When Corinthian Colleges, a national chain of for-profit colleges, went bankrupt last spring, students and taxpayers were left holding the bag. Though a federal judge recently found Corinthian liable for $531 million in damages for its illegal marketing and lending practices, the Department of Education failed to take effective action against the chain as it collapsed — indeed, the Department provided Corinthian with $35 million in new student aid money as it circled the drain.

That $35 million is gone forever, and the chances of anyone recouping the $531 million in damages are essentially zero. But even that figure is just the tip of the iceberg — the federal government backed some $3.2 billion dollars in student loans to Corinthian in just its final four years, much of which federal law entitles students to have forgiven in the wake of the chain’s closing. By one estimate, the government could wind up providing Corinthian’s alumni with as much as $3.5 in loan forgiveness by the time the whole mess is over.

How could this happen? Corinthian’s underhanded practices and shoddy finances were well-known long before the company collapsed, and the company had been the subject of multiple state and federal investigations in the years before it closed its doors. The Department of Education is supposed to be overseeing and regulating institutions like Corinthian, so why did the system break down so badly?

Regulating Too-Big-to-Fail Education, a new report by student debt expert Chris Hicks, finds that the ED’s regulatory tools, robust in principle, are not being used effectively to inform students, enforce compliance, or protect taxpayers from the effects of institutional failure. Just a few straightforward fixes, Hicks suggests, could save us all from the effects of future Corinthians.

One of the most powerful weapons the ED has against mismanaged and fraudulent colleges is something called the Financial Composite Score (FCS). The FCS is a rating of a school’s financial soundness — a college with an FCS above 1.5 is considered financially responsible, while a score below 1.0 is a major red flag. (An institution’s FCS score can range from -1.0 to +3.0.) An FCS below 1.5 is supposed to trigger special sanctions and oversight by the ED, specifically a requirement that the institution submit a letter of credit binding a significant percentage of its revenue as insurance against future defaults or sanctions.

Corinthian received a 0.9 FCS a full four years before it collapsed, but nothing was done. The institution was allowed to run out the clock on the finding, and the next year its FCS miraculously rose to 1.5, the exact number it needed to avoid ED action.

And as Hicks’ report shows, the problems with the FCS aren’t limited to lax enforcement. The FCS formula is outdated, arbitrary, and subject to gaming by institutions. In fact, many institutions are never given FCS scores at all, for reasons that remain unclear.

There’s more. FCS, because it only incorporates financial indicators of institutional health, ignores other warning signs. If the FCS was expanded to consider evidence of fraud, deception, or other malfeasance — and to allow the ED to force institutions to post letters of credit to hedge against risk of adverse outcomes in those areas as well — it would go a long way to giving the ED watchdog the teeth it so desperately needs. (To give you an idea of the scope of this problem, the New York Times recently reported that two dozen for-profit companies under investigation by state prosecutors currently operate a total of 152 colleges that receive $8.1 billion in federal grant and loan money last year.)

I could go on indefinitely — I’m by no means doing justice to the full scope of Hicks’ argument here — but that gives you a taste. If you’re interested in the subject, please read the full report.

It’s become increasingly obvious in recent years that we can’t fix higher education in the United States without fixing for-profit colleges. With fraudulent and mismanaged for-profits allowed to operate unchecked, students are being victimized while grant and loan money — taxpayer and student money — is being diverted away from more effective institutions. Legitimate higher education is being starved of funding. And perhaps worst of all, students — disproportionately poor, disproportionately at-risk students — are being left with worthless degrees or no degrees at all.

As Hicks writes, the Department of Education “has the authority and responsibility to take decisive action when it finds these schools are not responsible enough to continue to be trusted with billions of dollars from taxpayers and the livelihoods of the thousands of students enrolled at them.”

The time for such action is now.