Congress Should Put a Stop to For-Profit College Rip Offs

Billions of dollars are at stake—mostly your tax dollars.

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Less than a decade ago, for-profit colleges were a blip on the radar screen: Kaplan, Strayer, the so-called University of Phoenix. Some provided job training or skills-based learning, and online courses were in their infancy. They made money but didn’t make waves.

No one paid too much attention to accrediting these schools or to what was or was not happening to the students.

In just a few years, however, enrollment went from 365,000 to 1.8 million students. Marketing madness resembled March Madness for these schools, and many more new ones were established. Slick TV ads and thousands of marketers were hired. Returning vets were targeted, even at hospitals.

The key: Bring in millions from Pell grants and student loans. Taxpayer money.

By 2009, these for-profit schools were raking it in—$4 billion in Pell grants and $20 billion in student loans provided by the Department of Education. Over 80 percent of the revenue for the for-profits came from federal loans and grants. [See a roundup of political cartoons on the budget and deficit.]

In many cases, these were shell games. No campuses, few classrooms, and little interaction with teachers, but make no mistake about it, they were not cheap. Students were told they could get loans and grants and just send in the checks.

So, how was all this working? Graduation rates for private colleges are about 65 percent, for state schools about 55 percent, and for the for-profit colleges? Twenty-two percent.

Houston, we have a problem.

Where is all this money going? Think about this: The University of Phoenix major-domos, John and Peter Sperling, are worth $263.5 million and $574.3 million, respectively. The president of Strayer University is paid $41.9 million a year, 26 times the highest paid presidents of America’s finest colleges and universities.

Sen. Tom Harkin of Iowa has blown the whistle on this insanity in hearings, highlighting one case study, Ashford University, created in 2005. It seems that Franciscan University, a struggling religious school in Harkin’s home state, was acquired for its accreditation. They took it from 300 students to 78,000, with 99 percent of them online. Andrew S. Clark, who runs the operation, was paid $20.5 million in 2010.

The top executives for the top 15 for-profit colleges pulled in $2 billion last year. Two billion dollars, practically all taxpayer money.

And that student loan money?—the default rate at these for-profits is 43 percent!

So, only 22 percent graduate and 43 percent default on the loans, leaving us holding the bag because students have been sold a bill of goods by slick marketers.

Billions of dollars are at stake—mostly your tax dollars. Big-name lobbyists have been hired. Legislation has been introduced by Republicans to prevent a crackdown on the for-profit colleges.

The same Republicans who are so worried about NPR and Planned Parenthood. [Vote Now: Should NPR lose funding after Schiller-O'Keefe controversy?]

Let’s get this straight—H.R. 1, the Tea Party members’ signature bill to cut $61 billion from this year’s budget contains provisions to protect the $24 billion of our tax dollars that enriches fat cats who call themselves educators?

So why did Republicans boycott Harkin’s hearing, except for Mike Enzi of Wyoming, who called it the most “biased” hearing in his 15 years in the Senate before storming out? Don’t they see there is a problem? Is this their example of the “free enterprise” system where government money supposedly for kids apparently goes to enrich scam artists? [Read more about the national deficit and debt.]

Some of these institutions may be well meaning and provide real help to students, but the evidence of the last decade would indicate that things have gotten seriously out of hand.

Isn’t it time for Congress to put a stop to these folks?

  • Vote Now: Should NPR lose funding after Schiller-O'Keefe controversy?
  • Check out a roundup of political cartoons on the budget and deficit.
  • See a slide show of the best cities to find a job.

  • Corrected on 3/24/11: An earlier version of this blog post incorrectly spelled John and Peter Sperling’s last name.