Sen. Harkin to hold hearings on federal funds to for-profit colleges

By John Hechinger
Friday, June 11, 2010

Sen. Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee, said he plans to hold a series of hearings to examine the surge in federally funded grants and loans flowing to for-profit colleges in the United States.

The committee will probe the "rapid growth of federal investment" in the sector and "the corresponding opportunities and risks for students and taxpayers," Harkin, an Iowa Democrat, said in an announcement Thursday on his Web site.

Apollo Group Inc.'s University of Phoenix, ITT Educational Services Inc., Career Education Corp. and other for-profit educators are under increasing federal scrutiny over their recruitment practices and level of student loan defaults. President Obama's administration is proposing tougher regulation of the companies because of concern that recruiters are signing up unqualified students and leaving them with loans they may be unable to repay. For-profit colleges receive more than $20 billion a year in federal student grants and loans, Harkin said in his statement. The hearings are scheduled to begin June 24.

"We need to ensure for-profit colleges are working well to meet the needs of students and not just shareholders," Harkin said in the statement. "We owe it to students and taxpayers to make sure these dollars are being well-spent."

The number of students attending for-profit colleges in the United States rose to 1.8 million in 2008, up from 550,000 in 1998, according to Harkin's statement. One in five students who left a for-profit college in 2007 defaulted on the loan within three years, Harkin said, citing Department of Education statistics.

For-profit companies cater to lower-income and minority students, who are often unable to attend traditional schools, according to Harris Miller, president of the Washington-based Career College Association, which represents more than 1,400 for-profit colleges. Higher default rates at the for-profit colleges reflect graduates' socioeconomic backgrounds rather than the quality of their educations, according to Miller.

The for-profit colleges are lobbying against the Education Department's proposed regulations, which are expected to be issued for public comment as soon as next week. They would cut federal aid to for-profit colleges whose graduates' starting salaries make it difficult to repay their loans as well as tighten rules against tying recruiters' pay to the number of students they enroll.

-- Bloomberg News

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