates don’t earn much in the job market. This is a reasonable idea that could force reputable colleges and universities to take more responsibility for the quality and price of their offerings. But the provision doesn’t apply to undergraduate certificate programs, whose graduates are 10 times more likely to fall beneath the earnings threshold. And it will require teams of data analysts and lawyers to implement—that is, exactly the people whom McMahon just fired.
Meanwhile, the people who make a living off of unsuspecting college students are lying in wait. Carrie Poole has rebranded PCTI as the “Agri-Tech eLearning Institute,” whose slick website touts its “impressive and strong history spanning over a decade.” The website includes extensive information about federal student-aid programs that students legally cannot use to attend Agri-Tech (a disclaimer on another page notes that “Agri-Tech eLearning Institute does not offer or participate in federal financial-aid programs”), and invites people to “unlock a better future today.” (Agri-Tech did not respond to requests for comment.)
The U.S. Department of Education used to employ people whose job was to stop this kind of thing before it started. Right now, almost all of their desks are empty.
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