Harkin, Hagan Re-Introduce Bill to Promote Responsible Use of Taxpayer Dollars in Higher Ed

WASHINGTON – U.S. Senators Tom Harkin and Kay Hagan today re-introduced legislation to ensure that taxpayer dollars invested in federal assistance for college students is being used to educate and support students, not being wasted on advertising, marketing and recruitment. The Protecting Financial Aid for Students and Taxpayers Act aims to maximize the value of federal student aid and taxpayer dollars by prohibiting the use of Pell Grants, federal student loans, the Post-9/11 G.I. Bill, and other federal education funds for advertising, marketing and recruitment, similar to a current law that bans the use of federal higher education dollars for lobbying. 

“This bill sends a critical message to colleges that fund their marketing budgets with taxpayer dollars: find the advertising money elsewhere.  With middle-class students and families struggling to afford a higher education, we need to ensure that federal financial aid is used to help educate students, not recruit them,” said Harkin, who serves as chair of the Senate Health, Education, Labor, and Pensions Committee. “My Committee’s investigation of for-profit colleges found more federal money used on marketing — as much as 30 percent of their revenue — than on education, while students were left with a mountain of debt but no degree.  Simply put, we should not be picking up the tab for massive ad campaigns.  This is common-sense legislation to put an end to taxpayer subsidies for activities completely unrelated to providing an education.”

"In these tough fiscal times, it's imperative that every taxpayer dollar be spent wisely and responsibly,” said Senator Hagan, a member of the Health, Education, Labor and Pensions Committee.  “Taxpayer dollars should not be used on out-of-control marketing, advertising and recruitment budgets, and I’m particularly disturbed by recruitment tactics employed by some for-profit schools targeting our veterans and service members. Such unscrupulous practices should not be tolerated. This legislation takes the most significant action yet to protect students, active duty military, veterans and their families from deceptive recruiting practices by some for-profit colleges." 

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While the majority of colleges and universities devote a small percentage of their revenue to advertising, marketing, and recruiting, the HELP Committee investigation of the for-profit higher education industry led by Chairman Harkin revealed that several colleges with high dropout rates and low graduation rates devoted as much as 30 percent of their revenue to advertising, marketing and recruiting. The Protecting Financial Aid for Students and Taxpayers Act would prohibit the use of federal financial aid dollars from being spent on marketing, advertising and recruitment and require all colleges and universities, whether public, private, or for-profit, to pay for such activities with non-taxpayer dollars.

Further analysis by the HELP Committee revealed that:

• Fifteen of the largest for-profit education companies received 86 percent of their revenues from federal student aid programs – such as the G.I. Bill and Pell grants;
• In Fiscal Year 2009, these for-profit education companies spent $3.7 billion dollars, or 23 percent of their budgets, on advertising, marketing and recruitment, which was often very aggressive and deceptive;
• In contrast, the study found that nonprofit colleges and universities spend an average of one-half of one percent of their revenues on marketing.

Additionally, one study found, “In the corporate world, marketing budgets typically represent between 4-12 percent of sales,” and in the for-profit education sector, “marketing budgets can approach a whopping 40 percent of tuition revenue.” 

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