Report: A boom industry profits from U.S. student aid

A report issued by U.S. Sen. Thomas Harkin describes the explosive growth of for-profit colleges, from trade schools to online universities, fueled by federal loans to students who, more often than not, drop out.

Kai Ryssdal: There was news today about for-profit colleges. The Kaplan Universities of the world, the DeVry Institutes, as well as trade programs in cosmetology or medical billing or car repair. In all, about 10 percent of the total college student population goes to for-profits.

A Senate report out today (PDF) says they're a bad deal for a lot of those students and taxpayers.

Marketplace's Adriene Hill reports.


Adriene Hill: Sen. Tom Harkin is no fan of for-profit colleges. Or how, he says, they do business.

Tom Harkin: Exorbitant tuition, aggressive recruiting practices, abysmal student outcomes.

And, nope, he's not done there. Harkin says most of the revenues received by for-profit colleges came from federal student aid programs, and those colleges spent less than 20 percent of that revenue on actually educating students.

Harkin: We can't continue to pour more and more taxpayers dollars into this bottomless pit and students really aren't getting much out of it.

The Association of Private Sector Colleges and Universities -- as you might expect -- disagrees with the bottomless pit characterization, and a whole lot of the rest of the report. Steve Gunderson is the group's CEO.

Steve Gunderson: It's a very should I say careful use, or misuse would probably be the right term, of comparing numbers and statistics that just don't make sense.

But he says there are changes Harkin recommends that he supports. Among them, better tracking of student outcomes, but for all colleges.

Peter Wahlstrom is an analyst at Morningstar.

Peter Wahlstrom: It has been a very difficult and challenging environment, I think most companies would agree, in the for profit education space.

There's more oversight of how they recruit and do business and enrollment is falling. But Wahlstrom expects headline like today's will push for-profit-colleges to do more, to convince people that enrolling is a smart decision.

I'm Adriene Hill for Marketplace.

About the author

Adriene Hill is the senior multimedia reporter for LearningCurve.

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