In Partisan Hearing, Democrats Attack Proprietary Colleges for Profiting While Students Fail

September 30, 2010

More than half of students attending the nation's largest for-profit colleges withdraw within two years, a new report by Senate Democrats reveals.

The report, which is based on data collected from 16 for-profit companies, is the latest bad news for a sector that is under intense federal scrutiny and has spent millions of dollars fighting a rule that could put many of its programs out of business. It shows that proprietary colleges are reaping record profits even though a majority of their students are leaving their institutions without a certificate or a degree.

Democrats released the report Thursday at a hearing that alternated between policy debate and partisan bickering. In an opening statement, Sen. Tom Harkin of Iowa, the chairman of the education committee, called the report's findings "disturbing."

"For students enrolling in for-profit schools, graduation with a degree is a possibility, but debt without a diploma is a probability," said Harkin, who requested the data from 30 for-profit colleges as part of a continuing investigation into the sector.

Sen. Michael B. Enzi of Wyoming, the top Republican on the committee, acknowledged the sector's shortcomings, but he said it was "naïve" of Democrats "to think that these problems are limited to just the for-profit sector." The senator argued, more forcefully than he has in past hearings, that Democrats were discriminating against for-profits, ignoring nonprofits "with the same record."

Mr. Enzi said he had decided not to invite witnesses to Thursday's hearing because of "hostile treatment" his witnesses had received in the committee's first two hearings on for-profit colleges.

Thursday's hearing came a day after supporters of for-profit colleges descended on the Capitol to argue against a proposal that would cut off federal aid to programs whose students have high debt levels and low loan-repayment rates. More than 2,000 students attended the rally, including Tina Teeple, a student at All State Career School in Baltimore who is studying medical assisting and medical billing. She said she was worried that a few bad actors were "going to make it so that nobody has the opportunity in the future."

"If we want to go to proprietary schools, that should be our own choice," Ms. Teeple said.

Debt but No Degree

According to the Democrats' report, 57 percent of students who entered for-profit colleges during the 2008-9 academic year have withdrawn, many after 20 weeks or less of instruction. Over the past three years, almost two million students have left for-profit colleges without a credential, many with debt that could take years to repay. The typical full-time student spent between $8,800 and $11,300 on their education, the report estimates.

Meanwhile, the 16 largest companies earned $2.7-billion in profit in 2009 alone, reporting, margins ranging from 16 percent to 37 percent, according to the report.

Much of that profit comes from taxpayers, with federal dollars—including aid to veterans and unemployed workers—accounting for 87 percent of revenues at 14 of the companies.

Harris N. Miller, the president of the Association of Public Sector Colleges and Universities, said the report's findings were "logically inconsistent" with accrediting standards and graduation-rate data reported by the Department of Education. One of the nation's two largest national accreditors requires for-profit colleges to have a retention rate of 75 percent; the other requires a graduation rate of 65 percent. Meanwhile, data reported by the National Center for Education Statistics shows that for-profits accounted for 8 percent of students in 2007, but they awarded 15 percent of the credentials.

"The hypothesis that these schools recruited and turned over so many students in no way syncs with that data," Mr. Miller said in a conference call with reporters.

The report's findings seem to have strengthened Democrats' resolve to crack down on for-profits, convincing Mr. Harkin that the sector's problems are indeed "systemic," a word he used repeatedly during the hearing. He reiterated his promise to offer legislation to better regulate the sector, arguing that the system "cries out for some kind of fixing."

"They've figured out how to be profitable even when students are not successful," he argued at the end of the hearing. "There is irrefutable evidence that something has gone wrong with this industry."

But Mr. Harkin said he still needs more information about the sector and will not offer legislation until next year, after the midterm elections. Its chances of passing hinge on the outcome of that election. If Republicans regain control of the U.S. House of Representatives, as many polls and political experts project that they will, passing a bill could be difficult. If they also reclaim the Senate, which appears less likely, it would probably be impossible.

A Partisan Divide

The partisan divide over for-profit colleges was on full display at Thursday's hearings, with Republicans accusing Democrats of being anti-capitalist and classist, and Democrats responding with surprise and indignation.

The hearing began routinely enough, with testimony from four witnesses: an American Indian student who said she had been misled by a for-profit college; a for-profit recruiter turned career-services adviser who blew the whistle on colleagues who were manipulating job-placement statistics; and two advocates for students and consumers.

First up was Arnold Mitchem, president of the Council for Economic Opportunity in Education, a lobby group for federal TRIO programs. He spoke of the "inequities inherent in the relationship between low-income students and for-profit colleges," and called for safeguards to protect low-income students.

"On one side of the table, we have a poorly informed customer, and on the other we have a business with sophisticated, state-of-the-art marketing techniques," he said, calling that "a cocktail for abuse."

He was followed by Kathleen Bittel, a career-services adviser for Education Management Corporation's Art Institute Online, who said she was putting her career on the line by testifying before the committee. Ms. Bittel, who wrote to members of Congress in mid-September detailing abuses she saw at the job, described the "many tricks and sleight of hands" that her colleagues used to inflate their job-placement rates. She encouraged the committee to "take a good, hard look" at the employment numbers colleges are reporting.

EDMC responded with a letter to lawmakers saying an internal investigation "found no support for Ms. Bittel's claims of undue pressure ... to meet placement goals or falsely verify graduates' employment." It accused Ms. Bittel of refusing to cooperate with the institute's investigation. In questioning by the committee, she said she had provided extensive information but refused to name names.

The committee then heard from Lauren Asher, the president of the Institute for College Access and Success, a California-based group that supports expanded federal oversight of for-profit colleges, and Danielle Johnson, a Kaplan University nursing student who said recruiters for the college had lied to her about where she could do her clinical training.

The hearing began to devolve into political theater during the question-and-answer session, when Sen. Richard Burr, Republican of North Carolina, accused Democrats of undertaking a "witch hunt" against for-profits. Al Franken, Democrat of Minnesota, responded feistily, saying, "I feel like my motives have been impugned."

At one point, Sen. John McCain, Republican of Arizona, noted with glee that Lanny Davis, a prominent Democrat who served under President Bill Clinton, is working as a lobbyist representing for-profit colleges.

"I think he's an advocate for nasty for-profits," Mr. McCain said with sarcasm.

He accused Democrats of characterizing open-enrollment colleges, which serve large numbers of low-income and minority students, as inherently "bad," and elite institutions, like Harvard University, as "good."

"It has the uncomfortable feel of disparate class and racial treatment, which should make liberals uncomfortable," he said.

"It's one of the rare moments in my political career that I find myself in complete agreement with Lanny Davis," he added.

Sen. McCain suggested that things would be different if Republicans reclaim the Senate, saying, "hopefully in January we will have a different agenda for this committee."

Mr. Harkin expressed surprise that the hearing had become so partisan and said he hoped Mr. McCain wasn't implying that Republicans would drop the investigation.

"Is he saying that if Republicans take over the Senate, they won't do anything about the for-profit sector, that they can just keep going on as if nothing is wrong?" Mr. Harkin asked. "I hope that's not the case."

Meanwhile, Mr. Harkin doesn't show any signs of letting up. The next hearing on for-profit colleges is scheduled for early December.

Kevin Kiley contributed to this report.