Durbin: Congress Must Take Steps to Curb Exploitative Practices at For-Profit Colleges

CHICAGO, IL—(ENEWSPF)—August 31, 2010.  The for-profit colleges that have raked in federal dollars while leaving students poorly trained and drowning in debt have flourished, in part, because of a lack of federal oversight, U.S. Senator Dick Durbin (D-IL) said today at a forum he hosted in Chicago.

Durbin was joined by Michelle Zuver, a former student at Westwood College; Denise Parnell, a former student at the Illinois School of Health Careers; Chef William Reynolds, Provost, Washburne Culinary Institute, Kennedy King College; Daniel Hamburger, President and CEO, DeVry, Inc.; Dr. Wade Dyke, President, Kaplan University; Gary McCullough, President and CEO, Career Education Corporation; Dr. Girard Weber, President, College of Lake County; and Dr. Al Bowman, President, Illinois State University.

“While responsible for-profit colleges offer a valuable alternative to students, there are too many schools taking advantage of students and making money hand over fist,” Durbin said. “Some for-profit colleges are spending a quarter of their revenues on marketing and recruiting, and up to 90 percent of those revenues come from federal funding. We need to consider whether it is wise for companies to profit so handsomely on federal funding when the results don’t match the investment. And we need Congressional action to rein in abuses and ensure that taxpayer dollars are being wisely spent.”

Many students turn to for-profit colleges because they offer flexible schedules and online coursework. The industry is growing rapidly, fueled largely by Pell Grants and federal student loan dollars. While for-profit schools enroll just 10 percent of all students in higher education, they receive 25 percent of all federal financial aid. The industry as a whole received $20 billion in student loans and $4 billion in Pell Grants from the federal government last year. As of 2008, the 14 publicly traded companies in the industry enrolled 1.4 million students, a 225 percent increase over the past ten years.

The vast majority of for-profit colleges see 75 to 90 percent of their revenues coming directly from the federal government. The amount of revenue that can come from federal student loans and Pell Grants is capped at 90 percent, but many schools are lobbying for that cap to be removed.

According to the Department of Education, for-profit colleges are the only type of school where the majority of students are unable to repay on the principal of their student loan—only 36 percent of former students are in repayment. In addition, for-profit colleges cost five times more than public two-year colleges and twice as much as public four-year universities on average.

Many for-profit colleges engage in aggressive student recruiting, spending barely half of their revenues on education and nearly one-third on recruiting and marketing. According to a recent investigative study conducted by the Government Accountability Office, recruiters at all 15 for-profit colleges studied purposefully misled potential students about the costs, duration, and quality of their programs.

“Students, especially low-income students, come to these colleges in droves, lured by promises of high-paying careers, flexible courses, and easy financial aid. But when they enroll, they may find that far less money is put into educating them than on recruiting them. And if they do leave with a degree or certificate, they may find that it is basically worthless,” Durbin said.

During the forum, Durbin proposed:

·      Having for-profit colleges bear some of the risk on student loans so that if a student defaults, the taxpayers aren’t left footing the bill;

·      Requiring schools to provide more complete information regarding real costs, accreditation, completion rates, and job placement rates so that students can make informed decisions and aren’t burdened with debt without the skills and credentials necessary to succeed;

·      Putting an end to the practice of companies acquiring accreditation simply by purchasing non-profit, accredited colleges;

·      Examining the amount of federal funding being spent by for-profit colleges on marketing campaigns, including billboards, television commercials, and advertisements.