Leaders in Deception: For-Profit Colleges Pocket $32 Billion in Taxpayer Dollars

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For-profit colleges are charging students hefty tuition prices and consuming billions in taxpayer dollars, concluded a two-year Senate investigation into the industry.

Chaired by Sen. Tom Harkin (D-Iowa), the Senate Health, Education, Labor and Pensions Committee published a highly critical and lengthy report on July 30.

The findings are staggering. Taxpayers pour $32 billion dollars a year into companies that operate for-profit colleges, yet more than half of the students enrolled during the 2008-2009 school year dropped out within four months, without a degree. In addition, these students face heavy marketing and recruiting, few support services while they attend school, and too much debt after they leave.

MORE: True Stories of Student Debt

 “In this report, you will find overwhelming documentation of overpriced tuition, predatory recruiting practices, sky-high dropout rates, billions of taxpayer dollars spent on aggressive marketing and advertising, and companies gaming regulations to maximize profits,” Harkin said in a statement. “These practices are not the exception — they are the norm.”

The Democratic majority staff compiled the report, examining schools offered by 30 companies in the industry, including well-known entities such as ITT Technical Institutes and DeVry University. Republicans on the committee criticized the investigation for not including nonprofit colleges and for being a “hostile partisan effort,” reported The New York Times.

However, Harkin and other Democrats stood firm on the issue of for-profit colleges taking advantage of students and taxpayer dollars.

Here's a quick breakdown of some for-profit offenders:

Kaplan Higher Education Corporation (112,141 students) At the outset of the investigation, Kaplan was the source of a multitude of student and employee complaints, and was facing serious regulatory problems as a result of the high number of student defaults and an overdependence on Federal financial aid dollars. The company had poor student outcomes, with over 60 percent of 2- and 4-year degree students who enrolled in 2008-9 leaving by mid-2010. However, Kaplan has also implemented the most significant reforms of any company examined. Apollo Group, Inc (470,800 students) As the largest for-profit education company, and the company that pioneered the modern for-profit education model, Apollo Group, Inc. has the potential to be the industry leader in student success. Instead the investigation demonstrates that, at least during the period examined, the company invested relatively little in students and struggled to retain Associate degree students. While the company has started to take positive steps in the right direction, more remains to be done. Education Management Corporation (158,300 students) When the student outcomes for the company as a whole are examined, the company has some of the highest numbers of students leaving the company’s programs without completing a certificate or degree of any company examined.

According to the report, half of Department of Education student aid funds, and one-third of post 9/11 G.I. bill benefits, go to for-profit schools. When looking at the 15 publicly traded for-profit college companies, 86 percent of revenue came from taxpayers in 2009. 

“As a result of this investigation, a wide range of Americans – including taxpayers, prospective students and their families – are waking up to the troubling realities of this industry,” Harkin said. “I hope that for-profit colleges will be moved by this final report to reform and focus on students’ success instead of just their financial aid dollars.”

In 2009, for-profit college companies spent 23 percent on marketing and recruiting, compared to 17 percent on instruction. Tuition is often more expensive at these schools, yet many institutions do not have strong student or career services. Furthermore, of about 1.1 million students who enrolled at for-profit universities in the 2008-2009 school year, more than 50 percent left without a degree. For-profit college attendees borrow much more than those at private nonprofit or public schools, and they are also more likely to be unemployed after leaving school.

Looking at the report, the problems are endless. What can be done to fix the issue? The HELP Committee proposes more transparency regarding student outcomes, stricter oversight regarding financial aid and stronger protections for students.

“We need to know how every student is faring,” Harkin added. “We need to ensure that resources intended for education are spent productively.  We need colleges to provide the services that students need to succeed.  And for companies so reliant on taxpayer revenues, we need to start requiring they demonstrate results for students, not just shareholders.”

Which would you prefer to attend: a public, private nonprofit, or private for-profit university? Let us know in the comments.

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Kelly Zhou hails from the Bay Area and is currently a student in Los Angeles. She has written on a variety of topics, predominantly focusing on politics and education. Email Kelly | @kelllyzhou | TakePart.com

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