Department of Defense Appropriations Act, 2016

Floor Speech

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Ms. WARREN. I thank the Presiding Officer and thank Senator Durbin for calling us together to discuss this important issue.

Our higher education system is broken. Right now a student borrows money to go to college, and the college gets paid in full regardless of whether the college provides a decent education. In fact, Federal loan money is so easy to come by that a new business model of for-profit colleges has sprung up, spending more money on advertising to attract students than actually teaching them anything.

Consider three numbers--10, 20, 40. Just over 10 percent of all college students attend a for-profit college. Yet they take in about 20 percent of all Federal student aid and they account for about 40 percent of all student loan defaults. Many for-profit colleges target young vets and single moms for programs that promise the Moon but end up delivering nothing more than heartache.

I have met with student veterans at terrific public colleges and universities across Massachusetts, such as UMass Lowell and Bunker Hill Community College. These schools are working hard to reach vets and to help them get a first-rate education through their Office of Veterans Service and other resources. It is an exciting story, but time after time the for-profit colleges got there first, so young vets show up already tens of thousands of dollars in debt and without a single credit that will transfer to a decent public college. This makes me sick. These for-profit schools are stealing more than money. They are stealing the hard work and dreams of some of our finest young people.

There are 347 colleges in the United States in which the majority of the students have defaulted or failed to begin paying down their loans. Of these colleges, 85 percent are for-profit. Even with those huge default rates keep raking in the Federal loan dollars and paying out millions of dollars in dividends to their shareholders. These 294 for-profits are sucking down $2.2 billion in Federal assistance and leaving the majority of their students unable to repay their loans.

The business model of for-profit colleges challenges the conventional wisdom that a college degree is always a smart investment. A recent study found that the average salary increase of for-profit graduates isn't even enough to cover the costs of attending a typical for-profit institution. The research is clear: attendance at a typical for-profit college is simply not worth the cost. It is a bad return on investment.

For-profit colleges know this, but too often the potential students don't. Instead of taking the tough steps necessary to improve the value of the education they offer, most of these for-profit institutions have simply ramped up their marketing operations--and some just flatout break the law--to keep the gravy train going. These colleges have engaged in fraud in order to swindle more and more students and suck down more and more Federal funds.

Corinthian College is a prime example. At its peak, Corinthian was the Nation's largest for-profit chain, with 120 campuses enrolling over 100,000 students. It was massive. Corinthian built its business model to scoop up Federal financial aid by any means necessary--including fraud. Corinthian was trying to rope students in by using false and misleading information and then saddling them with debt that would be impossible to repay.

Federal policymakers had concerns about Corinthian's conduct for years and had the tools to shut off the Federal loan supply, but instead of acting, the Department of Education allowed Corinthian to keep recruiting more and more students and sucking down more and more Federal funds. When Corinthian's dangerous mix of mismanagement and deception finally blew up, the Department of Education even stepped in to bail out the college and keep it running a little while longer. Now Corinthian is bankrupt and its students are scrambling to start over.

Last week--due to a lawsuit brought by the Consumer Financial Protection Bureau--a Federal judge ruled Corinthian broke Federal consumer protection laws and ordered the company to pay $531 million for its illegal behavior, but Corinthian is dead broke, and its executives are off the hook for the financial liability. Plus students and taxpayers are left holding the bag.

Corinthian got people to sign up for student loans by scamming them. If an insurance salesman or a car dealer did that, the buyer wouldn't have to pay. The law is just as clear here, when a school breaks the law, students are entitled to cancel their student loans. That is why this week several of my Democratic colleagues are sending a letter to the Department of Education telling them they have dragged their feet long enough. These students don't owe the student loans that Corinthian tricked them into signing.

Schools like Corinthian make it clear that the Federal Government needs to be more aggressive and more willing to cut off the money faster when schools defraud students. When schools such as Corinthian break the law, their executives shouldn't be allowed to walk away from the mess. They should pay real penalties.

This is about basic fairness. Neither students nor taxpayers should be on the hook to a for-profit college that makes its money by cheating its students. It is time for the Federal Government to step up and do its job to hold for-profit colleges accountable and to ensure that higher education remains a real pathway to success for all hard-working students.

Thank you, Mr. President.

I yield the floor back to Senator Durbin.

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