Senate Democrats issued a withering report on for-profit colleges on Monday, castigating the schools for allowing revenues to take precedence over education while high tuition and escalating loan rates could leave students in debt for years.
The report, issued by Sen. Tom Harkin, D-Iowa, the chairman of the Health, Education, Labor and Pensions Committee, claims that for-profit colleges aggressively recruit students, who drop out in high numbers without the degree or certificate initially sought. It found that 54 percent of students enrolled in 2008-2009 left without a degree or certificate by mid-2010. In two-year associate degree programs, the dropout rate was even higher--63 percent.
The report also criticized recruiters for making enrollment quotas their highest priority. For-profit schools repeatedly put profits ahead of students, the report concluded. Publicly traded companies operating the schools had an average profit margin of 19.7 percent. They paid an average of $7.3 million in 2009 to top executives. The five highest paid leaders of large public universities averaged $1 million in compensation, while leaders at nonprofit colleges averaged $3 million salaries.
But for-profit school advocates say the report is misleading in many respects and was created to serve a specific agenda.
Steve Gunderson, president and chief executive officer of the Association of Private Sector Colleges and Universities, dismissed the report as inaccurate.
"Unfortunately, Sen. Harkin's report continues in the tradition of ideology overriding reality," said Gunderson, a former Republican congressman from Wisconsin. "The report twists the facts to fit a narrative, proving that this is nothing more than continued political attacks on private sector colleges and universities."
According to the report, students at for-profit schools faced tuition for bachelor's programs that averaged 20 percent more than similar programs at flagship public universities. Associate degree programs averaged four times the cost of similar programs at comparable community colleges, and certificate programs averaged four-and-a-half times the cost at comparable community colleges.
Once enrolled, 96 percent of students needed loans, according to information from the U.S. Department of Education. Fifty-seven percent of bachelor's degree students who graduated from a for-profit college owed $30,000 or more, compared to 25 percent of those earning degrees in the private, nonprofit sector and 12 percent from public colleges.
"Because many students who attend for-profit colleges are unable to get financing through private lending companies, many participate in institutional loan programs operated by for-profit education companies," the report said.
But according to data provided by the Association of Private Sector Colleges and Universities (APSCU), Harkin's financial analysis of the cost to educate students doesn't take into account the federal and state money funneled to public institutions, which subsidize tuition rates. The organization also disputes Harkin's dropout numbers. The graduation rate at two-year, for-profit colleges is much higher than the report claims. Based on stats kept by the U.S. Department of Education, 62 percent of students enrolled in the programs received a degree, compared to the 37 percent listed in Harkin's report.
Michael B. Horn, co-founder and director of education at the Innosight Institute believes that in many situations, for-profit schools have been falsely accused of being money-grabbing entities that will shortchange the public good if it means increased profits.
"In the case of higher education, government policies have historically defined the job to be done as expanding access--and have tied government dollars to this explicit goal. For-profit institutions, then, should not be faulted for focusing on access," Horn said in a recent article published by the American Enterprise Institute.
In 2009, seven large for-profit education companies offered institutional loans with interest rates ranging from 11.2 percent to 18 percent. During the same period, the Stafford federal loan rate was 5.6 percent.
Horn says that critics see no place for for-profit providers in American education. He encourages people to view for-profits as a force for good that can harness the profit motive to attract top talent and scale quality in public education: "The government and society have offered incentives for this behavior. Blaming for-profits for doing what we have asked and paid them to do from the outset makes little sense."
The Associated Press contributed to this report.