Now that President Obama has turned his attention to the problem of college affordability, it is also time to revisit a very important report that was released last year and buried by Beltway lobbyists.
Senator Tom Harkin of Iowa, the ranking Democrat on the Senate Health, Education, Labor and Pensions Committee, released a blistering report in 2012 about for-profit “universities.”
They have high attrition rates, low graduation rates, and large numbers of their students leave without a diploma but with a large debt to repay.
Senator Tom Harkin released a hard-hitting report about the need to regulate them.
The report found that:
- Between 2008 and 2009, over a million students started attending schools owned by the companies examined by the Committee. By mid-2010, fully half (54 percent) of those students had left school without a degree or certificate. For Associates-degree students, 63 percent left without a degree.
- Most for-profit colleges charge much higher tuition than comparable programs at community colleges and flagship State public universities. The investigation found Associate degree and certificate programs averaged four times the cost of degree programs at comparable community colleges. Bachelor’s degree programs averaged 20 percent more than the cost of analogous programs at flagship public universities despite the credits being largely non-transferrable.
- Because 96 percent of students starting a for-profit college take federal student loans to attend a for-profit college (compared to 13 percent at community colleges), nearly all students who leave have student loan debt, even when they don’t have a degree or diploma or increased earning power.
- Students who attended a for-profit college accounted for 47 percent of all Federal student loan defaults in 2008 and 2009. More than 1 in 5 students enrolling in a for-profit college-22 percent-default within 3 years of entering repayment on their student loans.
Tamar Lewin wrote in the New York Times:
According to the report, which was posted online in advance, taxpayers spent $32 billion in the most recent year on companies that operate for-profit colleges, but the majority of students they enroll leave without a degree, half of those within four months.
“In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation,” Mr. Harkin, an Iowa Democrat who is chairman of the Senate Health, Education, Labor and Pensions Committee, said in a statement on Sunday. “These practices are not the exception — they are the norm. They are systemic throughout the industry, with very few individual exceptions.”
Over the last 15 years, enrollment and profits have skyrocketed in the industry. Until the 1990s, the sector was made up of small independent schools offering training in fields like air-conditioning repair and cosmetology. But from 1998 to 2008, enrollment more than tripled, to about 2.4 million students. Three-quarters are at colleges owned by huge publicly traded companies — and, more recently, private equity firms — offering a wide variety of programs.
Enrolling students, and getting their federal financial aid, is the heart of the business, and in 2010, the report found, the colleges studied had a total of 32,496 recruiters, compared with 3,512 career-services staff members.
Among the 30 companies, an average of 22.4 percent of revenue went to marketing and recruiting, 19.4 percent to profits and 17.7 percent to instruction.
Their chief executive officers were paid an average of $7.3 million, although Robert S. Silberman, the chief executive of Strayer Education, made $41 million in 2009, including stock options.
Why did the Harkin committee’s expose of these frauds go nowhere?
The for-profit institutions hired the best lobbyists money can buy, from both political parties, as reported here in the New York Times:
The story of how the for-profit colleges survived the threat of a major federal crackdown offers a case study in Washington power brokering. Rattled by the administration’s tough talk, the colleges spent more than $16 million on an all-star list of prominent figures, particularly Democrats with close ties to the White House, to plot strategy, mend their battered image and plead their case.
Anita Dunn, a close friend of President Obama and his former White House communications director, worked with Kaplan University, one of the embattled school networks. Jamie Rubin, a major fund-raising bundler for the president’s re-election campaign, met with administration officials about ATI, a college network based in Dallas, in which Mr. Rubin’s private-equity firm has a stake.
A who’s who of Democratic lobbyists — including Richard A. Gephardt, the former House majority leader; John Breaux, the former Louisiana senator; and Tony Podesta, whose brother, John, ran Mr. Obama’s transition team — were hired to buttonhole officials.
And politically well-connected investors, including Donald E. Graham, chief executive of the Washington Post Company, which owns Kaplan, and John Sperling, founder of the University of Phoenix and a longtime friend of the House minority leader, Nancy Pelosi, made impassioned appeals.
In all, industry advocates met more than two dozen times with White House and Education Department officials, including senior officials like Education Secretary Arne Duncan, records show, even as Mr. Obama has vowed to reduce the “outsize” influence of lobbyists and special interests in Washington.
The result was a plan, completed in June, that imposes new regulations on for-profit schools to ensure they adequately train their students for work, but does so on a much less ambitious scale than the administration first intended, relaxing the initial standards for determining which schools would be stripped of federal financing.
If Obama was serious about eliminating waste in higher education he’d take down the for-profit college industry. But since the for-profits hired top lobbyists, we get Race to the Top, University Edition, and more empty rhetoric from this president.
The drop-out rates for community colleges are just as high or higher (California community colleges boast a whopping 31% completion rate — 26% for African Americans,) and none of that cost accrues to the student, so the cost to the taxpayer is that much higher. Serving these students that have been ill-served by the public school system is very difficult Diane, and the for-profit colleges invest a great deal of money and effort trying to help them persist. Most of the cutting edge techniques for retaining students in fact are coming from the for-profit sector today. But more to the point, when the publicly-funded schools and their unionized workforce for which you advocate — and dare I say lobby — are graduating competent graduates at high rates on a consistent basis, then perhaps this vitriol for investor-backed schools might be considered legitimate. Physician heal thyself.
Read the Harkin report. Ripping off students and taxpayers to make a profit is reprehensible. Shame on you. I am not a lobbyist for unions or anyone else. No one pays me for my views. I am not for sale. I hope you can say the same since you are defending the for-profit sector. No one does that willingly as a volunteer.
Trace:
Nonsense. It is fair enough to point out that the track record of public tertiary education is not great but it is very bad form to impugn the motives of anyone and a lousy way to make an argument.
Personally I cringe when I see ads for profit schools come on largely because they fail to provide realistic information about how difficult it is to (a) pay for their program; (b) use the credential to help get a job; and, (c) complete the program. Their marketing is as aggressive as those who want me to reduce the interest rate on my credit card.
I am sure Diane will respond in her own way.
Trace,
“Most of the cutting edge techniques for retaining students in fact are coming from the for-profit sector today.”
Can you give some examples of these techniques. I’m not quite sure what you are talking about.
Thanks,
Duane
Trace:
If you are the Trace in this exchange
http://www.huffingtonpost.com/davidhalperin/for-profit-college-analys_b_3399793.html
I would blush. It is hard to defend the indefensible.
Anita Dunn and Obama: what’s wrong with this picture:
“When executives at Kaplan University were looking for an Obama insider to help fight the administration’s efforts to rein in the for-profit higher education industry, they scored a major coup. They landed Anita Dunn, the former White House communications director and FOO (friend of Obama).
Dunn’s ties to President Obama date back to 2006, when the then-Senator hired her to be in charge of communications and strategy for his political action committee. In that role, she helped lay the groundwork for his presidential run. Dunn then served as a top adviser to Obama during the 2008 campaign and for most of his first year in office. Meanwhile, her husbandRobert Bauer is the president’s personal attorney and served as White House Counsel from December 2009 to June 2011. He is now the top lawyer on Obama’s reelection campaign.
Judging from an article that ran in The New York Times this weekend on for-profit college lobbying, Kaplan got its money’s worth. As a consultant for the giant for-profit college company, Dunn “played a key role in helping shape” the industry’s “message” in opposing the administration’s proposed “Gainful Employment Rule,” which aimed to shut down for-profit school programs that leave students buried in debt but without the training they have been promised, the newspaper reports.”
Read more (if you can stomach it;)
http://www.quickanded.com/2011/12/a-lobbyist-by-any-other-name.html
How can for-profit education be the problem with higher ed when it is the “solution” for K-12?
I wonder if Obama even wanted to get rid of the scam schools or whether he was just shaking their money tree.
Can’t wait for K-12 to be completely privatized!
Then I could work for a pittance with no benefits nor job security! Can’t wait, boy oh boy, just can’t wait!
This strikes me as more of a caveat emptor decision than anything else.
That said, these numbers are deplorable and appear to me to warrant some form of class action suit as much as Government regulation, if the advertising and promotional materials are misleading.
However, it is not clear to me that the Public Sector is much better than for profit schools at least in Massachusetts – though they may well be cheaper.
Click to access Massachusetts.pdf
Some excellent comments on Obama’s sham ratings system here:
http://ruggedegalitarianism.wordpress.com/2013/08/23/obamas-new-plan-to-accelerate-corporate-barbarism/
Must-read article by Matt Taibbi (Rolling Stone) on the federal government’s involvement in the student loan debacle:
http://www.rollingstone.com/politics/news/ripping-off-young-america-the-college-loan-scandal-20130815