[1]For-profit colleges are failing their students and saddling taxpayers with an enormous bill, a two-year investigation by the Senate education committee’s Democratic staff concluded.
The harsh report, released July 30 by the committee’s chairman, Sen. Tom Harkin, D-Iowa, found that federal taxpayers spent $32 billion on for-profit colleges in 2009-10, while more than half of the students who enrolled in them dropped out without a degree after about four months in 2008-09.
“In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation,” Harkin said. “These practices are not the exception—they are the norm.”
Steve Gunderson, president of the Association of Private Sector Colleges and Universities and a former GOP congressman, said the report “twists the facts to fit a narrative, proving that this is nothing more than continued political attacks on private sector colleges and universities.”
Republicans on the Senate Health, Education, Labor, and Pensions Committee, which is controlled by Democrats, also criticized the report for using biased information and failing to include Republican input, raising “substantial doubt about the accuracy of the information.”
The report linked the high dropout rates with a lack of money spent on instruction at for-profit colleges, finding that, in 2010, the 30 for-profit colleges examined employed 35,202 recruiters compared with 3,512 career services staffers. The companies examined in the report spent 42.1 percent of their revenue on marketing, recruiting, and profits, while spending only 17.2 percent on instruction.
More than 80 percent of the revenue at for-profit colleges came from federal financial aid, Harkin said.
“It’s plain common sense that taxpayer dollars should not be used for lobbying,” he added.
Gunderson said for-profit colleges deal with a unique constituency—comprised mainly of working adults, parents, and veterans—that can be reached only through marketing and recruiting. To ban the use of revenue for lobbying would “result in the end of private sector colleges and universities,” he said.
But many recruiters mislead prospective students about the cost of the program, the availability of federal aid, the job placement rate, and the transferability of credits, the report found.
The Department of Education estimates that 96 percent of students at for-profit colleges take out loans, a much higher percentage than students at community colleges, four-year public universities, and nonprofit private colleges. Students at for-profit colleges account for 13 percent of the nation’s college enrollment, but 47 percent of all federal student loan defaults.
The report concluded that significant reforms are needed to ensure that for-profit colleges succeed financially only when students also succeed and that taxpayer dollars are used for educational purposes.
In early July, attempts by the Education Department to penalize for-profit colleges whose graduates ended up with huge debts and low job prospects were struck down by a federal judge.
For-profit colleges can still lose federal student aid if more than 90 percent of their revenue comes from federal sources or their students have high loan default rates in the three years after graduation.
Democratic members of the committee called for legislation to better regulate for-profit colleges, including adding new rules to the Higher Education Act, which is scheduled to be reauthorized next year.
“If nothing else, this report has put the nation on notice that there is a problem here,” said Sen. Richard Blumenthal, D-Conn.
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