Senate Committee Further Scrutinizes For-Profit Industry
Thursday the Health, Education, Labor, and Pensions (HELP) Committee in the Senate met to talk about behaviors of private for-profit colleges and universities. Sen. Tom Harkin (D-Iowa), also released an analysis that showed the industry has expanded drastically in recent years, racked up record profits, and its students have withdrawn from programs in short periods of time at alarming rates.
The HELP Committee's report, which was an analysis of 16 for-profit higher education institutions, was titled "The Return on the Federal Investment in For-Profit Education: Debt Without a Diploma" and found some interesting things:
- The median attendance time for students at these schools during the 2008-09 school year was 20 weeks, meaning that many students may have secured grants and loans when they enrolled in the institution only to leave after 5 months without a degree and piles of debt. Of the 15 associates degree programs they evaluated (one did not offer such a program), 12 had withdrawal rates higher than 50 percent. Two others had rates between 40 and 50 percent.
- More than 95 percent of students at a two-year for-profit institution took out student loans in 2007 and 93 percent of four-year for-profit students did. Compare that to the just 16.6 of community colleges students who took out student loans and the 44.3 percent of public four-year students who did. For-profit students were also far more likely to obtain risky private loans that generally come with adjustable interest rates and fewer consumer protections
- Eight of the schools evaluated by the HELP committee had more than doubled the amount of Pell grants they received between 2006 and 2009. In fact, according to Harkin during the hearing, though for-profit students only make up a total of 10 percent of all students receiving federal money, they receive more than 25 percent of all federal dollars spent on Pell grants and loans.
- The 16 companies boasted profits of more than $2.7 billion in 2007. One company reported doubling its profits between fiscal year2009 and 2010, from $119 million to $241 million. Federal dollars accounted for 87.4 percent of 2009 revenues.
The Department of Education's regulations were designed to increase scrutiny on the for-profit industry in hopes of curbing the large amounts of debt the students currently incur. Schools would have to meet specific targets of debt-to-expected earnings ratios and shut down programs that had default rates that were too high. The for-profit industry has called the new regulations unfair because their industry serves low-income students. Their default rates are high, they say, because of the community they serve and not because of any specific practices or policies on their part.
But president of The Institute for College Access & Success (TICAS), Lauren Asher, testified before the committee that even controlling for factors like race and class, the for-profit industry still has default rates out of proportion to other schools:
The Career College Association's own study concludes that even after accounting for the differences in student demographics, students attending for-profit colleges are twice as likely to default as students of other types of colleges.
Additionally, Asher testified that some colleges lend their own money to students to help cover tuition, expecting not to get paid back:
Some for-profit colleges are aggressively expanding their own private lending to students who are at very high risk of default … Corinthian Colleges, Inc. made $150 million of such loans in the fiscal year that ended this June, as well as $120 million the year before. They fully expect a shocking 56 to 58 percent of the borrowers to default. Yet they consider these loans to be good investments because they will increase enrollment and with it a profitable flow of federal grant and loan dollars that outweighs the planned write-offs.
That's not the only questionable practice presented at the hearing. Stephen Burd over at Higher Ed Watch previewed the testimony of a for-profit whistleblower at the hearing. Kathleen Bittel, of the Education Management Corporation (EDMC) noted it was standard practice during her time as a councilor for them to doctor reported salary earnings of graduates:
Early on in my employment with career services, a co-worker showed me how to manipulate information received from a student, to ensure that the student could be listed as "gainfully employed" for the purposes of the company's statistics. This same co-worker later came to me exhibiting two documents: one was a signed Employment Verification form from the graduate saying they were working in their field earning $8,000 a year, the other a printout from salary.com estimating the average salary in that field and in their zip code would be $25,000, which would meet the salary threshold of $10,500 to justify marking them as employed in their field. "Which one do you think I’m going to turn in?" they laughed as they tossed the graduate's document in the trash and entered the salary.com data into the student's file. These kinds of actions were not discouraged by managers.
The room in the Dirksen office building was filled with investment firm representatives, consultants, and lobbyists, as well as a few higher education think tank and advocacy folks.
But noticeably absent were the 1,000 students that the Association of Private Colleges and Universities (APSCU) brought to Capitol Hill the previous day to rally against the proposed regulations of the for-profit industry. APSCU, formerly known as the Career College Association, opposes the Department of Education's proposed regulations that would specify acceptable debt-to-expected earnings ratios and default rates in order to receive federal Pell grants and subsidized student loans for particular programs. But no students testified in favor of the regulations at the hearings.
Perhaps because students don’t actually seem to know what the regulations do, or perhaps they just didn’t want students hearing the other information about ways the for-profit industry is conducting its business.
Kay Steiger is the editor of CampusProgress.org.
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