At the HELP Committee Hearing

“This is the second in a series of hearings by this Committee focusing on the growing federal investment in for-profit colleges and universities.  

“This industry has grown at an extraordinary pace.  Over the last ten years, enrollment has increased from 600,000 students to two million students.  Federal financial aid to students at for-profits has ballooned from $4.6 billion a decade ago to more than $23 billion, today.  The question is: what is driving the explosive growth in this industry?  And are students – and U.S. taxpayers – getting good value for the billions of dollars they are investing in these schools?     

“In our first hearing, in June, this Committee heard testimony from witnesses about the pressures for-profit companies face to relentlessly enroll more students in order to increase profits and – in the case of publicly traded companies – to meet the expectations of investors.  The Committee issued a report showing that, in order to boost recruitment, many publicly traded for-profit schools spend huge sums of Title IV dollars – taxpayer dollars – on TV advertisements, billboards, phone solicitation and web marketing, and as we will see shortly, an aggressive sales staff.   According to the Chairman’s report, an analysis of the eight publicly traded schools shows that, on average, they spend 31 percent of revenues on recruiting and marketing.  

“This spending by for-profit schools sets them radically apart from other colleges.  By contrast, community colleges typically spend just one or two percent on marketing – a tiny fraction of the money spent by publicly traded for-profits.  

“However numbers only tell a part of a story.  Much can be revealed, too, by the experience that students – perhaps the first in their family to go to college – have when they sit down to talk to a recruiter or admissions officer.  That is why I asked the Government Accountability Office to investigate this key encounter during the recruitment process at for-profit institutions.

“GAO’s findings – and we will hear from the lead investigator shortly – make it disturbingly clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight.  To the contrary, the evidence points to a problem that is systemic to the for-profit industry: a recruitment process specifically designed to do whatever it takes to drive up enrollment numbers, more often than not to the disadvantage of students.

“There is a cruel irony, here, that deserves special focus.  One ostensibly admirable aspect of for-profit colleges is that they seek out and enroll large numbers of minority and low-income students, offering them opportunities they wouldn’t otherwise have.  In choosing to enroll in a for-profit college, these students typically go deeply into debt and make other sacrifices, all in search of a better life.  They need information that is clear, complete and honest.  Instead, too often, they are victims of deceptive and/or abusive marketing tactics.  

“In our first hearing, we learned that for-profit schools are enrolling huge numbers of new students, but their total current enrollment numbers show only a small increase – which seems to point to an extremely high drop-out rate.  For example, one publicly traded school had 84,555 students as of March 31st, enrolled 21,673 new students between April 1st and June 30th but ended June with 84,695 students, a gain of only 140 students.  Reports for the past year show that this school turns over between 22 and 25 percent of their student population every three months!  

“Why are such large numbers of students turning over – presumably dropping out?  Are they leaving for-profit schools with debt and no degree?  And how can that be happening in such large numbers?  The testimony, this morning, from Gregory Kutz of the Government Accountability Office will begin to answer these questions.

“Our second panel will allow us to hear directly from a former recruiter for a large for-profit school.  He will offer us insight into the training and supervision systems that foster the deceptive and misleading recruiting tactics that are all too common at these schools.  We also will hear from an admissions counseling expert, who will contrast the recruiting policies and practices at non-profit and public colleges with those at for-profit schools.  Finally, we will hear from the Executive Director of a national accrediting organization to help the Committee better understand the national accreditation process, and the steps that accrediting agencies take to ensure that the for-profit schools they accredit are acting both lawfully and in the best interests of their students.  

“Finally, we will hear from the Executive Director of a national accrediting organization to help the Committee better understand the national accreditation process, and the steps that accrediting agencies take to ensure that the for-profit schools they accredit are acting both lawfully and in the best interests of their students.  

“I want to remind everyone that Congress has just committed to making a ten-year investment of $36 billion in the Pell grant program.  If current enrollment trends continue, a huge portion of those dollars will flow to students attending for-profit schools.  I encourage the Committee to keep this in mind as we hear testimony from today’s witnesses.  We need to keep two questions front and center:  are these schools serving the best interests of students?  Are our new investments in student financial aid sufficiently safeguarded under current law?

“With that, I will turn to the Committee’s ranking member and former chair, Senator Enzi, for his opening statement.”