Proposed legislation meant to make things easier for US universities and staff affected by Hurricane Katrina has created opportunities for profit-making proprietary schools.
Senate Bill 1715 removes a safeguard meant to prevent for-profit providers from receiving federal financial aid for students if they teach more than half of their courses online rather than face-to-face.
The restriction was imposed in response to concerns over low-quality correspondence courses and their potential for fraud.
Sponsors of the new bill, including Senator Edward Kennedy, say the idea is to make it easier for Katrina victims to continue their studies.
Last month, The Wall Street Journal reported that mainstream universities and for-profit companies were "scrambling" to teach more than 10,000 college students displaced by the hurricane.
However, critics complain that the inconspicuous provision, first reported by The New York Times , is a back-door route to taxpayer dollars for unscrupulous private institutions, several of which have been caught lying to prospective students about job-placement rates and accepting unqualified applicants who fail to graduate but still end up thousands of dollars in debt.
The change would lift the current restriction on for-profit schools receiving $20,000 (£11.300) or more each year for students eligible for government financial aid.
A separate proposal in the House of Representatives would require conventional universities to accept transfer credits from proprietary schools.
Higher education organisations, including the American Association of Collegiate Registrars and Admissions Officers, have lodged protests.
"When diploma mills and fraudulent credentials are becoming a national and international security problem, Congress should be strengthening, not undermining, the ability of colleges and universities to control the award of their own credentials," said Jerome Sullivan, the association's executive director.
Senator Kennedy said in a statement that his intention was to help students affected by Katrina continue their studies while their home universities remain closed.
He said he would revise the provision to make sure that only those proprietary schools enrolling victims of the hurricane would be eligible for federal tuition money.