Senate For-Profit College Hearing Aims to Curb Massive Abuses

Sen. Tom Harkin (D-Iowa), chairman of the Health, Education, Labor and Pensions Committee, plans to hold a hearing on for-profit colleges June 7, but Republican committee members say they won't be attending. The hearing is called "Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges" and will feature testimony from the U.S. Secretary of Education, higher education consultant Sandy Baum, and three other panelists.

Harkin wants to see strict rules put in place to stop abuses in the for-profit college industry. Sen. Michael Enzi (R-Wyoming) said in a letter on behalf of committee Republicans that rising education cost, debt and student outcomes are problems in all higher education sectors and suggested that selective focus on the for-profits is unfair.

What's at stake? About $24 billion in taxpayer funds annually. That's how much the government provided to students to attend for-profit colleges in 2008-2009.

Harkin's goal to rein in for-profit colleges doesn't go far enough. For-profit colleges should be excluded from participating in the federal student financial assistance programs altogether, and here's why:

* Industry-wide, these schools are not a good investment for the taxpayers. While quality of schools and programs vary, the for-profit model primarily serves corporate investors raking in profits, rather than students or taxpayers. How do I know this? Seven years working as an attorney for the U.S. Dept. of Education on postsecondary matters provided me intimate familiarity with postsecondary education funding and the constituency it serves.

* Students signing up at for-profit colleges take on more debt than students in any other postsecondary sector. Ninety-six percent who graduate from for-profits incur debts averaging about $33,000 compared to 72 percent of private college graduates shouldering average debts of about $28,000 and 62 percent of public university graduates taking on $20,000 in debt (2008 data). There is no corresponding higher payoff.

* This sector is responsible for 44 percent of student loan defaults, even though its enrollment share is 7 percent (2007 three-year cohort default data).

* Alarming numbers of students in the for-profit sector leave school debt-ridden without graduating.

* Federal funds channeled into the for-profit sector disproportionately line the pockets of owners of grossly-underperforming schools. One-sixth of the total amount of federal student financial assistance funds going to for-profits is taken in by one chain alone, University of Phoenix. For the $4.3 billion taxpayers send its way, Phoenix graduates only 9.9 percent of its first-time undergrads and 36 percent of its certificate program enrollees overall. This is not a sound investment for the American taxpayer.

* Although called "colleges" and "universities," many for-profits offer typical trade-school fare designed to train beauticians, masseurs, health care aides, dental assistants, and auto mechanics. Training programs that were of relatively short duration and far cheaper than college suddenly expanded and soared in cost when for-profit schools gained access to federal student financial assistance funds. They now cost many times more than similar programs offered by community colleges. These programs can be delivered more effectively and cost-efficiently to the students who aspire to them than by funneling federal funds through proprietary schools.

* The profit motive pushes the industry to enroll virtually anyone they can sign up, without regard to the students' sincere interest in the program or ability to succeed in it.

Would some good schools lose access to federal funds if Congress banned for-profits from participating in federal student financial aid programs? Undoubtedly a fraction of the $24 billion finding its way to for-profit schools funds education of value. But just because someone slaps an education label on an enterprise doesn't mean the American taxpayers have to foot the bill. No business has an inherent right to profit from taxpayer funds, not even a good one. The $24 billion funding these companies' corporate profits could be better allocated elsewhere.

It would take extreme political courage for Congress to exclude for-profits from participating in federal student assistance, and it isn't like to happen. A key reason is the vast lobbying expenditures by the for-profits- $8.1 million in 2010- and the influence that wields on Capitol Hill. Harkin's proposed curbs may turn out to be the next best thing.