Democratic report blasts for-profit colleges

WASHINGTON (AP) -- For-profit colleges put revenues above education, and charge students high tuition and loan rates that could leave them in debt for years, a Senate Democratic report said Monday.

While students are aggressively recruited, they drop out in high numbers without the degree or certificate initially sought, the report said. It found that 54 percent of students enrolled in 2008-09 left without a degree or certificate by mid-2010. When two-year associate degree programs were studied, 63 percent left without a degree.

The staff report was issued by Sen. Tom Harkin, D-Iowa, chairman of the Health, Education, Labor and Pensions Committee.

The report said veterans were among those vulnerable to the tactics by for-profit schools, since these colleges receive the largest share of military educational benefit programs. Eight of the top 10 recipients of GI bill money since the Sept. 11, 2001 attacks went to for-profit education companies.

The report said reaching an enrollment quota was found to be the highest priority for recruiters. Publicly traded companies operating these schools had an average profit margin of 19.7 percent. They paid an average of $7.3 million in 2009 to top executives, while the five highest paid leaders of large public universities averaged $1 million and leaders at nonprofit colleges averaged $3 million.

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."

He said some of the report's statistics are misleading and added, "Instead of joining the conversation about ways to expand access to postsecondary education, Sen. Harkin is attacking schools that are currently providing instruction to 3.8 million students. Today's students already face enough challenges accessing postsecondary education without these sorts of distractions."

According to the report, students at for-profit schools faced tuition for bachelor's programs that averaged 20 percent more than for similar programs at flagship public universities. Associated 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.

"Recruiting materials indicate that at some for-profit colleges, admission representatives were trained to locate and push on the pain in students' lives," the report said.

Once the students were enrolled, 96 percent needed student loans, according to Department of Education information. Fifty-seven percent of bachelor's degree students who graduated from a for-profit college owed $30,000 or more, compared with 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.

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.

In addition to the high loan rates and debt, students leaving private colleges hard a difficult time finding jobs.

The report cited a national study by an education center that found 23 percent of students who attended for-profit schools in 2008-09 were unemployed and seeking work.

Minnesota colleges under scrutiny

Three Minnesota-based for-profit colleges were included in the report: Capella University, Rasmussen College and Walden University.

The report says graduate students in Minneapolis- based Capella's online-only programs seem to fare much better than those at many companies in the investigation.

The university also has a solid track record, and past student-loan default rates have been very low. But investigators are seriously concerned about the high withdrawal rate among those seeking a bachelor's degree.

And the report said Capella's low default rate may not reflect the coming challenges for students seeking four-year degrees. It also says Capella spends an "unusually high" share of its revenue on marketing -- and a "relatively small" amount on online instruction.

Investigators were also concerned about the academic independence of Capella's faculty, most of whom are part-time.

That said, the report said the university does better than others in controlling recruiting practices and investing in student services.

Investigators call the programs at Minnetonka-based Rasmussen College expensive. The college has received growing amounts of funding through federal financial aid, and its profits have grown significantly.

Yet the report finds that more than 63 percent of its students leave without finishing their degree. Investigators called the college's retention rates among the worst in the report.

Investigators say Rasmussen has made minor improvements. It spends more on instruction and student services than many other for-profits in the report.

But investigators say it's not clear whether the company offers value to students or taxpayers.

The report says Minneapolis-based Walden University students have much greater retention rates than those at comparable for-profit schools. It spends a large share of its money on marketing and a "relatively" small amount on instruction.

But its students seem to do much better than their counterparts at other schools. And Walden spends more on student services than many other companies in the report. It doesn't spend much on online instruction.

Investigators have concerns about the academic independence of Walden's faculty, most of whom are part-time.

The university's withdrawal rate for those seeking a four-year bachelor's degree is 51.6 percent. That's considerably worse than the rate among its graduate programs. But investigators say Walden has moved fast to start a free orientation program, which should help.

They said placement rates and earning power are not an issue for graduate students in teaching and nursing. But it could become "a more serious concern" as it enrolls more undergraduate students.

Alex Friedrich of MPR contributed to this report.

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