Continuing Congress's scrutiny of for-profit colleges, Sen. Dick Durbin, Democrat of Illinois, argued at a forum he held in Chicago on Tuesday that "there are too many schools taking advantage of students and making money hand over fist."
The forum, which featured testimony from two former students and the leaders of three major for-profit higher-education companies and two traditional colleges, covered much of the same ground as recent hearings held by the Senate education committee in Washington, according to Wall Street analysts who attended the event. The two students described being misled about their programs' accreditation status and their job prospects, while the corporate executives defended their institutions and warned against a rush to regulate the for-profit sector.
A recording of the forum is available on Senator Durbin's Web site.
Like Sen. Tom Harkin, Democrat of Iowa, the chairman of the Senate education committee, Senator Durbin voiced concerns about the sector's aggressive recruiting tactics and heavy dependence on federal student aid. He dismissed the colleges' argument that the higher-than-average default rates for students of for-profit colleges are due to the sector's demographics and expressed outrage at the high costs of for-profit culinary programs.
During the question-and-answer period, Senator Durbin grilled the chief executive of the Career Education Corporation about the morality of charging $40,000 for culinary programs that prepare students for $10-an-hour jobs, calling the programs a "federally subsidized rip-off." He also confronted the president of Kaplan University and the chief executive of DeVry Inc. about their students' low loan-repayment rates.
"The loser is not only the student, but the taxpayer," Mr. Durbin said, according to an analyst with the investment-banking firm Signal Hill who attended the hearing. "You are enticing students into debt where they lose and you win," the senator said.
Mr. Durbin proposed that for-profit colleges be required to bear some of the risk on government loans made to their students and called for an end to the practice of allowing for-profit colleges to acquire accreditation by purchasing nonprofit institutions. He also proposed an examination of how much federal aid the colleges spend on marketing campaigns.
It's unclear how much influence Mr. Durbin will ultimately have in the debate over for-profit colleges, however. While the senator holds a key leadership post in the Senate, he does not serve on the committee that would consider any legislative changes for the sector.
For-profit colleges got some moral support at the hearing from a group of students from the Illinois Institute of Art, who stood outside the forum carrying signs that read "'Gainful employment' rule discriminates against my school." The Education Department's proposed gainful-employment rule would cut off federal student aid to programs where students have high debt-to-income ratios and low loan-repayment rates.
During the hearing, Mr. Durbin said he had approached one of the students and asked how much his program cost and what he thought he could make at his first job out of college. The student told him that his two-year culinary program would cost $54,000 and that if he was lucky, he could make $30,000 in his first job.
Comments
1. jalopez5 - September 01, 2010 at 09:00 am
This witch hunt against all profits is a discriminatory practice as it exist at this moment. It is very disturbing to see elected oficials acting like the inquisition in a country that was founded on very different principals. If they are going to go after the bad guys in for profit they need to do this in a surgical fashion rather that using a nuke.
2. nels4732 - September 01, 2010 at 09:07 am
And what does the Philosophy major who attended Harvard have for job prospects? Who's doing the calculations on what an MD earns in the first few years of residency after spending $100K or more on medical school?
A scalpel not a bone saw is needed on this issue - it's the admissions practices of for-profits that leave much to be desired. More focus should be placed on examining the status of students who are admitted and never graduate than those that actually do graduate and may have to draw out their loan repayment schedule. Those who are admitted without adequate preparation have much more of an impact on the loan default rate.
3. esselan - September 01, 2010 at 09:23 am
Simple solution: limit profits for each individual campus to a rolling three year average of 25% (that might sound like a lot, but some campuses make much more profit than that). Don't let them move to fee-for-service system for central expenses to get around this. This will force reinvestment in existing campuses and slow the rush of growth to open new campuses, since there will be less funds available to subsidize them.
4. mikehext - September 01, 2010 at 09:24 am
Its funny when you see students protesting this. They're protesting against their own rights!
Education Management Corp (AI) and Career Education Corp are the worst offenders of this.
I know I was victimized by both of them using the same tactics here in MA.
GAINFUL EMPLOYMENT would knock schools responsible for scamming people out of the running.
They're setting up students to protest who don't know what it is about and filling them with lies.
5. rferrin - September 01, 2010 at 09:27 am
As a former president of a private, non-profit, liberal arts college I find Senator Durkin's question about anticipated "first-job earnings" absolutely misleading and beside the point. The question is more about lifetime earnings, career advancement and job and life satisfaction. Unless you are a top "professional" college athlete, first-job income prospects are likely to be far less than college expenditures, but the long-term payoff looks much, much different.
6. smalmstrom - September 01, 2010 at 09:53 am
My son graduated from a for profit culinary program. His first job is paying the aforementioned $10.00 an hour. But this young man understands that in the culinary field, a new sous chef has to pay his or her dues. He is thrilled with his first job in the field, learning a lot, and looking forward to a long career. And yes, he is repaying his student loans.
What is wrong with that?
7. cwinton - September 01, 2010 at 10:19 am
No one should be surprised when politicians involve themselves in an issue that is getting them in the press looking like champions of the little guy. After all, demagoguery is the stuff of politics. On the other hand, for-profits dependent on the Federal student loan program for their existence are akin to government agencies, and so are subject to the kind of bureaucratic rules all goverhment agencies have to work with (that goes for not-for-profits as well, but I think they already understand this). This kind of for-profit is not the ordinary kind of business those who operate them would have us believe.
It is hardly surprising that with many documented cases of abuse, especially among for-profits, tighter regulations are under consideration. When all the dust has settled, I'm quite sure there will be new regulations in place intended to limit the kind of abuses that have been reported. I'm also quite sure some of the operators will immediately be determining ways to observe the letter of the rules while violating their intent. It is already evident a lot of lobbying is being aimed at creating those kinds of loopholes.
8. 22168549 - September 01, 2010 at 10:25 am
The good Senator is saying two things: that some of these schools are not doing the right thing for students, and they are making too much money.
Personally, I think that the utility companies do not do the right thing for humans, and they make too much money. Same argument, and neither is valid. The Senator needs to focus on students first, forget the profits.
A highly sagacious former neighbor once told me that one cannot complain that the pie is gone if you left it out on the table in the presence of teenagers. In other words, the feds made the money available, the for-profits ramped up their tuitions to maximize their profits, and yet we are telling them that this is 'bad, bad, bad', even though we typically applaud entrepreneurs.
If we were to limit their profits, who will decide what is or is not enough? How will we know it is too much or not enough? Will 25% be too much? If so, then how about 24.999%. The discussion continues ad nauseaum.
Congress needs to stop pandering to media hype to get attention: they need to focus on working to solve the bigger problems on a quinary level, and leave the details to the experts in the field.
9. betterschools - September 01, 2010 at 10:59 am
Those interested in facts cf. the things that come out of Senator Durbin's mouth might want to look at this comparison of loan amounts and repayment rates at targeted for-profits and public universities located in areas where they serve populations similar to the for-profits.
http://www.intered.com/storage/deptofed/InterEd_LoanRepay-Amount.pdf
If only these Senators could see themselves as other see them.
10. jstice - September 01, 2010 at 12:04 pm
My daughter went to Penn State and graduated last year. It cost $ 150 K for out of state tuition. Her first job pays just over $ 50 K.
Payback for her is three years. Payback for the culinary student, 1.8 years......culinary seems like a bargin to me......
The fact is that all of these schools teach or train basic skills, enough to enter and struggle in a chosen profession and learn to become an expert. All have value, all play a role, all have problems, all are the solution to our education challenge.
(I do understand the weakness of using payback as an analytical tool. It works for this example)
11. rogmar - September 01, 2010 at 01:03 pm
Someone needs to remind Sen. Durbin that most college graduates do NOT earn enough in the first year out of school to pay back college debt. Compare total medical school debt to first year earnings. Please, Senator, bring some good old common sense to your arguments!!
12. softshellcrab - September 01, 2010 at 01:51 pm
I support in concept what Sen. Durbin is doing. I have posted before, my entire experience with for-profit schools - and I have a pretty fair amount of teaching on the side I have done for them - is that they are simply all about money and keeping students at all costs, without any standards. I got so sick of hearing about required status reports for at-risk students (i.e., bums who were not doing a lick of work in the class, usually not even showing up) and the need to reach out and work with them (i.e., let them turn their work in super late, retake tests, etc..., anything to let them pass). I am truly sorry if I offend those who support or defend for-profit schools, but I simply cannot emphasize enough how whore-like the 4-5 were that I have pesonal experience with. My experience with a relatively average, state supported university has been just the opposite. Surprisingly tough standards and an attitude to weed out students who can't handle the work. The difference has been stark, and causes me to have little respect for for-profit schools. I am sure others will argue, but to be fair, I have taught for 4-5 of them, which is a fairly substantial experience with them, and they were all the same, just about keeping the students and their tuition dollars at all costs and passing them through no matter what. Some better, some worse, but all just more or less doing anything to pass the students and not lose their tuition money. Sorry to those who disagree. Just stating my own experience.
13. betterschools - September 01, 2010 at 02:15 pm
Average loan values and payback rates at five of the largest for profits:
- 32%/$11,034.29
Average loan values and payback rates at 13 state universities situated in areas serving demographics similar to the for-profits:
- 25%/$16,088.77
So is Mr. Durbin (a) incompetent, (b) lying and if (b) is he (a) hoping to score some points by climbing on the back of a bandwagon or (b) serving out a quid pro quo for the administration to trash the for-profits so they can transfer the stolen money to the community colleges?
14. forp5955 - September 01, 2010 at 02:35 pm
It comes as no surprise the student protesters were from Education Management Corporation's Illinois Institute of Art (Art Institutes International). It seems Education Management Corp. is going to great lengths in order "Astroturf" a campaign against this important rule. I wonder if DCI Group is attempting to rally students as well.
http://higheredwatch.newamerica.net/blogposts/2010/exclusive_manufacturing_dissent_at_the_education_management_corporation-36175
15. docfox - September 02, 2010 at 01:42 am
Betterschools, how much do the for-profit schools pay you to comment on the Chronicle stories? I've never seen anyone so regularly and diligently defend a corrupt industry in the comments section of a website. Do you get paid by the word or the hour? I kind of throw up in my mouth a little each time I see one of your allegedly "fact-based, non-partisan" posts.
16. fiscalsense - September 02, 2010 at 10:21 am
Senators should focus on why some students can finish a program with $40K or less in loans while others borrow $100K + for the same program. If the senator knew that half of all the loans borrowed ended up in students' pocket for "living expenses", he might feel differently. It's not just about debt to income, but debt to cost--how much the students borrow above and beyond the cost. Many part time (i.e. one night class per week), online students are taking advantage of easy loans and borrow over double the amount necessary to cover tuition and fees, even when they work full time. This is how so many students end up deep in debt and have a hard time getting an adequate return on their oversized investment.
17. betterschools - September 02, 2010 at 10:50 am
@docfox,
I regret that you are so feint of constitution. Perhaps you can replace your vacuous ad homonyms with counterfactuals arising from your own homework. It is the province of lazy, ill-informed Mandarins to believe that only they occupy a privileged position of impartiality while views expressed by others are somehow tainted by their pecuniary interests. Grow up. Do the hard work it takes to become informed, if you have the ability, and then tell us what you think.
Working with presidents and other senior decision-makers, I have served all three institutional types, more-or-less equally, for the past 27 years. I have examined hundreds of budgets, plans, operations, curricula, performance metrics, and have developed, launched, and revised countless programs in markets across the nation. I have an intimate understanding of the strengths and weaknesses of each institutional type and leadership model. From this vantage, I can tell you that no type has earned the privilege of occupying the arrogant position you would assume.
While you appear not to understand this, many of us operate on principle, serving truth wherever the chips may fall with respect to their personal situation. The actions being taken against the for-profits are dishonest and uninspiring; some are possibly illegal. We shall see. You would see every bit as many posts from me were comparably unfair attacks being made on public institutions. I hope you are not in a teaching role. I am overreaching here but your short post hints at a mind that lacks the intellectual honesty to be objective.
18. betterschools - September 02, 2010 at 11:33 am
@fiscalsense,
Bravo! Keep repeating this.
We have been looking at this closely and most of the variance in the loan payback and default rations is accounted for by the debt/income ratio. In turn, most of the variance in D/I is accounted for by how much one borrows and most of the variance in how much one borrows is accounted for by SES.
As you probably know, the absolute worst statistics in this regard -- by a country mile -- are turned in by HBCUs. They have the highest loan values, highest defaults, and lowest payback percent. The administration refuses to even acknowledge much less touch that issue.
Then, when stratifying by geography and prosperity, there are a group of publics serving economically disadvantaged areas of the country that are also produce statistics significantly worse than the for-profits. Some of these publics are HBCUs but the stratification rule that includes them is independent.
Overlaying and modulating all of this are the facts that we have 16%+ unemployment in this sector and that salaries have dropped. This is one of several reasons why applying Gainful Employment in its present form to any school is ill-informed, never mind the inherent unfairness for applying it only to the for-profits.
Our view is that the problem could be ameliorated significantly if the schools could provide guidance and even some control over how much students borrow. As you say, they are borrowing now for living expenses as a substitute for saving and working. Guess what the feds say to this? (Taken directly from a conference call with the Department of Education). You (the school) will be held accountable for defaults which we acknowledge are driven in part by loan amounts. That said, you (the schools) cannot participate in the process of setting loan amounts or even have any visibility into how much the student borrows. The first you will know of it is when we serve you with default statistics. Fair, huh!
19. docfox - September 02, 2010 at 05:51 pm
betterschools (a.k.a. Robert W. Tucker, former Senior Vice President for Research and Information Services for the University of Phoenix and Executive VP for Programs and Services for Cardean's UNext):
No offense, but given your history and business interests, I neither trust you nor any data present on these issues. I would encourage others to also view your posts and "data" with a critical eye. I'm sorry if you find that immature. I did not mean to hurt your feelings (or bottom line).
20. betterschools - September 02, 2010 at 06:34 pm
@docfox,
Spoken like a Mandarin. When you know you've nothing to say, attempt to impugn the character of your, in this case, mistaken target. Thanks anyway, though, I admire Dr. Tucker.
Mr. anonymous docfox, my source data are public and equally available to you. If you are a scholar, you will know how to access them. Please do so. Let's see if you can engage at an intellectual level above personal sniping. As for your admonitions to others, I think most prefer objective source data to childish sniping. Either way, they will decide for themselves.
21. docfox - September 02, 2010 at 06:54 pm
Mr./Mrs. apparently also anonymous (and delightfully pretentious) betterschools,
I will take your advice about attempting to "impugn the character" of your target to heart, as you are certainly an expert at it. Please re-read your posts for some great examples. If you are a scholar, you will be aware of the importance of attempting to protect the collection and evaluation of data from personal interests. I would love to see full disclosure of your (and Dr. Tucker's) personal and financial interests in the for-profit education industry. It would provide a nice context for evaluating your opinions and analyses.
22. docfox - September 03, 2010 at 02:22 am
betterschools is fond of presenting the reports and analyses of InterEd, Inc. (his/her obvious employer) as some sort of objective, impartial collection of facts, but I encourage everyone to consider the interesting links between InterEd, Inc. and the Apollo Group (University of Phoenix's parent company) when examining their reports (you'll need to scroll down on some of these pages and pay attention to name changes and mergers):
http://starpas.cc.state.az.us/scripts/cgiip.exe/WService=wsbroker1/corp-detail.p?name-id=07181606
http://starpas.cc.state.az.us/scripts/cgiip.exe/WService=wsbroker1/history-detail.p?corp-id=01434491
http://www.faqs.org/sec-filings/091027/APOLLO-GROUP-INC_10-K/p16132exv21.htm