Report blasts for-profit colleges

Jul 31 2012 - 1:24pm

WASHINGTON -- A new federal report on for-profit colleges blasts the industry for recruiting too aggressively, spending more on marketing than teaching, producing too few graduates and charging significantly higher tuition than comparable public schools.

The 5,000-page report, released last week, also criticized the profit-making schools for tying salaries to recruitment and for giving prospective students unrealistic impressions of potential post-graduate employment and earnings.

The report was issued after a two-year audit by the Senate Committee on Health, Education, Labor and Pensions. Its chairman, Rep. Tom Harkin (D., Iowa), has long been concerned that such companies put profits ahead of students.

"This is a failure, an abject failure," Harkin said in releasing the report.

The committee held six hearings and reviewed thousands of internal documents from 30 for-profits.

About 80 percent of for-profit schools' funding comes from federal Pell grants and Stafford loans, totaling more than $32 billion a year.

The report found students are ill equipped to repay their loans because most fail to complete their degree programs, while others graduate to find only low-paying jobs in the fields they studied.

Default rates are 22.5 percent for students at for-profit schools, compared with 9 percent for students at other schools, and their loans are typically more because tuition is higher.

An associate's degree in Web design and interactive media from the for-profit Art Institute of Pittsburgh, for example, costs $47,410, according to the report. Community College of Allegheny County offers the same degree for $6,800.

Instead of holding the line on tuition, Harkin said, for-profit colleges pay their executives high salaries, invest heavily in recruitment, and amass profits to satisfy investors. On average, they spend 17 percent of their budgets on instruction, 42 percent on marketing and profit, and 41 percent on other expenses, including executive compensation packages that run as high as $40 million a year.

"The student has debt around his or her neck that they can't discharge in bankruptcy, they don't have a degree to show for it, and they're worse off than when they started," Harkin said.

For Sen. Richard Blumenthal (D., Conn.), the story is about more than money.

It's about "dreams destroyed and the crippling debt on the part of students whose hopes and vision for the future has been literally decimated by the hype and pitches and promises made deceptively by many of these institutions," he said.

Taxpayers' investments in federal aid are being squandered, he said. "We must hold colleges accountable, and we must ensure that students and taxpayers are seeing a return," Harkin said.

Until that happens, for-profit schools are doing "real, lasting harm to the students that they enroll," he said.

Harkin has a recipe for reform. He wants Congress to require schools to provide progress reports for every student receiving federal aid, ban them from spending federal money on marketing and lobbying, and require them to offer student services including career counseling.

(Contact reporter Tracie Mauriello at

(Distributed by Scripps Howard News Service,



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