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New Senate Report on For-Profit Colleges Shines Light on Troubling Industry

Senate report shows practices that cost billions while leaving students saddled with debt but without degrees

July 30,2012

New Senate Report on For-Profit Colleges Shines Light on Troubling Industry
WASHINGTON, DC – A new report released today by the Senate Committee on Health, Education, Labor, and Pensions (HELP) takes a hard look at the for-profit college industry and the troubling practices that cost taxpayers billions while leaving students saddled with debt but without degrees.

The final report, the culmination of a two year investigation by the Committee, found taxpayers are investing billions of dollars a year — $32 billion in federal student aid in the most recent year — in companies that operate for-profit colleges. Yet more than half of the students who enrolled in those colleges in 2008-9 left without a degree or diploma, oftentimes within a matter of months. Rather than investing in student support services, like career services, these for-profit institutions spend more on aggressive recruiting and boosting profit margins.

Consumers Union, the policy and advocacy division of Consumer Reports, praised the HELP Committee for their work and said the report confirmed the need for reforms in the industry.

“For-profit colleges are taking advantage of students and taxpayers alike at a financially vulnerable time for many families,” said Pamela Banks, senior policy counsel for Consumers Union. “These institutions promote the opportunity to advance your education and career and then leave students drowning with debt without the degree or experience to become a higher earner. We need to find ways to hold these for-profit colleges accountable and make sure that these expenses aren’t charged to the taxpayer’s tab.”

Legislation introduced by U.S. Sens. Kay Hagan (N.C.) and Tom Harkin (Iowa) would limit what activities for-profit colleges could use federal funds for. The Protecting Financial Aid for Students and Taxpayers Act, supported by Consumers Union, would require all colleges and universities to pay for advertising, marketing and recruiting with non-taxpayer dollars. According to the Senate Committee’s investigation, for-profit education companies spent an average of 23 percent of their revenue on ads, recruiting, and other marketing tactics. By comparison, nonprofit colleges spent an average of only one-half of 1 percent of their revenues on marketing, the senators said.

Banks said, “Schools should be focused on helping students, not their bottom line. This report underscores the need for Congress to protect students and taxpayers by passing this bill.”