For-Profit Colleges

Floor Speech

Mr. DURBIN. Mr. President, in the school year 2009-2010, the U.S. Department of Education provided $132 billion in grants and loans to students. That was up from $49 billion in 2001--a dramatic increase in Federal aid to education. A large part of the increase can be traced to one particular type of school: enrollment at for-profit colleges.

That has grown faster than any other sector.

Currently, about 10 percent of the students pursuing education after high school attend for-profit schools--for-profit colleges and different training schools that offer certification in certain skills and certain professions, 10 percent. But that 10-percent portion of students in America account for 25 percent of all the Federal aid to education. In other words, dramatically more money is going to those students than those attending other schools after high school.

When it comes to the student loan defaults, where college students borrow money to go to school and then fail to pay it back, for-profit school students account for 44 percent of the student loan defaults in America. Again, 10 percent of the students, 25 percent of the Federal aid to education, and 44 percent of student loan defaults are attributable to for-profit schools.

The industry is dominated by 10 publicly traded for-profit companies. Of those 10 companies, they enroll almost half the students in for-profit schools.

So it is dominated by the big players. The largest, of course, the Apollo Group, University of Phoenix, at one point had over 450,000 students enrolled nationwide, more than the combined enrollment of all the Big Ten colleges and universities--a big player when it comes to higher education and a big player when it comes to Federal aid to education. The Apollo Group, University of Phoenix, receives more money than any other college in America, far and away. None are even close. The next two schools, when it comes to Federal aid to education, are also for-profit colleges.

While Federal spending on student aid has seen a huge increase, there has been very little accountability when it comes to these for-profit schools. Worse yet, almost no information has been available about whether the students are actually learning and finding work in their respective fields after graduation.

In June of last year, Senator Tom Harkin--who has joined me in this effort to look closely at for-profit schools across America--added his name to a letter we sent to the Government Accountability Office to study the outcomes for students attending for-profit colleges. The report has been formally released. For-profit colleges serve--and one could argue they target--primarily low-income, nontraditional, and minority students.

For-profit colleges often claim the reason more of their students can't find jobs and the reason more of their students default on student loans is because they are trying to provide education to students whom others will not accept. That is their explanation for higher debt levels and higher default rates and poorer student outcomes. Senator Harkin and I wanted to ask the Government Accountability Office straight out to take a look at the different students in terms of their income and background and compare outcomes--for-profit schools versus public universities and private schools. Our question was: What does the research show about graduation rates, employment outcomes, student loan debt, and default rates for students at for-profit schools compared to those at nonprofit and public schools, taking into consideration different student backgrounds.

When looking at student debt, one study by the GAO found that 99 percent--99 percent--of for-profit college students took out loans, almost all of them. What is the comparison? Seventy-two percent of those attending public colleges took out loans, with 83 percent of those attending private, nonprofit colleges.

When it comes to student loans, the for-profit colleges lead all types of schools and universities in the number of students who are taking out loans. The GAO found that for-profit college students have higher rates of unemployment when it is all over. When it comes to loans and debts, students at for-profit colleges fare much more poorly than their peers attending nonprofit or public institutions. Students at for-profit colleges took out more student loans and they generally had higher loan debt.

Let me tell you about one of those students who contacted our office. His name is Jacob Helms. He attended a for-profit, online school to earn a bachelor of computer science degree in videogame design. When he enrolled, he was a little bit apprehensive because of the cost. You see, this for-profit, online school told him he had to take about nine classes a year and each class would cost him $1,500. Jacob was concerned about the cost, but the school told him: Don't worry about it. The loans you have to take out will cover your entire education.

With that assurance, Jake enrolled 4 years ago. After about 4 years of attending courses year-round, Jake reached the maximum direct loan amount for independent undergraduate students. He had borrowed $57,500. The problem was, he wasn't finished. He hadn't completed his required courses. He had just run out of the ability to borrow any more money from the government. Jake is $57,500 in debt. He has no degree and no job prospects. He says all he wants to do is move forward and start a career--his original goal. Jake says the school will provide him with no assistance or alternative other than to drop out with a debt, no diploma, and no job.

In fact, Jake didn't even know he had reached the maximum level on his Federal direct loan limit. He was withdrawn from online classes with no explanation and finally determined that since he could no longer borrow money from the Federal Government--he was at the top, with $57,500--they didn't want him. When he inquired, the school told him he had run out of money. With an annual income of less than $25,000 and no other way to pay the tuition, Jake dropped out. He says the school's attitude was very clear: We got our money; we are done with you.

Jake is not alone. Student debt has outpaced credit card debt. Imagine that. In October of last year--13 months ago--for the first time in history, the total amount of student loan debt is greater than credit card debt in America. In 2009, the average debt nationally for students at for-profit colleges was well above those who attended other institutions. Students at for-profit colleges graduated with an average debt of $33,000. At public universities, the average was $20,000. At private nonprofits, the average was $27,600.

There are very few penalties for schools where students incur huge amounts of debt and can't repay their loans. More than three in four--that is 76 percent--of young adults say college has become harder to afford in the past 5 years. Nearly as many--73 percent--say graduates have more student debt than they can manage.

It was interesting to see with this Occupy movement--which had many different causes, in many different cities--that the one recurring theme, particularly from the younger people who were there, was we have to do something about student loan debt. Students across America, those who have attended colleges and universities, understand that debt and the burden it places on their lives. These students have to put off buying homes, starting families, and other major life decisions because of their debt.

Sadly, many students are not informed about the loans they are taking out. They do not know the difference between a direct loan and a private loan, but they should. The one critical difference is this. It wasn't that long ago in America where people could borrow money from the Federal Government to go to college and beyond and then declare bankruptcy, so we changed the law. We said: That is not fair. They can't borrow this money from the Federal government and then refuse to pay it. So student loans from the government were no longer dischargeable in bankruptcy.

I thought there was some sense and justice to that decision. We had cases that were reported of students literally finishing medical school and declaring bankruptcy before they went into practice so they didn't have to pay their student loans. That was unacceptable and unfair and it can no longer be done. Just a few years ago, we changed the law again and said private college student loans--those are loans from the university and not from the government--were also not dischargeable in bankruptcy. What does that mean? It means, if a student has incurred a debt or if one has signed on to their son or daughter's college debt, they are on the hook. They will have to pay that off or else.

We asked some of the Federal agencies: Are you concerned about student loan default? They gave a very cold answer. They said: No. We will get our money because we will be watching for the rest of that person's life. Every time they think they are going to receive a Federal income tax refund, we will take the check. If necessary, we will take their Social Security checks too. That shows this student loan debt can haunt them for a lifetime.

We recently had an e-mail from a young man. It was heartbreaking. He told a story of going to one of the for-profit colleges in the Chicago area and he ended up coming out of college with $90,000 in debt, a worthless diploma and no job. His parents signed a note. Because of the penalties and interest which accumulated after he had finished his education, his debt was now up to $124,000. Both his parents had decided they could no longer afford to retire, as they had planned. They had to keep working to pay off their son's student loan for an education that turned out to be worthless.

I wish that was the only example I knew of, but we have been receiving more and more examples just like it. There is no way in this circumstance for this student to consolidate loans, lower interest rates or pay off the balance.

Sadly, many students are not informed about the loans they take out. They do not know the difference between direct loans and private loans. They do not know this aspect of nondischargeability in bankruptcy. Private loans are even more burdensome. You see, when a person takes out a government student loan, after a period of time--because of some of the decisions made by President Obama and by this Congress--they can be at least limited in their exposure of how much they have to pay each year, 10 percent of their income, with certain qualifications--10 percent, no more. After 10 years, should they take a job as a teacher or nurse, some of their government student loan debt can be forgiven.

This is not true on the private side. The money loaned to a student by the school, for example, or by some other institution other than the government is not subject to these benefits or limits. Students wrack up unmanageable amounts of debt, then can't repay their loans or discharge their private student loans in bankruptcy.

In September, the Department of Education released the fiscal year 2009 national student loan default rates. It is a measurement of how many students default on their student loans, and it gives us a view of the overall burden of college on students. The rates of students attending for-profit colleges continue to soar well above the rates for students at private and public colleges--4.6 percent of students who attend private schools defaulting on their loans. But students who attend for-profit schools default at a rate almost 3 1/2 times as high, at 15 percent. That is dramatically higher if they attend for-profit schools. Because their debt is higher, their likelihood of a job is much less.

This says more about the institutions than it says about the students. Yet there are no repercussions for schools with high default rates, unless--under new regulations from this administration--they have 25 percent default rates for 3 consecutive years. This is unacceptable.

The recent GAO study recognizes we have few measures to determine the quality of education students receive. One measure we do have is that students at for-profits continue to go deeper and deeper into debt even though most of them don't graduate. Of students who began their education at for-profit schools in the 2003-2004 school year, only 15 percent had obtained a bachelor's degree by 2009. Again, for-profit schools, over a period of 6 years, graduate 15 percent.

What about other schools? Sixty-four percent of students at public colleges graduated in that 6-year period of time, and 71 percent at private colleges obtained a bachelor's degree. That is a huge difference. A 15-percent graduation rate at for-profit schools means students, many of them, are deeply in debt by a margin of almost 6 to 1 are not graduating. They don't end up with a diploma. They have the debt, they have no diploma, and some of them end up with a worthless diploma.

The recent Department of Education regulations are starting to work. They are cracking down on aggressive recruiting practices. Students are thinking harder about where they enroll in schools. In some cases, students are avoiding for-profit colleges. Every high school student in America should read the summary of the Government Accountability Office report on for-profit schools before they even consider enrolling in one of those schools.

Some of the schools are starting to ask questions on their own about the way they do business, and they have come to me--many of these schools--pleading with me, saying: You are just talking about the bad guys. We are the good guys.

Well, prove it. Prove it. Make certain that students are getting an education that is worthwhile. Don't sink them with debt. Stand by them when it comes to finding a job or at least be mindful of what that debt means to their lives.

More needs to be done to educate families, high school teachers, and high school counselors about the choices students face. I hope these companies will continue to examine their practices, and I hope the Department of Education is going to continue monitoring the schools and the way they operate.

Let me tell you about one such operation, the Career Education Corporation. I know about this school because its former CEO came and met with me in my office in Chicago and then appeared at a hearing, pleading with me to give special consideration to his for-profit schools, which were different and better and shouldn't be lumped into the category of these schools that are exploiting young people coming out of high school. I listened to him and basically said: Well, I will pay attention to the way this turns out.

This gentleman, whose name is Gary McCullough, resigned as the CEO of Career Education Corporation on November 1 after it was reported that his school had misrepresented its placement rates for its graduates.

Career Education Corporation is an Illinois-based company with over 100,000 students nationwide. If you have not heard of Career Education Corporation, you may have heard of some of the names of its schools. I saw one of them on a bus in Chicago advertising for more students, and it is a familiar name to people who have followed the culinary side of business for a long time: Le Cordon Bleu. They bought that name, and they named one of their schools Le Cordon Bleu. We will teach you how to be a superchef, an Iron Chef, whatever chef you want to be. But it turns out that they were not only failing to educate and train the students, but the students couldn't get jobs, and the students were deep in debt.

When Mr. McCullough ended up resigning as CEO of Career Education Corporation, they found out that only 13 of their 49 health, education, and art design schools--13 of 49--met the 65-percent minimum placement rate for the reporting period. They had falsified their numbers, and now they are under investigation. They should be. We need to get to the bottom of it. If they are lying to the students, something has to happen.

First, they shouldn't be qualified for Federal student loans or Pell grants. If they are not graduating students into jobs, then they ought to be held to higher standards. And the students shouldn't be misled into believing that if they can get a Federal loan at a school, it has to be a good school.

Secondly, there has to be some standard for accreditation. There obviously is little or no accreditation accountability at this point. You can't expect a high school student or his parents to be able to look at a school from the outside or look at the Web site and decide whether it is any good. There have to be some standards for performance and excellence when it comes to these for-profit schools--for every school, for that matter.

Finally, if this school loses its accreditation, particularly in the programs where it has failed to graduate students, I think this school and this corporation should be held accountable for the student loans that have been incurred by these students. They didn't know they were signing up to go to an unaccredited school. Their debt is very real; their diploma is a phony. So it is time for these schools to be held accountable.

I am sure there are many for-profit schools that offer a good education, but there are certainly many that are exploiting students today. They are so good at marketing, you can't avoid them, whether it is on the Internet or television. They are everywhere, everywhere you turn, particularly in low-income communities. They are offering ``college'' to many students who can't get into a regular college or university. These students feel they are finally going to get their chance. Little do they know that all these for-profit schools are looking for is the money they can bring to them. When it is all over, they are deep in debt with no job and no place to turn.

What is our responsibility? Remember, we put $132 billion a year into Federal aid to higher education. It is time for us to make sure the schools that receive them for the students are real schools, are graduating students and preparing them for a good life and a good job.

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