Senate Report: For-Profit Colleges Exploit Students

A report released Monday by Senate Democrats says for-profit colleges exploit students with aggressive recruiting tactics, high tuition and low graduation rates. The report says some schools set tuition based on the level of government grants or raised the price for some courses if the school was not making enough profit on them. The report is the culmination of a two-year investigation.

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A Senate committee today released a scathing report on some of the nation's largest private for-profit colleges. It's the result of a two-year investigation and lists numerous abuses. The report looks specifically at the educational and business practices of an industry that is pocketing more than 30 billion taxpayer dollars a year.

NPR's Claudio Sanchez reports.

CLAUDIO SANCHEZ, BYLINE: In a news conference on Capitol Hill, Iowa Senator Tom Harkin called the problems and abuses among for-profit schools systemic throughout the industry. Among the most glaring problems...

SENATOR TOM HARKIN: The average dropout rate was almost 50 percent, some dropout rates as high as 67 percent.

SANCHEZ: Harkin, who was chairman of the Senate Health, Education, Labor and Pensions Committee, based his committee's investigation largely on internal documents from 30 of the biggest for-profit schools, including the University of Phoenix owned by the Apollo Group, and Kaplan owned by the Washington Post Company. Harkin's conclusion...

HARKIN: In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and profit, and regulatory evasion and manipulation. And these practices are not the exception. They are norm.

SANCHEZ: And because most students in for-profit schools - 96 percent - take out loans, many end up saddled with debt that they are unlikely to pay back. In many cases, students were misled about the true cost of their tuition, according to investigators. Students in for-profit schools represent 13 percent of the nation's total college enrollment, but account for almost 50 percent of all loan defaults.

For-profit industry schools say Harkin's allegation that for-profit schools are making tons of money by ripping off students and taxpayers is flawed and unfair.

STEVE GUNDERSON: I would welcome the senator to find any one of our schools that is making money this year.

SANCHEZ: Steve Gunderson, a former congressman from Wisconsin, is president of the Association of Private Sector Colleges and Universities whose members have spent millions in the last two years to counter Harkin's investigation.

Take the student loan default rate, says Gunderson. It's high because of the kinds of students that for-profit schools enroll.

GUNDERSON: We serve adults, single mothers, heads of household and people coming back to school, first generation college attendees. There's no question that we are serving a constituency that, for the most part, would otherwise not have a chance to get the education and skills that will give them a good job.

SANCHEZ: And as far as Senator Harkin's point that for-profit schools spend only 17 percent on instruction...

GUNDERSON: What he didn't tell you is the University of Iowa spends 16.2 percent.

SANCHEZ: The University of Iowa says that's wrong. It spends at least twice that. Still, Gunderson says Harkin's investigation did not scrutinize nonprofit and public colleges in the same way.

GUNDERSON: There is no reason that we should waste any amount of time, taxpayer dollars or effort on an attack on one sector of higher education.

SANCHEZ: Senator Harkin argues that the for-profit sector must be scrutinized more intensely because it's become so much more dependent on federal funding. Eight out of every $10 in revenues comes from public tax dollars. From 1998 to 2008, enrollment more than tripled to nearly two and a half million students. Harkin says what his investigation has done is put private schools on notice that, unless they clean up their act, Congress will do it for them.

Claudio Sanchez, NPR News.

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