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New Harkin Report: For-Profit Colleges Offer High Debt, Few Diplomas

September 30, 2010

New Harkin Report: For-Profit Colleges Offer High Debt, Few Diplomas

Despite High Rates of Student Failure, Companies Rake In Record Profits from Taxpayer Funds

WASHINGTON, D.C. – A new report released today by Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (D-IA) reveals that more than half of students at many for-profit colleges will drop out within the first two years, most likely with significant loan debt.  The companies themselves, however, are raking in record profits largely comprised of taxpayer dollars.  The report concludes that under current law, for-profit schools can be extremely profitable while failing a majority of its students. 

“The farther we take this investigation, the clearer it becomes that many for-profit colleges view students as no more than cogs in the profit-making machine, with little concern for their education or success,” said Harkin.  “As many students face a lifetime of debt with no diploma, these schools are enjoying profit margins that place them among the most successful companies in America – profits derived from taxpayer dollars intended to serve as an investment in American students.”

Harkin released his findings at today’s HELP Committee hearing to examine federal investments in for-profit colleges, the third hearing Harkin has convened this year investigating the for-profits.  The report, entitled “The Return on Federal Investment in For-Profit Education:  Debt Without a Diploma” reveals that:

Students at for-profit colleges leave without a diploma at an alarming rate: 
• Out of 16 for-profit schools analyzed, 57% (546,749) of the students who entered school between July ‘08 and June ‘09 have already left the schools.  In total these schools have lost 1.9 million students in the past three years.

The vast majority of students at for-profits are left with significant loan debt:
• More than 95% of students at two-year for-profit schools and 93% at four-year for-profit schools took out student loans in 2007.   
• Only 16.6% of students attending community colleges took out loans during the same time period.  At four-year public schools the borrowing rate was 44.3%, still half the rate of four-year for-profit colleges. 

For-profit schools mask high withdrawal rates by aggressively recruiting and enrolling new students:
• In 2008-09, one school started the year with an enrollment of 71,246 and ended the year with an enrollment of 89,479.  However, the school added 120,638 new students over the course of that year.  Recruiters had to enroll 120,000 new students to increase enrollment by 18,000 for the following year.

Despite these dismal student success rates, for-profit institutions are raking in record profits:
• For the 16 companies analyzed, profits in 2009 totaled $2.7 billion.  Between FY2009 and 2010, one company more than doubled its profits from $119 million to $241 million, while a second went from $235 million to $411 million.

These “profits” are largely made up of the taxpayer dollars intended to support student success:
• Across 14 schools, federal dollars total 87 percent of 2009 revenues and ranged from 93 percent of revenues to 85 percent of revenues.

In June, Chairman Harkin released his first report on the for-profit industry, entitled “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education.”  After convening two hearings, Harkin issued a document request to 30 for-profit education companies to better understand the range of practices across the for-profit spectrum.  The Committee has received cooperation from all 30 companies that received document requests.  Today’s report is based on an analysis of information provided by the 8 largest publicly traded and the 8 largest privately held for-profit education companies that offer certificate, associates or bachelors programs. 

To read the full report, click here.