Where do for-profit colleges get the money they spend on all those highway billboards and television and radio ads?
Mostly from the government, at least indirectly. Federal money, most of it through the financial aid that students get, accounts for up to 90 percent of for-profit colleges’ revenue — even more in some cases if veterans attend the school on the GI bill.
And while figures vary, some institutions spend a quarter or more of their revenue on recruiting, far more than traditional colleges. In some cases, recruiting expenses approach what these institutions spend on instruction.
A recent Senate report on 15 large, publicly traded for-profit education companies said they got 86 percent of their revenue from taxpayers and have spent a combined $3.7 billion annually on marketing and recruiting.
Sen. Tom Harkin, D-Iowa, says the connection is clear: “Their marketing budgets are funded by taxpayers.”
On Wednesday, Harkin and Kay Hagan, D-N.C., introduced a bill to try to check the flood of advertising, which has particularly targeted Iraq and Afghanistan veterans for the benefits they receive under the new GI Bill. The measure would prohibit colleges of all kinds from using dollars from federal student assistance programs, including the GI Bill, to pay for advertising and recruiting.
The bill would extend a current rule that prohibits federal dollars from being used for lobbying — though the lobbying budgets of for-profit colleges are tiny compared to what they spend on advertising.
“Today we are sending a strong message to colleges that choose to spend federal dollars on advertising at a time that middle-class students and families are struggling to get ahead: Find the money for marketing elsewhere, not from taxpayers,” said Harkin, chairman of the Senate Committee on Health, Education, Labor and Pensions.
The bill faces daunting odds in Congress. But it represents a new tactic in recent efforts by some in Washington to curb aggressive marketing tactics by for-profit schools, particularly toward veterans.
Military veterans are particularly attractive recruiting targets because they come with generous federal tuition support and also don’t count toward a limit called the “90/10” rule, which requires colleges to get at least 10 percent of their revenue from non-federal sources.
The proposal would forbid GI Bill dollars from being used in marketing, along with funds from other forms of federal student aid such as Pell Grants.
The rule would apply to colleges of all kinds but would mostly affect for-profits. While not-for-profit colleges do more and more advertising and recruiting, Senate backers cited a study showing such expenses typically total no more than 1 percent or revenue. Those colleges also typically get much lower proportions of their revenue from federal student aid, so they wouldn’t be constrained.
However, colleges generally resist any efforts from Washington to tell them how to spend their money — so opposition from traditional universities will make the bill even more of a longshot.