Senate Talks For-Profit College Industry Regulation

Higher education's shadiest swindlers get congressional lashing.

By Julianne Hing Aug 05, 2010

On Tuesday Democrat Sen. Tom Harkin led a Health, Education, Labor and Pensions Committee Senate hearing to discuss for-profit college industry accountability measures, the second in a series to determine how to rein in the industry. For-profit colleges are the higher education institution everyone loves to hate, and for good reason.

The big news came from the Government Accountability Office’s new report that found rampant fraudulent and deceptive business practices among every for-profit school the agency randomly sampled. You can check out the GAO’s video here, with video footage of admissions representatives, the education sector’s subprime mortgage loan officers, telling prospective students to claim extra dependents to qualify for more financial aid, or to keep a $250,000 inheritance off of their financial aid forms. "That’s what tax returns are for," the admissions-officer-cum-sales-rep says. More financial aid means more revenue. After fourteen days of classes the school can keep a student’s federal grant money even if they drop out or can’t finish the program.

Preying on low-income students is a central part of the for-profit school business model. Unfortunately, equipping students with an education and proper certification in their chosen field is an afterthought. Joshua Pruyn, a former Westwood College admissions rep with a conscience, testified about the shady business practices. According to Pruyn, admissions reps would understate the full cost of Westwood’s programs. At Westwood an associate’s degree costs $40,000, and a bachelor’s degree upwards of $70,000. But Pruyn was coached to tell prospective students the cost per term– $4,800 — and not correct those who assumed that for-profit schools run on the same three-term fall-spring-summer schedule that traditional schools do. Westwood has five terms per year. Pruyn also testified that he didn’t know that many of the programs he was selling students were actually unaccredited; students would find upon graduation that their units were neither transferrable nor legitimate.

Harkin and Senators Michael Enzi, Al Franken, Lamar Alexander and Michael Bennet took turns taking swings at the for-profit industry. "Is there any evidence you can provide that the industry has any interest in self-policing itself?" Franken asked Michale McComis, executive director of the Accrediting Commission of Career Schools and Colleges, which accredits hundreds of higher education institutions. McComis could produce no good response; turns out that the accrediting body is funded by membership dues from the schools it is supposed to monitor.

Right now there are a number of solutions on the table. One includes outlawing the commissions pay that encourages admissions representatives to throw all ethics out the window in order to bring students in the door. For-profit schools helped design a 1992 bill that was supposed to curb the incentive pay model with so many gaping holes that it’s swiss cheese regulation.

A second solution proposed by Secretary of Education Arne Duncan in July would require schools to disclose graduation rates and post-program employment numbers to prospective students. Schools with high student loan default rates could stand to lose their federal funding. According to Harkin, nine percent of all the students in higher education are enrolled in for-profit schools right now, and they use 24 percent of the available Pell Grants — the industry took in $4 billion federal grants in 2009 — and this small fraction of students account for 44 percent of those who eventually default on their student loans. At the hearing today senators floated around the idea of examining the accrediting bodies that are supposed to oversee for-profit schools.

There’s definitely a place in society for the kinds of 1950s-era trade schools that for-profit schools grew out of, and those sorts of programs need to be protected for people who don’t want to go to traditional colleges. But the real tragedy is that many students turn to for-profit schools because there aren’t better options. More affordable community colleges are too poor to keep pace with for-profit college growth, bound by law not to lie to prospective students, and are riddled with too much bureaucracy and too many hurdles to get classes. At for-profit colleges, class offerings are plentiful and flexible; programs are efficient and labs and equipment are readily available. Not so for underfunded community colleges, state schools and public universities that lock out low-income students.

Yesterday’s hearing was the second in a series of what promises to be a long, ongoing conversation. There was plenty of earnest moralizing on display from senators. Many are eager to bring accountability to the for-profit school industry. But we’ll have to wait and see when the hearings are over and it’s time to pass some laws if their excitement is not tempered by the millions of dollars for-profit schools spend in lobbying every year.