Congressional Report: For-Profits Are a Bad Deal for Students and Taxpayers

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A new congressional report confirms what many have long known: for-profit higher education companies are looking out for their wallets, not their students. Students are amassing high levels of debt to attend these institutions, but too many receive only worthless credentials or no credentials at all. Instead of focusing on improving these troubling statistics through better instruction, the congressional study shows these companies are spending larger portions of their revenue on marketing, and lobbying to protect their lucrative business model.

The report, released by Sen. Tom Harkin (D-Iowa), is the result of a two-year investigation and highlights many troubling aspects of the for-profit industry. For instance, students enrolling in four-year for-profits face only a 28 percent chance of graduation. And 46 percent of these students take out private education loans (compared with only 9 percent of students at public institutions). The combination of low graduation rates and high student loan debt is a dangerous mix and may explain why the industry is responsible for nearly half of all student loan defaults, even though it enrolls only 13 percent of college students.

Judging by how they spend their money, these companies clearly prioritize the good of their shareholders over that of their students. The study found they spend nearly 23 percent of revenue on marketing, 19 percent on profits, and only 17 percent on instruction. In 2010, these companies received 25 percent of all student-aid funding spent by the U.S. Department of Education. Exploiting the 90-10 loophole, they aggressively recruit veterans in order to capture their education benefits. And their efforts are paying off: 37 percent of post-9/11 GI Bill funds and half of Defense Tuition Assistance benefits now go to for-profit companies. It is estimated that in 2010, 82 percent ($32 billion) of the revenue taken in by the for-profit companies investigated came from taxpayer funds.

The results of the congressional investigation prove that for-profit companies are a bad investment for students and taxpayers. The report urges the federal government take several important steps toward protecting students from the for-profit industry, including reducing the amount of revenue the companies can pull from federal sources back to 85 percent; banning their use of federal dollars for marketing, recruitment, and lobbying; and setting minimum standards for student outcomes. It is crucial that we hold these companies accountable for the results they deliver to our students.

— Nicole Tortoriello