A two-year congressional investigation lays bare the for-profit college industry’s strategy: Recruit vulnerable students to tap into billions in federal financial aid; spend little on instruction and counseling; leave students with crippling debt and little chance of landing a job.
The Senate Committee on Health, Education, Labor and Pensions, led by Iowa Democrat Tom Harkin, examined 30 companies and came away with a scathing indictment of an industry that preys on low-income students, veterans and taxpayers.
You will find overwhelming documentation of exorbitant tuition, aggressive student recruiting and abysmal student outcomes, Harkin said. These practices are not the exception. They are the norm.
Some key findings:
Taxpayers invested more than $32 billion in the for-profit companies in a recent year, yet more than half of the students who enrolled left without a degree or certification.
Ninety-six percent of students at for-profit schools took out loans, compared to about 13 percent in community colleges and 48 percent in four-year public colleges.
The for-profit sector accounts for only about 13 percent of enrollment nationally, but nearly half the loan defaults.
The 30 companies investigated spent $4.2 billion on marketing and recruiting, or 22.7 percent of all revenue.
The publicly traded companies had an average profit margin of 19.7 percent, generated a total of $3.2 billion in pre-tax profit and paid an average of $7.3 million to their chief executive officers in 2009.
For-profit colleges collect the largest share of military education benefits: 37 percent of GI bill benefits and 50 percent of Department of Defense Tuition Assistance benefits in the most recent reporting period. Because of the cost of the programs, however, they trained far fewer students than public colleges.
The companies investigated include some that have become giants in the education industry: Apollo Group, which operates the online University of Phoenix programs; Education Management Corp, which operates Brown Mackie Colleges; and Kaplan University, owned by the Washington Post.
ITT Educational Services, which is based in Carmel and operates ITT Technical Institutes in 38 states, received especially harsh criticism in the report, which charges that ITT employs some of the most disturbing recruiting tactics among the companies examined.
(ITT) devotes the largest share of revenue to profit of any (for-profit education) company analyzed at 37 percent, according to the study, Taken together, these issues cast serious doubt on the notion that ITT’s students are receiving an education that affords them adequate value relative to cost, and calls into question the $1.1 billion investment American taxpayers made in the company in 2010.
Harkin is seeking additional regulation, but he acknowledged that election-year tension and an impending budget stalemate will likely prevent its approval.
If nothing else, this report has put the nation on notice that there’s a problem here, said Sen. Richard Blumenthal, D-Conn. When someone walks into an office or a veteran is approached on a base, they’re going to be a little bit more aware and wary.
Buyer beware always is good advice, but the taxpayers’ stake in for-profit education demands that Congress do more than make potential students aware of the for-profit colleges’ tactics. In a time of soaring budget deficits and chronically high unemployment, it is unconscionable to allow the companies to continue pocketing billions.