This is a
shame, because many for-profit colleges offer innovative alternatives for
students juggling work and family obligations. They could be a valuable part of
our higher education system if they work for students rather than CEOs and
shareholders. Regrettably, an ongoing investigation by my committee has exposed
an industry marked by widespread deceptive recruiting practices, overpriced
programs, huge profits and staggering debts for the most vulnerable students.
Just as subprime lenders used the promise of homeownership
to lure Americans into loans they couldn’t afford; for-profit colleges are
using the promise of higher education to convince students to take on large
debts without providing the promised education or economic advancement. An
undercover General Accountability Office investigation that I requested as
committee chairman found all 15 schools they visited this spring were using
deceptive recruiting practices to convince students to enroll.
Our
investigation has revealed that for-profit colleges are often much more
expensive than comparable public schools, guaranteeing that almost every
student takes out loans. The average tuition at a for-profit institution is six
times that of community colleges and about twice that of public four-year
schools, leading 95 percent of for-profit college students to borrow to attend
school, compared with just 16 percent of community college students. For-profit
colleges account for only 10 percent of higher education students, but account
for 23 percent of federal student loans and 44 percent of loan defaults.
The
committee has documented that, at 16 large for-profit schools, 57 percent of
students who enrolled in 2008-2009 had dropped out — most within
four-and-a-half months. At the largest for-profit school, more than 64
percent of those seeking an associate’s degree dropped out within a year and
averaged only a four-month stay. Because for-profit colleges continually lose
so many students, they must aggressively enroll tens of thousands of new
students throughout the year in order to keep their enrollment levels up and
the federal subsidies rolling in.
Meanwhile,
for-profit institutions are raking in record profits despite their dismal
student success rates. Profits at 16 of the largest for-profit schools totaled
$2.7 billion in 2009. Although it defies logic, these profits are
overwhelmingly drawn from taxpayer dollars intended to support student success.
More than 87 percent of revenue at the 14 largest schools comes from taxpayer
dollars.
CEOs at
for-profit education companies are rewarded with mega-million-dollar,
taxpayer-funded salaries, even as the low-income students targeted by these
schools struggle with staggering debts. For example, Strayer, a chain of
for-profit colleges that receives three-quarters of its revenue from U.S.
taxpayers, paid their chairman and CEO $41.9 million last year. That’s nearly
60 times the compensation of Harvard’s president.
Despite
their huge profits, investments in actually educating students take a back seat
to non-education expenses at for-profit colleges. Eight large schools devoted
nearly 50 percent of their spending to marketing, recruiting and non-education
expenses, and their investments in expensive and manipulative marketing campaigns
are paying off. The largest for-profit school reports current enrollment of
458,600 — larger than the undergraduate enrollment of the entire Big Ten
conference.
What is
the bottom line, here? The for-profit higher-education industry is rife with manipulative
and misleading marketing campaigns, educational programs far more expensive
than comparable public or non-profit programs and sky-high dropout rates. Yet
the industry is reaping huge profits, drawn almost entirely from taxpayer
dollars. Rather than invest the profits to improve student success, the schools
reward executives and invest in enrolling more new students. They churn through
a steady stream of new recruits, suck in billions in taxpayer dollars and leave
in their wake millions of former students with no degree but plenty of debt —
debt that is not dischargeable in bankruptcy.
My deep
concern is that while millions of subprime mortgage borrowers lost their homes,
millions of for-profit students stand to lose their future. In recent years,
inadequate federal oversight has allowed a dangerous bubble to grow in the
for-profit college industry. The challenge facing us is to crack down on the
abusive practices, while preserving the positive options and innovations that
many for-profit colleges have pioneered.
Sen.
Harkin is the chairman of the Committee on Health, Education, Labor and
Pensions.