Senate Scrutiny, Round 3

Partisan divide in for-profit debate intensifies as Tom Harkin's committee examines student outcomes and profit margins.
October 1, 2010

WASHINGTON -- The increasing divisiveness of the debate over the federal government’s role in the oversight of for-profit colleges (and the growing likelihood that nonprofit higher education will get roped into the scuffle) was on full display Thursday as a Senate committee convened for its third hearing examining the sector.

Framing his concerns about the sector’s $24 billion stake in the federal financial aid program and what he called "misleading, deceptive, overly aggressive or fraudulent" practices that lead students to enroll at for-profit colleges, Senator Tom Harkin (D-Iowa), chairman of the Health, Education, Labor and Pensions Committee, singled out the institutions for scrutiny. “They figured out how to be profitable even when the students are not successful,” he said. “There’s irrefutable evidence now that something’s gone wrong with this industry. I’m not saying that everybody’s bad in the industry, I’m just saying that the system has gone wrong.”

Harkin reiterated his pledge to sponsor legislation relating to for-profit colleges early next year. But he conceded the need for further investigation and more hearings, because “I don’t know exactly what needs to be done.” He also announced that the next hearing on the sector would be in early December and focus in part on the increasing share of funding going to for-profit colleges from the tuition assistance programs for veterans, active duty military and their families.

At the start of the hearing – which was devoid of the startling revelations that some in the sector and investors had feared -- Harkin unveiled a report analyzing some of the data submitted to the committee by 30 for-profit colleges as part of his staff’s investigation of the sector. The report focuses entirely on the for-profit sector and does not include data on nonprofit colleges and universities as a basis for comparison.

That, said Senator Michael B. Enzi (R-Wyo.), was problematic. “I agree there is clearly a problem in higher education -- now you’ll notice I didn’t limit that comment to for-profit schools,” he said. “It’s naïve to think these problems are limited to just the for-profit sector. We’ve been looking at this in a vacuum.”

Harkin countered: “The point is that only 16 percent of community college students borrow money; 95 percent of [students at] the for-profits borrow money and they borrow money at a higher amount than they do at the community colleges.” Tuition for for-profit programs can be significantly higher than for comparable programs at community colleges, he said, pointing to findings from the Government Accountability Office’s August report on the sector. To him, the examination was not one done in a vacuum but one focused on the most pressing area of concern.

Partisanship was a defining characteristic of the hearing. All four of the witnesses who testified were selected by the committee’s Democratic staff and walked into the hearing room having already spoken out against some of the sector’s practices.

Danielle Johnson, a student at Kaplan University in Iowa, alleged that she had been misled during the admissions process and said she ended up disappointed with the choice she had made. Kathleen Bittel, a career counselor at Education Management Corp. on leave after deciding to speak out against the company's recruitment and placement practices, said the company encouraged her and others to manipulate placement data to make the numbers look more favorable.

Two experts on college access -- Lauren Asher, president of the Institute for College Access and Success, and Arnold Mitchem, president of the Council for Opportunity in Education -- spoke about high levels of student debt and varied outcomes.

The committee’s Republicans decided not to offer up their own witnesses for the hearing. “Given the hostile treatment received by our previous witnesses, I’ve refrained from leading other witnesses into that kind of treatment,” Enzi said, adding that, in his 14 years in the Senate, “I haven’t been through a series of hearings that have been this one-sided.”

The hearing, he postulated, was being used by Harkin to reinforce the U.S. Department of Education’s momentum in pushing ahead on its controversial “gainful employment” regulations.

The message coming from Harkin during the hearing was a bit muddy, alternating between denunciations of the sector’s business model and expressions of concern for its students. “For-profit colleges have made the federal government their primary free money spigot,” he said, noting that in data provided to the committee by 30 for-profit higher education companies, profit margins ranged from 16 to 37 percent.

At other points, though, Harkin stressed that he had no problem with the sector’s profits but was alarmed by the likely outcomes for students. By his staff’s calculations, 57 percent of students who enrolled between July 1, 2008 and June 30, 2009 at 16 of the institutions from which he received data had withdrawn by Aug. 2010. For new enrollees, he said, “graduation is a possibility, but a debt without a diploma is a probability.”

After the hearing, Harris N. Miller, president of the Association of Private Sector Colleges and Universities, questioned many of the statistics offered by Harkin’s report, noting that national accreditors -- who oversee most of the sector -- require high retention and graduation rates. Harkin’s findings, Miller said, “do not square” with other recent reports by researchers and think tanks examining the sector’s students.

On a broader level, the debate over for-profit colleges is about the flow of federal education dollars and the priorities for where that money should go. Harkin hinted that some of that money could be better used at community colleges. Senator Al Franken (D-Minn.) didn’t say where he wanted to see student aid money spent, but said he had done “everything I can to fight for Pell Grants” and doesn’t “want them wasted.”

He stressed that senators ought to play an investigative and protective role. “Isn’t it our job -- I would think -- our committee and our jobs as senators to uncover deception so that when the invisible hand is operating it isn’t an invisible hand with a card up its sleeve?”

Enzi was not the only Republican combative with Harkin. Senator John McCain, of Arizona, read from an op-ed written by Lanny J. Davis, the Clinton administration special counsel who is representing several for-profit colleges as a lawyer and a lobbyist, that criticized scrutiny of the sector. “On one of the most rare occasions in my political career I find myself in complete agreement with Lanny Davis,” he said. “Of course there needs to be action taken to stop the abuses that [Harkin] ad nauseum continues to point out … but to kill off the for-profit institutions … we’d be literally be doing away with every department of the federal government.”

The hearing, McCain said, “sort of exemplifies the broad, really sharp divisions between our two parties and our two philosophies of government.” Hinting at November’s congressional elections and the possibility that Republicans will take majorities in the House of Representatives and Senate, and thus the chairmanships of committees, he added: “Hopefully, maybe in January it seems pretty clear that we will have a new agenda for this committee and the United States Senate.”

Harkin and Franken both said that McCain’s statements were dubious and excessively partisan. “I’ll do everything in my power to avoid and try not to get sucked into a Democratic-Republican debate over this,” Harkin said at the end of the hearing. “Students are taking on too much debt, defaults are too high and students are having too much difficulty finding jobs or even completing their program of study.”


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