Harkin also pointed out that large for-profits receive almost 90 percent of their revenues from federal taxpayer dollars, 23 percent of all federal student aid money. He said that in 2009, for-profit colleges received $18 billion in guaranteed student loans.
Meanwhile, 57 percent of students who enrolled in 2008-2009 departed without a diploma and with a high probability of debt. Students at for-profits make up about 10 percent of all college enrollment but account for almost 50 percent of all loan defaults.
The lawmakers heard from Eric Schmitt, who after obtaining a paralegal bachelor’s degree at an Iowa career school found himself $45,000 in debt and without a job despite promises of a 100 percent placement rate in his field.
But Harris Miller, president of the Association of Private Sector Colleges and Universities, an industry group, told The Associated Press that Harkin “has always exaggerated the size and dimension of the problem” and “only invited witnesses who are ideologically opposed to what we do.”
He said the default rate at career colleges is no different from that of other institutions serving low income people and minorities and that graduation rates surpassed those of community colleges.
He denied that career colleges were making money by pressuring students to take out high-interest loans. “We don’t want to be in the lending business,” he said. “We don’t make money.”
Harkin, addressing Education Department undersecretary Martha Kanter, said the new rules issued last week were “better than nothing,” but noted that the stock prices of the companies owning the schools soared after the rules were announced.
Under the rules, schools will only be able to receive federal money if at least 35 percent of their former students are repaying their loans.
Under the original plan, schools could have lost their federal loan eligibility immediately for not meeting criteria, but the final rule was softened to give schools multiple chances over a four-year period to improve their statistics.