CQ - New Bill Would Tighten Rules on For-Profit Colleges' Use of Federal Funds

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By Lauren Smith

Senate Democrats on Wednesday took the most significant step to date in their efforts to curb possibly deceptive recruiting tactics among for-profit colleges by unveiling a bill that would prevent institutions from using federal student-aid funds to pay for such activities.

"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 Kay Hagan, D-N.C., who is cosponsoring the bill with Tom Harkin, D-Iowa, the chairman of the Health, Education, Labor and Pensions Committee.

The bill, which has not been officially filed, would prohibit all higher-education institutions from spending revenue gained through federal student-aid programs on advertising, marketing and recruiting. Such a ban already prevents colleges from using federal student-aid money for lobbying and for advertising, marketing and recruiting as it relates to sports.

The bill would also prevent student-aid programs operated through the Defense Department, such as Post 9/11 G.I. benefits, from being used for advertising, marketing, and recruiting. Those programs currently are not counted as federal revenue, because they don't originate through Title IV of the Higher Education Act (PL 89-329).

"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," Harkin said.

Although the proposal applies to all types of colleges and universities, it was born out of concern about for-profit institutions, which, several investigations have shown, spend millions of dollars to target vulnerable populations such as veterans and low-income individuals while skimping on spending for education instruction, student support services and job-placement counseling.

According to a HELP Committee study, 15 of the largest for-profit education companies received 86 percent of their revenue from federal student-aid programs, such as Pell grants for low- and middle-income students and the Post 9/11 GI Bill. Together, they spent $3.7 billion, or 23 percent, of their budgets on advertising, marketing and recruiting.

Industry Reaction
The for-profit-colleges industry came out swinging against the bill, saying it is another attempt by Democrats to shut them down.

"While the bill introduced by Senators «Hagan and Harkin applies to all sectors of higher education, it is clearly another attempt by some policy makers to try and put private-sector colleges and universities out of business," said Steve Gunderson, a former House member who now serves as president of the Association of Private Sector Colleges and Universities.

"It also reflects a fundamental misunderstanding of the students we serve and the public service we provide," Gunderson continued, noting that many of the students enrolled at for-profit colleges are adults who can't be recruited through a high school guidance counselor.

For-profit colleges came under scrutiny by Congress and the Obama administration last year, after numerous studies showed that many of the schools get much of their revenue from federal financial aid but that large numbers of their graduates are unable to pay back their loans. In addition, deceptive marketing and recruiting practices were detailed in a series of Senate hearings and a Government Accountability Office report.

But the chances of passing legislation are slim, given that members of both parties in the House contend that the stricter rules favored by Harkin and other industry critics would restrict access to college for minorities and single parents, and could spur job losses if the education programs were eliminated.

Republicans have dismissed the reports and have accused Harkin of being engaged in a "witch hunt" against for-profits. They argue that federal aid and recruiting practices should be investigated at all colleges, not just at for-profit schools.

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