For-Profit College Investigation
Between 2000 and 2009 both the number of students enrolling in "for-profit" colleges and the amount of federal student aid loans and grants flowing to the schools escalated dramatically. In 2010, HELP Committee Chairman Tom Harkin launched an oversight investigation to better understand how these schools were serving students and taxpayers. The investigation included six hearings and the production of documents and student outcome data from 30 for-profit schools, and culminated with a final report released July 30, 2012.
Senator Harkin's HELP Committee investigation found:
- 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.
- Despite dismal outcomes and high defaults, for-profit colleges enroll between 10 and 13 percent of students but receive 25 percent of all federal financial aid dollars. In 2009-10, this amounted to 25 percent of the total Department of Education student aid program funds.
- The final report estimates that the 15 publicly traded companies operating "for-profit" colleges received 86 percent of their revenues from federal taxpayer dollars.
- For-profit colleges spend these taxpayer dollars primarily on non-education related expenses: In fiscal year 2009, the companies examined by the committee spent:
- $4.2 billion or 22.7 percent of all revenue on marketing, advertising, recruiting, and admissions staffing.
- $3.6 billion or 19.4 percent of all revenue on pre-tax profit.
- $3.2 billion or 17.2 percent of all revenue on instruction.
- In 2009 the CEOs of the publicly traded, for-profit education companies took home, on average, $7.3 million. In contrast, the five highest paid leaders of large public universities averaged compensation of $1 million, while the five highest paid leaders at non-profit colleges and universities averaged $3 million.
- The investigation also documented that many companies recruiting tactics misled prospective students with regard to the cost of the program, the graduation rates of other students, the job placement of other students, and the transferability of the credit.
