For-Profit Colleges

Floor Speech

Mr. DURBIN. Mr. President, lately it seems that there is nothing the Senate can agree on. We argue on partisan lines over every issue imaginable.

But I know of at least one issue that would bring every Member of the Senate to the floor in agreement: Pell grants.

This is a program designed to help poor students get the education they need to give themselves and their families a better future. Millions of Americans have seen the benefits of the Federal investment in Pell grants first hand.

Over the past 2 years, the Congress has provided significant increases in funding to the Pell grant program. We have raised the maximum Pell grant to an all time high of $5,550 and we set a course so the grants will continue to rise reaching almost $6,000 in 2017.

I have supported those increases. The recent expansion of the Pell grant program is essential for our economic recovery as Americans are returning to college to learn new skills.

But the investment does not come without a cost. To finance the higher Pell grant levels, we invested $17 billion from the Recovery Act and $36 billion from the recent reconciliation bill.

And we still have a shortfall this year caused by the tremendous new demand for Pell grants.

I have spoken before about my concern that increases to Federal student aid are diminished by the skyrocketing cost of higher education at many colleges and universities, but today I want to discuss a new threat to the Federal Pell grant program--in the form of for-profit colleges.

I am worried that a portion of the investment of taxpayer funding into higher education may be going to waste at the hands of for-profit colleges.

For-profit institutions of higher education have experienced a meteoric rise. Two decades ago, the phrases ``for-profit college'' or ``proprietary school'' would have conjured up images of the beauty school around the corner or the trade school down the street. Most of those schools were small mom-and-pop operations. Some were bad apples that wasted taxpayer money and some provided needed training to students with no other opportunities, but their impact was small.

That is no longer the case. Today, the largest recipient of Federal financial aid is a for-profit institution that enrolls over 450,000 students, many of those online.

Enrollment at for-profit colleges has grown by 225 percent over the past 10 years.

The 14 publicly traded companies in the industry enrolled 1.4 million students as of 2008.

Because of the high price of tuition and the active recruitment of low-income students, for-profit colleges receive a tremendous amount of Federal financial aid funding. For-profit colleges received $4.3 billion in Pell grants in 2009.

We also need to examine the funding that for-profit schools are receiving from other Federal sources.

Along with the billions of dollars in Pell grants and Federal student loans, the for-profit college industry also receives significant funding from the Department of Defense through tuition assistance and from the Department of Veterans Affairs through the G.I. bill.

Some for-profit institutions serve active-duty students and veterans well by offering flexible course schedules, distance learning, and course credit for military training.

But there are also reports of for-profit colleges aggressively targeting military personnel. One prominent for-profit has 452 military-focused recruiters. It is troublesome that so much money is spent on recruiting students whose tuition is paid by the Federal Government.

The tuition payments for active military and veterans funding does not count towards the 90 percent Federal funding limitation, which makes Defense and G.I. bill funding particularly attractive to for-profit colleges.

Their tactics are working. Seven of the top 10 recipients of G.I. bill funding in the last school year were for-profit colleges.

It is time we examined these sources of funding. This week, Senator Webb and I are sending letters to Secretary Gates and Secretary Shinseki asking some important questions about the Federal investment in for-profit colleges as well as the quality controls over these institutions.

And students who attend for-profit colleges are more likely to borrow student loans than students attending public or nonprofit colleges. And they take out larger student loans.

In 2008, one-quarter of graduates from for-profit schools had borrowed more than $40,000 to finance their education.

There are good trade schools and for-profit colleges, and they serve an important purpose with job training that provides a way up the economic ladder.

But that is not the case across the board. Too often, those loans and Pell investments are not paying off.

For-profit schools enroll just 10 percent of all students in higher education, but their students use 25 percent of all Federal aid and represent over 40 percent of all student loan defaults.

Students are enrolling in for-profit colleges in search of opportunity. At some of these schools they learn important skills, graduate, and move on to good careers.

But too many students drop out or graduate only to realize that the education they have borrowed so heavily for has not provided them the skills or credentials they need to find employment.

These students will often find their high monthly student loan payments impossible to meet and stop paying.

A few weeks ago, the Chicago Tribune told the story of Denise Parnell. Denise is a single mother who dreams of becoming a nursing assistant.

She enrolled at an Illinois for-profit college where she completed an 8-month program that she was promised would lead to a career.

But in June, Denise and the other students in her program learned that the school's program wasn't approved by the State Department of Public Health. Denise was not eligible to take the exam she needed to become a certified nursing assistant.

Denise had wasted a year of her life in a program leading nowhere. And even worse, she owes more than $13,000 in student loans for her trouble.

Before she enrolled at that for-profit college, I wish Denise had looked to her local community college.

There, she would find many programs of study that could give her the skills she needs to start a new career as a health care worker. But community colleges are not able to compete with the marketing skills of for-profit colleges.

Many for-profit colleges spend substantial sums of money on recruiting and marketing through television commercials, billboards, phone solicitation, and other direct marketing.

In fact, many for-profit colleges spend barely half of their budget on education and nearly one-third on recruiting and marketing. At least one prominent school actually spends less on teaching than it does on marketing.

This is a recipe for disaster. Low-income students come to for-profit colleges in droves, lured by promises of high-paying careers, flexible courses, and easy financial aid.

But when they enroll, they may find that far less money is put into educating them than on recruiting them.

Today, the Government Accountability Office released a report documenting the recruiting practices of for-profit colleges.

Senator Harkin asked GAO to send undercover investigators to determine if for-profit colleges' admissions representatives were engaged in deceptive marketing tactics.

GAO sent undercover applicants to 15 for-profit colleges, including two in Illinois.

At every single one, they found that recruiters made deceptive or otherwise questionable statements.

And at four of the schools, the for-profit college representatives actually encouraged fraud.

Some of the tapes of those encounters would shock you.

The recruiters made false claims about potential salaries, program duration, cost, and graduation rates. Other recruiters encouraged students to lie on their financial aid forms.

In one video, the representative informs a prospective applicant that some graduates are making $1,000 a day as barbers in the District of Columbia. That would be a salary of around $250,000 per year. The average barber in DC makes $19,000.

In another video, the recruiter claims that you don't have to pay back your student loans at all. She says that unlike a car loan, no one will come after you for not paying a student loan.

In several videos, recruiters refuse to let the applicant speak to financial aid officers until he enrolls in the school.

Throughout, the representatives of the for-profit colleges employ aggressive tactics and convey false information to prospective students in order to sign them up.

Why is all this pressure placed on students? Money.

In many for-profit schools, recruiters' salaries, bonuses, or promotions are determined by how many students they sign up.

As a result, they try to bring in as many students as possible--regardless of their ability to succeed or complete the program--and load them up with loans.

Students deserve full and complete information when enrolling in a college and taking on large amounts of debt.

Students should be informed about debt loads, completion rates, job placement rates and salaries, and accreditation information so that they and their families can make smart choices.

Instead, students are being misled, misinformed, and lied to.

Students are not the only ones being taken advantage of by the worst for-profit colleges. Taxpayers are on the hook as well when Pell grants are wasted or when student loans are defaulted on.

When a student cannot repay his loan, the college he attended bears no responsibility. Instead, the taxpayers take the loss.

Steve Eisman, profiled in the book ``The Big Short,'' has discussed the similarities between the subprime mortgage industry and the for-profit college industry. Some of his predictions are startling.

He estimates that over the next 10 years, former students of for-profit colleges will owe $330 billion on defaulted loans and fees. Given our current fiscal situation, that is not a cost we can bear.

Eisman believes that if we don't rein in this industry, we will face another social disaster akin to the collapse of the housing industry. I hope that does not come to pass.

This is a situation that demands our attention.

Along with several of my colleagues in the House and Senate, I've asked the Government Accountability Office to review the quality of for-profit colleges and make recommendations based on its findings.

I commend Senator Harkin for holding oversight hearings in his committee on this important issue, including a hearing this week on marketing and recruitment by for-profit colleges. I look forward to working with him on legislative action.

I also commend the administration and specifically the Department of Education for their engagement on this issue.

Unfortunately for the taxpayer and for countless students, the previous administration loosened many regulations that have made it easier for abuses to occur. I am pleased to see the current administration back on the appropriate track. The Department of Education has proposed a number of new regulations that will address some of the abuses in the industry.

Several of my colleagues are working with me on the President's Deficit Reduction Commission. One of the principles guiding our work is not just what we're spending, but how wisely.

Does it make sense for the Federal Government to send Pell grants to schools that are spending more of that money on marketing than on education? Does it make sense for the Federal Government to guarantee loans to students who are given no realistic chance at the career they think they are training for?

We need to look carefully at this trend in for-profit schools. If enrollment has increased by 225 percent over 10 years, while $4 billion in Federal dollars went to for-profit schools last year, and 40 percent of their students are defaulting on their loans ..... this may not make sense.

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