WASHINGTON ñToday, Senator Tom Harkin (D-IA) testified before the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security at a hearing entitled “Preventing Abuse of the Military’s Tuition Assistance Program.”
Harkin, who is the Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, summarized the findings of the Committee’s investigation into the for-profit education sector, which has uncovered exponential growth in both enrollment and profits in their industry even as students drop out at an alarming rate with high debt. Specifically, Harkin highlighted the Committee’s report released in December detailing the massive growth in military education benefits flowing into for-profit colleges.
“[B]ecause of the high costs, high withdrawal rates, and high default rates among the general student population, combined with troubling stories I have heard from veterans, I am deeply concerned that that there is inadequate oversight of our nearly $30 billion in Federal aid to for-profit schools. At the beginning of this investigation I found an alarming lack of information on how much money the Department of Defense and the Veterans Administration were directing to for-profit colleges and how students at these institutions were performing. … I applaud this Committee for turning its attention to this issue as it pertains to the Department of Defense,” Harkin said.
For more information about the HELP Committee investigation into for-profit education companies, click here. To read the HELP Committee report titled, “Benefitting Whom? For-Profit Education Companies and the Growth of Military Educational Benefits,” click here. To date, Harkin has chaired three hearings into the for-profit college industry and released four reports.
Harkin’s full testimony as prepared for the record is below:
“Chairman Carper, Ranking Member Brown, members of the Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security, thank you for your attention to the important issue of safeguarding our federal investment in higher education, and for your invitation to be here today.
More than 75 years ago, the Federal Government embarked on an ambitious plan to provide education support to service members returning from World War II. The GI Bill was a spectacular success, helping to usher in a new era of American prosperity. Since that time, we have expanded our support beyond veterans, to also include active-duty service members and all Americans who seek to better themselves through higher education. On the whole, this has been a wise investment in our people and in our nation.
As Congress continues to invest in support for higher education, the question is: How do we ensure that students and taxpayers get what they deserve from institutions of higher education? Last summer, following growing media scrutiny about abuses at for-profit colleges, I began an investigation in the Health, Education, Labor and Pensions Committee to ensure our students are being well served, and that our taxpayer investment is resulting in the intended educational success and economic advancement.
Thus far the major findings of my investigation are that:
– As a sector, for-profit higher education has experienced disproportionate growth over the last ten years.
– That growth has been fueled by federal subsidies. The fifteen publicly traded for-profit colleges receiving 86 percent of their revenue from taxpayer dollars.
– As a result many of these companies have been extraordinarily profitable with return on revenues exceeding 30 percent.
– However just because schools are profitable, doesn’t mean students are succeeding. Nearly every for-profit student borrows a federal loan to attend college and 25 percent are defaulting within 3 years of leaving school as compared to 11 percent at public institutions and 8 percent at non-profit colleges.
The question before Congress is not whether for-profit colleges should exist, but how to make sure that they are doing their utmost to serve students and to give taxpayers good value for the dollar.
For-profit colleges have existed in our country for over a hundred years, primarily offering professional training and short-term degrees and certificates. The GI Bill marked the first time for-profit schools were made eligible to receive significant Federal subsidies. With this new source of revenue, for-profit schools set their tuition rates to the maximum amount of aid a GI was eligible for. There was significant growth in the for-profit industry as a result of the GI Bill, and the schools began to aggressively market their programs to veterans, in order to maximize revenue from the Federal Government. In the early 1970s, we would see schools repeat this behavior when Congress made for-profit colleges eligible to receive student loans and Pell grants.
Over the past two decades, the for-profit higher education industry has grown and evolved, bringing innovation to postsecondary education and expanding the number of students enrolled. In 2008, nearly two million students were enrolled in for-profit institutions to pursue everything from technical certificates to graduate degrees. Enrollment has grown by 225 percent over the past 10 years, and there have been tremendous increases in the numbers of students taking classes online.
The growth of for-profit colleges has been entirely dependent on generous Federal subsidies, including Pell grants, and Federal student loans, as well as military and veterans’ benefits. And while the for-profit share of enrollment has grown significantly, the sector’s share of Federal student aid dollars has grown even larger. In 2008, the sector enrolled approximately 10 percent of students but received approximately 23 percent of all Federal Pell grants and student loans ñ more than $23 billion.
The potential for rapid growth, combined with a large available pool of Federal subsidies, has made for-profit colleges an attractive prospect for investors. The challenge for these companies is how to satisfy their legal obligation to maximize profits for shareholders while still serving students. Unfortunately, some companies have prioritized enrollment growth and profit over student success.
For-profit colleges must spend a large percentage of their Federal dollars on aggressive marketing campaigns and sales staff to grow. The Government Accountability Office, which visited 15 campuses of 12 companies, found misleading, deceptive, overly aggressive or fraudulent practices at every one of those campuses. Investigators posing as prospective students were lied to about the cost of the program, about what they could expect to earn, about how many students graduated, about whether their credits would transfer, and about whether the program was accredited.
In addition, my Committee has reviewed recruitment training manuals from several different campuses and they all have one thing in common: manipulation. They encourage their sales staff to identify the emotional weaknesses of prospective students and to exploit what they call the student’s “pain” in order to motivate them to enroll. These high pressure sales tactics are designed to maximize enrollment and profits, not to ensure a good match between a student’s educational needs and the school. In my testimony, I provided some of these documents to the Committee.
Unfortunately, our military bases are by no means safe havens from these types of aggressive and misleading recruitment practices. According to a Bloomberg article on for-profit colleges and service members, some of the schools are recruiting on base without permission, circumventing the education coordinator.
For-profit colleges tend to be more expensive than their peer public institutions offering similar degrees. As a result, nearly every student who attends a for-profit school borrows to pay the tuition. In 2008, while only 16 percent of community college students took out loans, 95 percent of for-profit students at two-year schools took out loans.
Unfortunately, students are far more likely to take out a student loan at a for-profit college than they are to receive a diploma. At the HELP Committee’s third hearing on for-profits, in September, we sought to answer the question: What is happening to all the students that these schools are pushing so hard to bring in the door? Of the 30 companies we analyzed, 54 percent of students who came in the door in the 2008-2009 school year had left without a degree by the following year. For some schools and programs, the withdrawal rate was as high as 84 percent of students. This is not even the total amount of students dropping out; it is just the students withdrawing within one year of enrolling.
One consequence of high tuition combined with high withdrawal rates is a rapid increase in loan defaults. According to data released last month by the U.S. Department of Education, students taking loans to attend for-profit colleges now account for 46.6 percent ñ nearly half ñ of all student loan defaults.
Despite this disturbing record of dropouts and defaults by for-profit students, Congress has acted to increase educational benefits available to active duty troops and families and to veterans of Iraq and Afghanistan. In December, I released a report into these two programs and found that revenue from DoD educational programs at 18 for-profit education companies increased from $40 million in 2006 to an unexpected $175.1 million in 2010, a 337 percent increase.
Revenues from military education benefits at 20 for-profit education companies increased more rapidly than overall revenues in every year between 2006 and 2010. This growth is fine if service members and veterans are receiving good value for their education. However, Tuition Assistance and GI Bill benefits are finite. And if schools are misleading students and serving them poorly, they are encouraging students to waste hard-earned benefits.
In sum, because of the high costs, high withdrawal rates, and high default rates among the general student population, combined with troubling stories I have heard from veterans, I am deeply concerned that that there is inadequate oversight of our nearly $30 billion in Federal aid to for-profit schools. At the beginning of this investigation I found an alarming lack of information on how much money the Department of Defense and the Veterans Administration were directing to for-profit colleges and how students at these institutions were performing. Together with several other Senators I wrote letters to Secretary Gates and Secretary Shinseki to request additional information. I applaud this Committee for turning its attention to this issue as it pertains to the Department of Defense.
Thank you again for the invitation to speak before you today.” |