House Subcommittee Hearing Puts Spotlight on For-Profit Colleges

By Megan Walter, Policy and Federal Relations Staff

The House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies (Labor-HHS-Education) held a hearing Tuesday to learn more about for-profit colleges in an effort to protect students and taxpayer dollars from predatory practices. This is only the second congressional hearing since 2010 focusing on for-profit institutions.

Rep. Rosa DeLauro (D-CT), chair of Labor-HHS-Education, started the hearing Tuesday by putting the committees charge into perspective, saying “it is this committee’s responsibility to shine a light on the bad actors in the for-profit sectors. It’s an area we must address because predatory colleges are scamming taxpayers out of millions of dollars, and Education Secretary Betsy DeVos is helping them get away with it. It's our responsibility to ensure that students don’t get taken advantage of while they seek to invest in their own skills and we will continue fight for taxpayers and students by demanding the Trump administration enforce the gainful employment and borrower defense rules.”

Ranking member Rep. Tom Cole (R-OK) followed DeLauro, saying he recognizes the value of having multiple college options for high school graduates and acknowledges that proprietary schools were some of the first to offer distance education and online courses, as well as being of the great innovators in the higher education field. He was cautious, he said, of proposing rules that could end up forcing good for-profit institutions to close their doors.

Sen. Richard Durbin (D-IL), a witness for the hearing, in his submitted testimony stated that while “for-profits enroll only 9 percent of all postsecondary students, these students account for 34 percent of all federal student loan defaults.” Durbin said during the hearing, “the answer to how these numbers are possible is easily answered; these institutions are charging too much for tuition, which in turn forces students to borrow more, leaving them with too much debt, and sometimes, even without a diploma. For those that did receive a diploma, many graduates are finding that the earnings and job prospects they were promised, aren't materializing, and end up defaulting on their borrowed loans.”

Durbin went on to say that these institutions are part of the one of the most subsidized industries in America, with some institutions having subsidies that make up as much as 90 percent of their revenue. “These institutions only exist because of massive subsidies,” Durbin said. “No other industry takes money from the Treasury like this industry does and when they fail, they leave tax payers ending up holding the bag.”

The lawmakers also heard from a panel of higher education experts and a former student on how issues with for-profits have harmed students, and taxpayers, including Kevin Carey, vice president of education policy and knowledge management from New America, who pointed out that students of color, particularly black males, tend to fare worse when it comes to for-profit institutions. Carey pointed out that data show that if a black male ever attended a for-profit college, they have a 58 percent chance of defaulting on their loans, and if they didn’t receive a diploma, that number rises to 75 percent. Carey also informed the lawmakers that there are currently over 200,000 claims to have debts discharged because of closed institutions equal to billions of dollars, just from for-profits, and not a cent of that responsibility would fall on the school, it falls on taxpayers. “For-profits work from a different set of incentives than non-profits, and without strong guardrails, there is a high likelihood of waste and exploitation,” Carey told the lawmakers in closing.

Marc Jerome, president of Monroe College, a private for-profit institution, in response to Carey, defended for-profits by arguing that “higher education as a whole is not adequately serving low-income students” and that “we must recognize that the problem has to be addressed across all sectors.” Jerome, in his testimony, took issue with the “habitual coupling of the word ‘predatory’ with ‘proprietary education,’” saying, “words matter. It’s not right and it immediately stifles thoughtful discussion.”

Jerome also expressed concern that only students attending for-profit institutions, or enrolled in non-degree programs, seem to be protected by accountability metrics, such as gainful employment, arguing that all institutions should be held accountable if they aren’t graduating students at a reasonable rate, or if those graduates aren’t earning enough at jobs to pay the debt they accumulated for the degree.

Eric Luongo, a former student of DeVry University, a for-profit institution with campuses nationwide, testified to tell his story about his experiences as a student navigating the for-profit industry. A Navy veteran, Luongo decided to focus on web graphic design to start his educational path, picking DeVry University because of their promises that his classes would be free, due to his GI Bill benefits, and that he would be able to earn a salary of around $80,000 after receiving his degree. Upon graduation, Luongo found that he had unknowingly maxed out his federal aid borrowing power, and had no evidence with which to file a borrower defense to repayment claim, as his conversations with the institution were primarily over the phone. When asked by Cole if he believes the for-profit industry should just be done away with, Luongo said he knows people who have had both bad and good experiences with for-profits, and wouldn’t suggest that as an answer to the issues in thr for-profit industry.

Lastly, Robert Shireman, the director of higher education excellence and senior fellow at the Century Foundation, addressed the issues between the relationship of federal funding and for-profit colleges. “The problem isn't bad actors; most for-profit schools don’t start out aiming to be predatory,” Shireman said, “They’re launched by business people who have the initial plan to do good, by doing well.” When it comes to accountability, he said, “simplistic indicators of business success, like growth, are not adequate, particularly when the customer is a third party—the government—that is not able to check the value for the money.” He concluded his testimony saying that, when creating regulations, “overlooking that a sector is run by investors is ‘sector ignorant,’ not ‘sector neutral.’ The sectors are very different beats, and for-profits are more hazardous.”

DeLauro questioned the panel asking whether “there is reason for alarm in respect to the for-profit industry,” to which Carey replied that he’s alarmed by “the abuses in recruitment and marketing, by financially motivated institutions to enroll anyone possible.” Shireman replied that “the committee should be concerned that some of the top recipients of Pell Grant dollars last year were the University of Phoenix and Grand Canyon Universities, especially given for-profits’ history of collapsing unpredictably.”

Cole questioned Jerome about “what he thinks [the] committee should be thinking about when investigating for-profits,” to which Jerome replied that he “would love to see policies that stop the really abusive practices, by being speculative about rapid growth, and focusing on return on investment for taxpayers, by asking how much Pell Grant goes to each institution, and how many of those students are graduating.”

“This is an area where public policy can make a big difference,” DeLauro said. “That is what we need to do here, and my hope is that we can draw on the expertise of this panel and we move forward. The stakes are high. People are trying to better themselves, their families’ lives, through education. We know that education is the great equalizer and we can't sit idly by and allow students to be targeted and taken advantage of, on the government's dime.”


Publication Date: 3/13/2019

Jeff A | 3/13/2019 5:16:29 PM

Marc offered constructive discussion with ideas that made a lot of sense and would help improve all of higher education.
In contrast, others presented a well-coordinated agenda with outdated and misrepresented data as a misdirect to the important outcomes challenges faced by all of higher education, especially for low-income and minority students.

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