For-profit schools fight to keep profits

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Updated: August 4, 2011 4:20PM

Sen. Dick Durbin has fought the tobacco industry. He has tangled with credit card companies and big banks, too, he says.

“But I’ve never seen a lobbying effort like this. It’s like a full-employment program for former members of Congress,” said the Illinois Democrat.

The industry?

For-profit colleges.

The industry is attempting to stop new regulations that would withhold federal education loans and grants from its schools with high student debt and low student loan repayments.

Critics contend that too many students of for-profit programs leave with useless degrees and heavy debt. The new rules would stop funding to individual programs when two-thirds of their students do not pay down the principal on education loans and do not earn enough to do so, a measure called “gainful employment.”

In the 2009-2010 election cycle, the industry donated millions of dollars to the campaigns and political action committees of nearly 100 Democratic and Republican congressional candidates. For-profit colleges spent more than $6 million on lobbyists in 2010.

In recent months, a trade group funded advertising that urged: “Don’t let Washington get in the way.” In one TV spot, Karri Danner of Walbridge, Ohio, says she went back to school to become a licensed practical nurse. “It’s my education and my job. It should be my choice,” she says.

In a speech last week in Washington, Durbin said that for-profit colleges are “consuming a disproportionate share of federal financial aid dollars.”

For-profit schools educate less than 10 percent of all college students but get 25 percent of all Pell grants, he said. For-profit school students make up 44 percent of the federal student loan defaults.

While there are “many good for-profit colleges” there are “also a lot of bad for-profit schools that are raking in huge amounts of federal dollars and leaving students poorly trained and over their heads in debt,” Durbin said.

Too many students are paying $20,000 to $30,000 for associate’s degrees but their diplomas aren’t landing them jobs.

“They’re no more employable than they were before and now they’re deep in debt,” said Durbin, the assistant Senate majority leader.

Gathering and disclosing to the government student income and debt information bothers many for-profit colleges, said Harris Miller of the Association of Private Sector Colleges and Universities, which paid for the ads. His members would prefer performance benchmarks.

Miller’s group estimates the new rules would displace 300,000 for-profit college students in the first two years after implementation, including a disproportionate number of poor and minority students.

“Standards are necessary,” said Miller. But new rules should “incentivize all colleges and universities to produce positive results for student, taxpayers, and the country” — not just target the for-profit industry.

Mike Buttry, a spokesman for the for-profit Capella University, worries about “one- size-fits-all” regulations. An accredited institution, Capella has a student loan default rate of only 3.3 percent — less than a third of the overall average at for-profit colleges and lower than the averages for public and nonprofit private schools.

“We’re not saying don’t do anything,” Buttry said. “We’re saying get it right.”

Capella, which has an enrollment of 38,000 and paid $100,000 last year for lobbyists, got 78 percent of its $335 million in revenue from government loans and grants in 2009.

With the industry lobbying furiously, the education department delayed putting the rules in place late last year. It now promises implementation some time in early 2011. Pressure to dilute, delay or even defeat the regulations seems to be gathering momentum.

Supporters of the proposed policies point to a Government Accountability Office audit that alleged deceptive, high-pressure sales tactics, as well as a study of 16 for-profit colleges that found that 57 percent of students dropped out within a year, almost all carrying loans they would be hard-pressed to repay.

The controversy is taking a toll on the stock prices of publicly traded for-profit colleges: Shares of the Apollo Group, a $4.9 billion giant that owns the University of Phoenix, have lost a third of their value over the past year and Capella shares are down more than 20 percent in that period.

Scripps Howard News Service with Sun-Times staff