Senators Kay Hagan (D-NC) and Tom Harkin (D-IA) today announced new legislation to ensure that taxpayers' investment in federal assistance for college students is not being wasted on advertising, marketing and recruitment rather than being used to educate and support students. The Protecting Financial Aid for Students and Taxpayers Act will maximize federal student aid by prohibiting the use of Pell Grants, federal student loans, the Post-9/11 G.I. Bill, and other federal education funds for such practices, similar to a current law that bans the use of federal higher education dollars for lobbying.
"In these tough economic times, we need to protect taxpayers' investment of billions of dollars in student financial aid by ensuring that it is used to help students succeed in college, not on out-of-control advertising, marketing and recruitment budgets," said Senator Hagan, a member of the Health, Education, Labor and Pensions Committee. "I am especially troubled by the tactics some for-profits have employed in targeting active duty servicemen and women and their families. North Carolina has one of the largest populations of active duty service members and veterans in the country, and each of these courageous men and women deserves access to a quality education. This legislation takes the most significant action yet to protect students, active duty military, veterans and their families from deceptive recruiting practices by some for-profit colleges."
"Today we are sending a strong message to colleges that choose to spend federal dollars on advertising at a time that middle class students and families are struggling to get ahead: find the money for marketing elsewhere, not from taxpayers. This is common-sense, fiscally responsible legislation to maximize financial aid dollars for educating students," said Harkin, who is Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee. "Our Committee's investigation revealed a staggering amount of money is being spent on advertising and recruiting from for-profit colleges that fail their students. Taxpayers should not be picking up the tab for colleges with dismal graduation rates that spend up to 30 percent of their revenue on marketing machines."
While the majority of colleges and universities devote a small percentage of their revenue to advertising, marketing, and recruiting, the HELP Committee investigation of the for-profit higher education industry led by Chairman Harkin has revealed that several colleges with high dropout rates and low graduation rates devoted as much as 30 percent of their revenue to advertising, marketing and recruiting. This legislation would require all colleges and universities to pay for such activities with non-taxpayer dollars.
Further analysis by the HELP Committee has revealed:
Fifteen of the largest for-profit education companies received 86 percent of their revenues from federal student aid programs - such as the G.I. Bill and Pell grants;
In Fiscal Year 2009, these for-profit education companies spent $3.7 billion dollars, or 23 percent of their budgets, on advertising, marketing and recruitment, which was often very aggressive and deceptive;
These colleges not only outspend other institutions of higher education in their efforts to secure student enrollments, but such spending is highly disproportionate when compared to American businesses overall.
One study found, "In the corporate world, marketing budgets typically represent between 4-12 percent of sales," and in the for-profit education sector, "marketing budgets can approach a whopping 40 percent of tuition revenue."
In contrast, the study found that nonprofit colleges and universities spend an average of one-half of one percent of their revenues on marketing.