Senate Panel Gives For-Profit Colleges An 'F'

Renee Montagne talks with Democratic Sen. Tom Harkin of Iowa about what can be done to regulate for-profit colleges' alleged abusive recruitment policies and high dropout rates. Harkin heads the committee that conducted a two-year investigation into the colleges — and issued a scathing report Monday.

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RENEE MONTAGNE, HOST:

It's MORNING EDITION from NPR News. I'm Renee Montagne.

We've been hearing a lot about for-profit colleges, recently. Now a scathing, new report is out. It's based on a two year investigation by a Senate committee. It found that students at for-profit colleges leave with high debt loads, even though a large percentage don't even complete two year degrees. The report also shows that for-profits spend more than 40 percent of the money that comes in on recruiting students and marketing the schools. They spend less than half that amount on actually teaching students.

All of which is troubling to Tom Harkin, the Democratic Senator from Iowa, who heads the committee behind the investigation - because, he says, most of the money for-profit colleges make, comes from government-funded student loans and grants, plus the new GI Bill. In other words, taxpayer dollars.

SENATOR TOM HARKIN: That money coming in is both Pell Grants and also what we call Stafford Loans, or federal loans, to these students. These schools then take the Pell Grants and the loans, they use them for marketing and recruiting more students, then the student drops out - as we pointed out, about 50 percent drop out within a year - and the school keeps the money and the student has the debt.

MONTAGNE: What do you say, though, to those who have responded from the for-profit colleges, that this report is outdated? At least one spokesperson for one of the larger groups - that's the University of Phoenix - has said that they're working with veterans organizations, now, to make sure that there are no abuses.

HARKIN: Some of the bigger schools are beginning to make some changes, and that's very welcome. But a lot of the schools aren't. And here's a fear that some schools may want to start doing the right thing, and being more responsible and putting more money into students, but then some schools won't. And then you continue to have this race to the bottom, because the good schools will be put at a competitive disadvantage.

MONTAGNE: Now, the Obama administration has been trying to regulate for-profits, but earlier this month a judge struck down a key provision in a proposal aimed at stopping for-profits from saddling students with huge debts and not giving them the education they need to get a job. What would the next move be, given that you've got some tough opposition on the Hill to regulating these schools?

HARKIN: Well, if we're going to give Pell Grants out and direct government loans, we need to know how every student with an I.D. number is doing. We've got to make it very clear that federal money is spent on education, not advertising, not recruiting, not lobbying.

We need to make sure these schools are providing student services that will give these at-risk students a fair shot at completing their education. That's mentoring, tutoring, employer partnerships, career counseling - all the way through. And we need to think, seriously, about outcome-based thresholds, especially for these colleges that get a huge amount of revenue from taxpayers.

MONTAGNE: Well, let me just ask you, though, some Republicans in Congress who support for-profits as a good free market idea and a good way to reach nontraditional students, I gather, were upset that this focused only on for-profit colleges when quite a few tax dollars are being put into local community colleges, as well, very directly, and this didn't scrutinize them.

HARKIN: The reason we were focusing on the for-profits is because of what's happened in the last 10 years. Enrollment grew from 760,000 to 2.4 million. The amount of Pell Grants that started going to these colleges, skyrocketed. And what we saw was that about 83 percent of all the money going to the for-profits came from federal taxpayers. Plus, the amount of profits they were making, plus, all of the stories we were hearing of students who were getting Pell Grants, getting loans, dropping out.

I mean, look at it this way. The for-profit schools take in about 10 to 12 percent of all the students of higher education. They get 25 percent of the Pell Grants and they account for over 50 percent of the defaults. Right away, you look at that and you say something isn't right here. And I can tell you it is not right. Something needs to be done here.

MONTAGNE: Thanks, very much, for joining us.

HARKIN: Thank you, Renee.

MONTAGNE: Iowa Senator Tom Harkin chairs the Senate committee on health, education, labor and pensions. It's just completed a two year investigation into for-profit colleges.

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