Another U.S. Senator Raises Doubts About For-Profit Higher Education

June 30, 2010

Sen. Richard J. Durbin, a Democrat of Illinois, joined a growing chorus of federal lawmakers voicing concerns about the growth and cost of for-profit colleges in a speech on Wednesday that called for limits on the amount of federal student aid that may be spent on marketing and a review of a rule that allows for-profits to receive up to 90 percent of their revenue from federal aid.

Mr. Durbin also proposed a ban on companies that acquire accreditation through the purchase of nonprofit colleges, and suggested greater scrutiny of loans that for-profit colleges make to their students.

His remarks, in a speech at the National Press Club, came a week after the Senate education committee held a hearing in which lawmakers vowed to crack down on "bad actors" in the rapidly growing for-profit sector to protect federal student-aid dollars from fraud and abuse. That hearing featured testimony from a Wall Street investor, Steven Eisman, who likened for-profit higher education to the real-estate market before its collapse, with easy credit driving prices ever higher and large defaults looming.

In his speech, Mr. Durbin cited Mr. Eisman's testimony and echoed its warnings.

"There is growing concern that we could be looking at a repeat of the subprime-mortgage fiasco, with low-income, high-risk students mortgaging their futures—not on overpriced homes this time, but worthless diplomas," he said.

Mr. Durbin promised to work on legislation taking aim at for-profits with Sen. Tom Harkin of Iowa, chairman of the education committee.