Senator Durbin Declares Battle To Stop Fed-Aid Abuse By For-profit Colleges

Tejinder Singh – AHN News Correspondent

Washington, DC, United States (AHN) – Senator Richard J. Durbin, (D-Illinois) called for a check on the unregulated growth and spiraling costs of for-profit colleges on Wednesday, comparing the bubble growth of these educational institutions to the subprime mortgage fiasco.

At a Newsmakers press conference at the National Press Club, Senator Durbin cited Steve Eisman as saying, “Subprime goes to college,” adding that Eisman was one of the witnesses at the first of a series of hearing of the Senate HELP Committee.

“There is growing concern that we could be looking at a repeat of the subprime mortgage fiasco, with low-income, high-risk students mortgaging their futures – not on overpriced homes this time, but on worthless diplomas,” Senator Durbin noted.

In the current year, “The largest chain of for-profit colleges, the University of Phoenix, has become the second-largest higher education system in America, behind only the State University of New York. With 458,000 students, it is now larger than the entire undergraduate enrollment of the Big Ten,” Durbin said.

The Senator in his remarks also mentioned the for-profit schools like “Kaplan University, and DeVry University, which is headquartered in my home state of Illinois,” citing statistics in their growth.

The Senator quoted from a description of student profile from Peter Waller, CEO of Corinthian Colleges Inc., a company that owns many for-profit colleges, including some in Illinois.

“They are 25 to 27 year-old average age, who frankly have got lost in life, and we are their lifeline to a career,” Waller is quoted as saying while the Senator added, “That lifeline doesn’t come cheap.”

“Tuition at for-profit schools is, on average, five-and-a-half times the price of community colleges, and about twice as much as public four-year colleges,” noted Durbin.

Although recession and eagerness “to improve their skills and boost their employability,” are some of the reasons that are responsible for the burgeoning expansion of for-profit colleges, Senator Durbin cautioned that there are two other major reasons: “First is easy access to government loans. For-profit schools make it easy for students to line up loans and enroll with no money upfront.”

The other factor, the Senator noted, is “slick marketing and hard sells,” explaining, “career colleges market their programs as passports into the middle class.”

The Senator called attention to elaborate TV commercials put out by these colleges urging viewers to “make the call that will change your life and get you on the right track to a rewarding career.”

Senator Durbin called for limits on the amount of federal assistance that may be spent on marketing and a review of a rule that allows for-profits to receive up to 90% of their revenue from federal aid.

Durbin also proposed a ban on companies that acquire accreditation through the purchase of nonprofit colleges, and suggested greater scrutiny of loans which for-profit colleges make to their students.

The speech from Durbin came on the heels of the Senate education committee hearing arguing in favor of a crackdown on the rapidly growing for-profit sector in order to protect federal student-aid dollars from fraud and abuse.

The Senator outlined some of the ways already being channeled by the Obama Administration like tightening oversight and accountability of federal student aid; restricting institutions that receive student aid from paying admission recruiters and disclosing job placement rates and tying the employment with aid.

Durbin promised to work on legislation taking aim at for-profits with Sen. Tom Harkin of Iowa, Chairman of the Education Committee.

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