08/02/2012

Report details troubling practices at for-profit colleges

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A two-year investigation by the Senate Health, Education, Labor and Pensions Committee of the for-profit higher education industry has found widespread problems throughout the sector. Sen. Tom Harkin (D-Iowa), committee chair, released an exhaustive report on July 30.

In thousands of pages of "overwhelming documentation," said Harkin at a press conference, the report provides evidence of "overpriced tuition, predatory recruiting practices, sky-high dropout rates, billions of taxpayer dollars spent on aggressive marketing and advertising, and companies gaming regulations to maximize profits."

The AFT has long been concerned about the financial and educational impact of profit-driven education companies on unsuspecting students who are heavily recruited to sign on the student loan dotted line. (See AFT resolution.) "It's criminal, really," says AFT Washington president Sandra Schroeder, who is an AFT vice president and chair of the AFT Higher Education program and policy council. She has taught English at Seattle Central Community College.

"I know from personal experience that these kids are sold such an unrealistic dream by recruiters that reputable financial aid officers, if they try, cannot convince them not to take on a huge debt," Schroeder says. "More often than not, students leave these schools without a degree, saddled with high debt, and lacking the ability to get a job that will earn them enough money to pay back their loans."

Among the report's findings:

  • Taxpayers are investing more than $30 billion a year in companies that operate for-profit colleges. Among the 15 publicly traded for-profit college companies, income from federal financial aid, Post-9/11 GI Bill benefits and Department of Defense Tuition Assistance funds accounted for 86 percent of revenues.
  • Tuition at the for-profits is much higher than at traditional nonprofit institutions. For B.A. degrees, the cost was 19 percent higher than at flagship public universities. Both associate degrees and certificates cost four times more at for-profit two-year institutions than at public nonprofits.
  • The Senate committee interviewed former employees and sought undercover investigations through the Government Accountability Office to expose aggressive, misleading and emotionally exploitative recruiting practices.
  • The committee studied 30 companies in 2009 and found that they devoted 22.4 percent of all revenues to marketing, advertising, recruiting and admissions staffing; 19.4 percent to profit; and only 17.7 percent to instruction. The average CEO salary was $7.3 million.

"These practices are not the exception—they are the norm," Harkin said. "We need real, bold legislative reforms" so that for-profit companies will "demonstrate success for students, not just shareholders."

The full report is available online. [Barbara McKenna]

August 2, 2012