Statement of Chairman Tom Harkin (D-IA)

“This is the third in a series of hearings by this Committee examining the federal investment in for-profit colleges and universities.

“As we have seen in recent months, this is a very wealthy and powerful industry.  It has spent a small fortune on full-page ads in major newspapers drawing attention to its schools.

“I certainly agree that, at their best, for-profit colleges offer a valuable alternative model for higher education.  But this Committee’s ongoing investigation has brought to light disturbing practices that appear to be systemic to this industry, and that raise serious questions about the enormous taxpayer investment in these schools.

“During our last hearing, on August 4, the Government Accountability Office presented a troubling picture of student recruitment at for-profit colleges. Undercover investigators from GAO visited 15 campuses of 12 companies and found misleading, deceptive, overly aggressive or fraudulent practices at every one of those campuses.  We heard testimony that these recruitment practices result in students unprepared or poorly matched to their academic program, with a high probability of dropping out – leaving school not with a degree, but with a mountain of debt.

“Frankly, it is hard to imagine that an educational relationship that begins with a school deliberately misleading and sometimes outright lying to the student could result in a meaningful degree or a positive outcome.  Nevertheless, we continue to hear claims from for-profit colleges that, despite their deceptive marketing, they provide a meaningful educational opportunity to low-income college students.  At today’s hearing, we will explore the credibility of that claim.

“Following our last hearing, I issued a request for documents from 30 for-profit higher education companies.  Each of those companies has cooperated.   I would like to thank the companies, especially the smaller schools who may not have expected to be included, and have provided particularly clear and thorough responses.  I look forward to the completed submissions in the next two weeks.  

“The information provided by the companies is helping to fill in the serious gaps in publicly available information about the for-profit education sector and its students, and about what taxpayers are getting for the $24 billion investment in these schools.  In preparation for today’s hearing, I have asked my staff to assemble a report based, in large part, on data about federal and state revenues and student outcomes provided by the companies and analyzed by staff .

“This report, titled ‘The Federal Investment in For-Profit Higher Education: Debt Without Diploma,’ shows how for-profit colleges have raised the stakes for the federal taxpayer and for students.  First, because of their almost total reliance on taxpayer dollars, for-profit colleges have made the federal government their primary investor.  At least four of the for-profits, analyzed, federal dollars now account for over 90 percent of revenues.  At just the 16 companies analyzed in the Committee report, profits in 2009 totaled $2.7 billion, with extraordinary profit margins as high as 37 percent.

“Second, by obligating almost every student to take out loans, for-profit colleges have turned higher education into a high-stakes gamble for low-income students.  Ninety-five percent of for-profit college students borrow to attend school compared to just 16 percent of community college students.  For-profit colleges account for only 10 percent of students enrolled in higher education, but those students receive 23 percent of Federal student loans and grants, and account for 44 percent of defaults.   

“For millions of students at for-profits, the gamble has not paid off.  This new report examines the rate at which students withdraw from 16 institutions.  Of students who enrolled during the 2008-9 school year, 57 percent had withdrawn by this past summer.  That is 57 percent of students withdrawing within the first two years, based on self-reported numbers by the institutions themselves.  These students take with them thousands of dollars in student loan debt and none of the earning potential that comes with a college degree.  Over the past three years, almost 2 million students have withdrawn from for-profit colleges.  None of these students gained a degree or certificate, but almost every one of them left with debt that they are struggling to repay – debt that is not dischargeable in bankruptcy, and could bar them from getting future student loans.

“The bottom line is this:  For students enrolling in for-profit schools, graduation with a degree is a possibility, but debt without a diploma is a probability.  Going to college should not be like going to a casino, where the odds are stacked against you and the house usually wins.

“Given the financial risk that some for-profit schools pose to prospective students, are they the right institutions to be targeting low-income students?  Today we will hear from several witnesses with insight on this question.

"Early this morning we were informed by one company that they had provided inaccurate data to the committee. The HELP Committee depends on companies to competently and accurately provide information for analysis. If this incorrect data, provided by the school, requires adjustments to the report they will be made accordingly.”