Democrats target for-profit colleges

At the first in a series of hearings on for-profit higher education, Sen. Tom Harkin, an Iowa Democrat, hit the for-profit sector for taking a disproportionate share of federal aid and for students’ high default rate on loans, reports the New York Times.

Fueled by federal student aid, the for-profit sector has mushroomed. While overall post-secondary enrollment increased 31 percent from 1998 to 2008, the for-profits’ enrollment grew by 225 percent. Although they account for less than 10 percent of students, the for-profit colleges get almost a quarter of the federal student aid. In 2008-9, they got $4.3 billion in Pell grants and $19.6 billion in Stafford loans.

The committee hear four witnesses talking about abuses in for-profit higher education and one representative of a for-profit college.

One witness, Steven Eisman, a hedge-fund manager known for predicting the housing market crash, compared the for-profit colleges to the subprime mortgage industry, describing them as “marketing machines masquerading as universities.” Mr. Eisman told the committee that about half of all for-profit students dropped out.

Before the hearing, Harris Miller, head of the Career College Association, said Eisman is “a trader who would profit from any decline in the stock of the proprietary colleges.”

Harkin complained that there’s little data on how many students graduate, how many find jobs in their field and how many default on loans over time.

Sen. Michael Enzi of Wyoming, the ranking Republican, complained that his party had been left out of the process of arranging the hearing. “It is essential that we use a scalpel and not a machete,” Enzi said.

Ninety percent of DeVry graduates have found jobs related to their education since the 1970s, said Sharon Thomas Parrott, DeVry’s chief compliance officer.

The Education Department’s inspector general said for-profits account for most investigations for fraud and abuse, such as falsifying students’ eligibility for federal aid or receiving aid for “online students who never participate in any classes or assignments.”

The committee also heard testimony from Yasmine Issa, who, as a 24-year-old, divorced mother of twins, enrolled in a $32,000 course at Sanford-Brown Institute in White Plains, to learn to be an ultrasound technician. After she completed the program in 2008, Ms. Issa learned that she could not get a job because the program was not accredited by the American Registry for Diagnostic Medical Sonography. Now she is carrying more than $21,000 in debt, which, the committee noted, cannot be discharged in bankruptcy.

Miller, the for-profit industry lobbyist,  called the hearing a “firing squad.”