IBJNews

Democratic report blasts for-profit colleges; ITT stock sinks

Back to TopCommentsE-mailPrintBookmark and Share

For-profit colleges put revenues above education, and charge students high tuition and loan rates that could leave them in debt for years, a Senate Democratic report said Monday.

While students are aggressively recruited, they drop out in high numbers without the degree or certificate initially sought, the report said. It found that 54 percent of students enrolled in 2008-2009 left without a degree or certificate by mid-2010. When two-year associate degree programs were studied, 63 percent left without a degree.

The staff report was issued by Sen. Tom Harkin, D-Iowa, chairman of the Health, Education, Labor and Pensions Committee.

Stock in for-profit colleges tumbled after the report. Shares in Carmel-based ITT Educational Services Inc. fell 7.9 percent Monday afternoon, to $39.99 each. The company's stock has fallen more than 36 percent since July 3.

A Bloomberg index of 13 for-profit college companies slipped 3 percent Monday, and had dropped 50 percent through Friday.

The report said veterans were among those vulnerable to the tactics by for-profit schools, since these colleges receive the largest share of military educational benefit programs. Eight of the top 10 recipients of GI bill money since the Sept. 11, 2001 attacks went to for-profit education companies.

The report said reaching an enrollment quota was found to be the highest priority for recruiters. Publicly traded companies operating these schools had an average profit margin of 19.7 percent. They paid an average of $7.3 million in 2009 to top executives, while the five highest paid leaders of large public universities averaged $1 million and leaders at nonprofit colleges averaged $3 million.

Steve Gunderson, president and chief executive officer of the Association of Private Sector Colleges and Universities, dismissed the report as inaccurate.

"Unfortunately, Sen. Harkin's report continues in the tradition of ideology overriding reality," said Gunderson, a former Republican congressman from Wisconsin. "The report twists the facts to fit a narrative, proving that this is nothing more than continued political attacks on private sector colleges and universities."

He said some of the report's statistics are misleading and added, "Instead of joining the conversation about ways to expand access to postsecondary education, Sen. Harkin is attacking schools that are currently providing instruction to 3.8 million students. Today's students already face enough challenges accessing postsecondary education without these sorts of distractions."

According to the report, students at for-profit schools faced tuition for bachelor's programs that averaged 20 percent more than for similar programs at flagship public universities. Associated degree programs averaged four times the cost of similar programs at comparable community colleges, and certificate programs averaged four-and-a-half times the cost at comparable community colleges.

"Recruiting materials indicate that at some for-profit colleges, admission representatives were trained to locate and push on the pain in students' lives," the report said.

Once the students were enrolled, 96 percent needed student loans, according to Department of Education information. Fifty-seven percent of bachelor's degree students who graduated from a for-profit college owed $30,000 or more, compared to 25 percent of those earning degrees in the private, not-for-profit sector and 12 percent from public colleges.

"Because many students who attend for-profit colleges are unable to get financing through private lending companies, many participate in institutional loan programs operated by for-profit education companies," the report said.

In 2009, seven large for-profit education companies offered institutional loans with interest rates ranging from 11.2 percent to 18 percent. During the same period, the Stafford federal loan rate was 5.6 percent.

In addition to the high loan rates and debt, students leaving private colleges had a difficult time finding jobs.

The report cited a national study by an education center that found 23 percent of students who attended for-profit schools in 2008-09 were unemployed and seeking work.
 

ADVERTISEMENT

  • retired
    I have worked in the "for profit" industry and it targets the pain of prospective students to get them enrolled. In fact the students believe that the government is giving them not only free money to go to school but is actually paying them so much to attend. While this is certainly not the case most institutions are not doing due diligence and making sure that they understand this is a loan which must be paid back, and can not be forgiven by bankruptcies. They only have them sign documents with small print that the recruits do not read. Further more some of these institutions put pressure on the instructors to pass them regardless of whether they learn or not so that the government derived cash flow is not disrupted. Instructors on only put on term to term contracts and if students are failed they are not hired back for the following term. The mash availability of student loan money has only brought out the crooks seeking to line their personal pockets with little if any regard for the student. In fact you can make a case that the average student they serve is worse off in that then can not get a decent job but now they are from 40 to 70,000 dollars in debt. There are exceptions however but that is what they are exceptions not the rule. A program that seemed to be set up to help the disadvantages, only makes they worse off but using mass amount of tax payer money to do that which filters to the Rich at the Top of these institutions. Government does have the responsibility to protect the consumer from unethical and now becoming debt damaging practices. The Students these organizations are aggressively recruiting are the very ones who are for what ever reason unable to do independent research and gather information to make an informed and educated decision.
  • WHAT ABOUT PERSONAL RESPONSIBILITY
    While some of these universities operate in an unscrupulous manner, they didn't force students to enroll or to take out loans. What happened to personal responsibility? Oh, I forgot, we are living under the "blame everyone else for my choices and problems and live off of the hard work of others" administration.
    • agree w Harkin report
      I have a friend who worked as a recruiter for Ashford Univ, a for profit online college. Getting people to enroll regardless of qualifications, ability to pay or chances of succeeding was the top priority. Then they were steered to financial aid counselors who helped them get gov loans. They had brief counseling to keep them in school for one semester and then no counseling after that. The students dropped out, Ashford got the $ and the student was left with huge debt. Then the process rolled on again with new students. Ashford also bought a small collge in my hometown and used the photos to promote itself as a real "college" with a campus etc. It only had 600 students on campus and 40,000 online where it got their money and left them hanging. These schools are scams and should be shut down. Taxpayers are having their money funneled right into the pockets of the school owners. Gunderson is probably on their payroll.

    Post a comment to this story

    COMMENTS POLICY
    We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
     
    You are legally responsible for what you post and your anonymity is not guaranteed.
     
    Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
     
    No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
     
    We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
     

    Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

    Sponsored by
    ADVERTISEMENT

    facebook - twitter on Facebook & Twitter

    Follow on TwitterFollow IBJ on Facebook:
    Follow on TwitterFollow IBJ's Tweets on these topics:
     
    Subscribe to IBJ
    ADVERTISEMENT