06.24.10

Statement of Chairman Tom Harkin (D-IA) at the HELP Committee Hearing on the Federal Investment in For-Profit Institutions of Higher Education

As Prepared for Delivery

“For more than 50 years, the Federal government has provided students with grants and loans to help pay for college.  That’s a public-private partnership between the government and students.  It is an investment premised on the idea that a higher education will improve life for the borrower, and also will strengthen our society by giving more Americans the knowledge and skills to get good jobs and give back to their communities.  

“In the past two years, Congress has provided significant new resources to help students access and finance a college education.  In 2008 we increased the amount of Stafford loans that undergraduates could borrow by $2,000 a year.  The Recovery Act provided another $17 billion to the Pell grant program.  The recent reconciliation law added another $36 billion to Pell over the next 10 years.  

“Both this Committee and the Labor, Health and Human Services Appropriations Subcommittee have made hard choices to secure these increases for financial aid programs.  The money is an investment by Congress in our nation’s students and also in our country’s future.  For that investment to pay off, we must ensure that students are being well educated, and that schools are using Federal dollars responsibly.  

“There are growing questions about whether all students -- and taxpayers by extension – are receiving value for their educational dollar.  Today I released a report titled ‘Emerging Risk?  An Overview of Growth, Spending, Student Debt, and Unanswered Questions in For-Profit Higher Education,’ which takes a close look at what we know about how for-profit schools are operating.  

“I want to take a few minutes to highlight some of the key findings from the report:

•    Over the past 20 years, the for-profit higher education industry has grown and evolved, bringing innovation to postsecondary education and expanding the number of students it enrolls.  In 2008, nearly two million students were enrolled in for-profit institutions to pursue everything from technical certificates to graduate degrees.  Enrollment has grown by 225% over the past ten years, and there have been tremendous increases in the numbers of students taking classes online.  At four of the large publicly-traded schools students are taking classes almost exclusively online.  That’s more than 200,000 students.   

•    Nearly every student who attends a for-profit school borrows to pay the tuition.  While only 38 percent of 2008 community college students graduates took out loans, 98 percent of for-profit students graduated with debt.  

•    For-profit students were also eight times more likely to graduate with a loan larger than $20,000.  Not surprisingly for-profit college students are more likely to default on their loans than their non-profit peers.  According to one recent analysis by the U.S. Department of Education, for-profit colleges accounted for only 10 percent of enrolled students but 44 percent of defaults.

•    The growth of for-profit colleges has been dependent on Federal subsidies, including Pell grants, Federal student loans, and military and veteran’s benefits.  And while the for-profit share of enrollment has grown significantly, the sector’s share of Federal student aid dollars has grown even larger.  

•    The sector enrolls approximately 10 percent of students but received approximately 23 percent of all Federal Pell grants and student loans in 2008 – more than $23 billion.

•    For all our investment in this sector, we know surprisingly little about whether students are completing degrees, transferring to other schools or just dropping out.  What information is available suggests that very large numbers of students are leaving for-profit schools each year.  

•    What enrollment numbers we do have show huge student turnover.  

•    For the four publicly traded schools that disclose detailed enrollment numbers, more students left over the course of one year than were at the school to begin the semester.  Experts describe this as the student ‘churn.’  It’s as though Iowa State University were turning over its entire student body and refilling the school with new students every year, rather than every four years.    The important question is ‘What is happening to these students?’  Are they graduating or dropping out?  We just don’t know.  Given the number of students enrolled in for-profit colleges, the billions of dollars in Federal aid that these institutions receive, and the lack of clear data on student outcomes, I believe Congress must devote more attention to this sector and its impact on our postsecondary education system.  

“Today marks the first in a series of hearings to look at the for-profit education sector.  We have a responsibility to ensure that taxpayer dollars are being spent wisely and that for-profit colleges are serving students, not just shareholders.

“I have invited several individuals with expertise in this field to help us begin our oversight of this sector.  My hope is that they will help the Committee understand what has happened in this sector.

“The Committee’s report makes clear there is much that we don’t know.  We don’t know how many students graduate, how many get jobs, how schools that are not publicly traded spend their Title IV dollars, and how many for-profit students default over the long term.  More broadly, we don’t know exactly what risk we are taking by investing an increasing share of our Federal financial aid dollars in this sector.

“Let me conclude by talking about the students who attend these schools.  They are, after all, what matters most.  For some students, the for-profit higher education system has worked well.  The flexible schedules, convenient locations, and online offerings allow working adults to finish their degree while also meeting family and job responsibilities.  Many for-profit schools offer students an excellent technical education that prepares them for good paying jobs that will allow them to pay off their student loans.  In short, for many students, attending a for-profit college is a great decision.  And when those students succeed, they not only pay off their own loans, they also make good on the federal investment in their future.  

“But, unfortunately, many students have had a very different experience at for-profit schools.  They have left without a certificate or degree, but saddled with very large debts.  Many students were misled about the value of the education they would receive.  Just in the past week, my office has received hundreds of stories from students who believe they were exploited by a for-profit institution.  But you can also find them in the reporting of Bloomberg News which has brought to light some of the most compelling stories.  

“This morning, we will hear from one of those students, Yasmine Issa.  We will also hear from a former prosecutor who has extensive experience in the ways that some schools mislead students about their job prospects after graduation.  

“I know first-hand how a student loan can transform the life of someone from a background of modest means.  Low-income students depend on the Federal government to provide them with the opportunity to attend college.  Congress has a responsibility to ensure that this opportunity is real, and not just false hopes pedaled on a billboard or pop-up ad.

“I will turn it over to our Ranking Member and my friend, Senator Enzi, for his opening statement and then I will introduce our witnesses.”

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