Editorial: Rein in abuses by for-profit colleges

Sen. Tom Harkin, D-Iowa, chairman of the Health, Sen. Tom Harkin, D-Iowa, chairman of the Health, Education, Labor and Pensions Committee, releases a Senate Democratic report asserting that for-profit schools often hit vulnerable students with exorbitant tuition, aggressive recruiting practices, and abysmal student outcomes, on Capitol Hill in Washington. (July 30, 2012) Photo Credit: AP

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Wounded veterans. Victims of abuse. The recently incarcerated. The grieving. The poor. The self-doubting.

These are just the kinds of people who might benefit most from more education. Unfortunately, they're also the people aggressively targeted by for-profit colleges concerned more with making a quick buck than developing human potential.

In the push to get more Americans into college, many people had high hopes for profit-making schools, which often focus more intensively on job skills and specialize in the non-traditional students who have come to predominate among America's undergraduates.

But a scalding new congressional report etches a very different picture -- one so ugly it cries out for reforms. In often shocking detail, the report portrays an industry riddled with abuses, given to preying on the vulnerable, and almost wholly dependent on federal funding.

Once full of small trade schools awarding certificates in fields such as cosmetology and truck driving, the industry is now dominated by large companies that are publicly traded or controlled by private equity firms. Two- and four-year degree programs are common. So is an intense focus on taxpayers as a source of profit.

The report, from the Senate Committee on Health, Education, Labor and Pensions, says Uncle Sam provided grants and loans to students of for-profit higher-education companies totalling $32 billion in 2009-10, up from just $5 billion a decade earlier. The 30 leading firms the committee examined spent just 18 percent of revenue on instruction, versus 42 percent for marketing and profits. Average annual chief executive pay was $7.3 million.

The tragic fact is that more than half the students who enroll in such schools come away without a degree, shackled to student loans they can ill afford to repay. While no more than 13 percent of U.S. college students attend for-profit schools, they account for 47 percent of federal student loan defaults. Nearly all for-profit students borrow -- for-profit colleges are expensive -- and nearly half default. The colleges get paid, and taxpayers often are left holding the bag.

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Halting the abuses won't be easy. Past reforms have been undone by compliant lawmakers on behalf of an industry that spends millions on lobbying. Nor has the Department of Education been aggressive in enforcing rules already in place. The Senate committee, headed by Sen. Tom Harkin (D-Iowa), has proposed some reasonable reforms for these schools:

Require minimum results -- examples might include graduation rates or grade-point averages -- to maintain eligibility for federal money.

Revoke eligibility for excessive loan default rates.

Bar the use of federal funds for marketing.

Require for-profits to get at least 15 percent of revenue from non-federal sources.

Create a government-run online student complaint clearinghouse.

Ban enrollment agreements limiting aggrieved students to binding arbitration instead of going to court.

Another way to rein in abusive for-profit colleges would be for the traditional nonprofit schools to learn from the things their money-making counterparts tend to get right. That means making themselves more accessible to non-traditional students, and making better and more creative use of techology.

It's also vital to find ways to accommodate more older students at low-cost public institutions such as community colleges. Doing more online, on weekends and in the summer would help these traditional colleges wring more education out of their facilities, as would raising faculty productivity and undoing some of the cutbacks in state funding that have hit public colleges and universities in recent years. Steps like these would at least assure that students considering a for-profit school have a low-cost alternative.

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