For-Profit Friends and Foes Duel on the Hill

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In a politically charged Senate hearing room thick with dueling news releases and high-priced lobbyists, Sen. Tom Harkin said Thursday he will continue to investigate what he sees as malfeasance in the for-profit college industry, with an eye toward tighter government regulation.

At the third in a series of hearings on charges of fraud and deceptive practices in the for-profit college industry, the Senate Health, Education, Labor and Pensions Committee, chair by Harkin (D-Iowa), heard from students who had been deceived and an employee of a for-profit who said she saw employees wield deliberately misleading statistics about the job-success rates of its graduates.

While there was no one from the for-profit industry at the witness table, they were not shut out from the hearing altogether: They attended in droves, dropping news releases as they went and holding a news conference by telephone after. Lanny Davis, a leading lobbyist and former Clinton administration special counsel, led the pack and charged that the congressional hearing process smacks of discrimination, because most for-profit college students are poor.

“This is about demographics,” Davis told Youth Today. “If this were George Bush doing this with this racial impact, can you imagine what the liberal Democrats would be saying today?”

The Education Department is considering new rules that would toughen requirements for graduation rates of the for-profit schools in order for them to remain eligible for federal student loan and grant money. Some $24 billion in federal money has gone to the for-profits, and critics charge that many of the loans are defaulted on by students who either don’t graduate from the programs or can’t find jobs when they do.

Harkin’s staff did an extensive study of the programs and found that of the students who enrolled during the 2008-09 school year, 57 percent had withdrawn by this past summer. They still have their debt to repay, and in many cases, simply can’t, so they default, Harkin said.

At the witness table today, Danielle Johnson of Tama, Iowa, said recruiters enticed her to enroll in a Kaplan college, saying she could stay near home to train as a nurse. But that turned out to be false, she said, and the school also refused to release her transcripts so she could transfer to a cheaper community college because she still owed Kaplan $877.

Some Republicans challenged the statistics in the report by Harkin’s staff, noting that publicly-funded community colleges have withdrawal and no-graduation rates that are similar to those at for-profits. Sen. Richard Burr (R-N.C.) led the pack, saying that the Senate should be careful about curbing federal money to for-profits, which serve many populations, including returning service members. “When you do that, you will be taking the first step toward telling these service members they can’t use that G.I. (bill) money to go to NASCAR and be a mechanic.”

But Sen. Al Franken (D-Minn.) said that was a red herring. He said there were many for-profits that do good jobs, but that some are “bad actors” and need tighter regulation. “I don’t want Pell grants being used in a way that is just going to waste,” Franken said. “These schools have 10 percent of the students and 40 percent of the defaults.”

The proposed regulations have made strange bedfellows in opposition. Some liberals, led by many members of the Congressional Black Caucus, charge as lobbyist Davis did that the tighter rules would shut out poor, minority students. Republicans are leery of over-regulating an entire industry based on some poor practices.

“I find myself in complete agreement with Lanny Davis,” said GOP 2008 standard-bearer Sen. John McCain (R-Ariz.), to chuckles in the room. McCain said there needs to be action to stop the abuses, but if we killed off government because of abuses, “we’d be doing away with every branch of the federal government.”

McCain said the sharp divisions were politically motivated. “Perhaps in January [after the elections] we will have a different agenda for this committee and the United States Senate,” he said.

Harkin denied a political motive. He and the Education Department say the for-profit colleges’ poor practices are pervasive, and that their profit motive outweighs concern for students.

According to the analysis by Harkin’s committee, the amount of federal dollars going to the for-profits is accelerating rapidly, with more than eight of the schools doubling the amount of federal money they have taken in between 2006 and 2009. At the same time, the report said, the institutions are making record profits, with one company doubling profits from $119 million to $241 million.

In a conference call with reporters after the hearing, for-profit college executives and supporters wielded their own anecdotes about successful students. “We change people’s lives,” said Henry Herzing, chancellor of Herzing University, which  operates in 11 cities and online. “We give people hope.”

Ramping up the for-profits’ lobbying effort, about 1,500 students, teachers and administrators had rallied in front of the U.S. Capitol building Wednesday to oppose the proposed regulations that would force for-profit colleges to show that graduates are repaying their loans and make enough to afford repayment.