NAICU Washington Update

Hearing on For-Profit Schools Gets Partisan

October 01, 2010

Sen. Tom Harkin (D-Iowa), chair of the Health, Education, Labor, and Pensions Committee, held the third in a series of hearings on for-profit higher education, a system he describes as preying on low-income students to profit from tax-payer subsidized student aid.

At the Sept. 30 hearing, Harkin released findings from the committee's first report, which analyzed information provided by 30 for-profit colleges, in response to a survey from the committee this summer.

Harkin said his analysis of the data revealed that 14 of the for-profit institutions surveyed received, on average, 87 percent of their revenue from the federal government. Some received over 90 percent when both Education Department and GI Bill funding were considered.

This subsidy was largely responsible for FY 2009 profit margins as high as 37 percent at 16 of the institutions analyzed, totaling $2.7 billion. In recent months, the industry has spent $3.3 million on advertising.

Harkin pointed out that while 95 percent of students at for-profit schools borrow, only 16 percent of community colleges do, and in much lower amounts. He qualified his remarks by saying that one large company called him hours before the hearing to say it had provided inaccurate information.

Sen. Mike Enzi (R-Wyo.), the committee’s ranking minority member, led the Republican counter, asserting that Harkin and the Democrats were "picking on" for-profit colleges despite problems existing across all of higher education. He cited, as an example, expensive law schools producing lawyers for a glutted market.

Sen. Richard Burr (R-N.C.) later picked up the gauntlet, citing statistics indicating that for-profit colleges in North Carolina have better graduation rates than the traditional sector. Sen. John McCain (R-Ariz.) read from a Huffington Post piece written by Lanny Davis, a former Clinton administration official and current lobbyist for various for-profit schools, asserting that Harkin’s efforts were ideological, misinformed, and would have unintended consequences.

Sen. Al Franken (D-Minn.) stated he was confounded by the Republican’s rhetoric, and that he was not against for-profit industries. In fact, he said, he had come from a very profitable one.

The witnesses were all invited by Harkin. Enzi refused the offer of a minority witness because he did not feel the witness would be well-treated. Harkin’s witnesses included a Kaplan student, an employee of Education Management Corporation (EDMC), Arnold Mitchem of the Council for Opportunity in Education, and Laura Asher of the Institute for College Access and Success.

The Kaplan student said she felt lied to by the institution. She said Kaplan stymied her efforts to resume her education at a community college by refusing to send her transcript because of an unpaid bill. Harkin said he found that very troubling.

In response to Franken’s question about what could be done to prevent disreputable practices, the EDMC employee said the problem was that the "foxes guard[ed] the hen house"( i.e., the accreditors were controlled by the institutions).

Witness testimonies and the committee report are available on the Senate HELP committee website.

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