For-Profit Schools

Floor Speech

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Mr. DURBIN. Mr. President, I have been coming to this floor for a long time. The Presiding Officer is new to the body so I know he has been spared my speeches on the subject talking about for-profit colleges.

This is an industry that lures students with flashy ads and misleading promises, gobbles up the Federal loan and grant money these students can bring to them and then ends up producing students--if they are lucky enough to get a diploma--who can't find good-paying jobs. To understand the for-profit college industry in America today, you only need to know three numbers--and for those who are listening, this will be on the final. Here are the three numbers: For-profit colleges enroll ten percent of college students in the United States of America. When you think of for-profit colleges, think of University of Phoenix, DeVry, Kaplan. There are a lot of them. Ten percent of college students go to these schools.

These schools, the for-profit schools, receive 20 percent of the Federal aid to education.

Why do they get so much if they only have 10 percent of the students? They charge so much. Their tuition goes through the roof. Ten percent of the students, 20 percent of the Federal aid to education. But this is the number I don't want you to forget--44.

Forty-four percent of all student loan defaults are students of for-profit schools. What does that tell us? It tells us these students are getting in over their heads. They are borrowing too much money. It tells us these students are dropping out and unable to pay their loans or end up with a worthless diploma and can't find a job.

How can the Senate stand back and say this is acceptable? For-profit colleges are the most heavily subsidized private companies in America today--the most heavily subsidized.

In the home State of the Presiding Officer and mine, we have some farmers. Our farmers get kicked around a little bit about all of the Federal money they receive. Our farmers don't hold a candle to the for-profit colleges and universities.

These folks have turned siphoning money out of the Federal Treasury into an art form. The money they pay the CEOs who engineer these arrangements is in the millions of dollars each year, all Federal dollars, virtually all, 90, 95 percent of Federal dollars. How can you call yourself a private, for-profit company, when 80 to 90 percent of your money is coming directly from the Federal Government?

As a matter of fact, this industry, the for-profit college industry, if we took the money we spent in subsidies to these schools, would be the ninth largest Federal agency in Washington.

Yet many flinty conservatives who hate subsidies and hate deficits look the other way: Oh, it is a private company--10 percent of the students, 20 percent of the aid in Federal education, 44 percent of all the student loan defaults--and they are getting 80 to 90 percent from the Federal Treasury and we are supposed to look the other way?

From time to time, students come and sit in our galleries. Many of them are soon to graduate from high school. They will be inundated by these for-profit schools.

As soon as you reach a certain age, you can't log onto your computer without these schools roaring at you about the great deals they have to offer. I took a look back in recent memory. They actually ran an ad before the Presiding Officer was elected, and it was an ad that was on local television here. It showed a very attractive young lady in her pajamas, lounging on her bed, and she had her laptop computer. She said in this ad: I am going to college in my pajamas. I am going to a for-profit college--I don't even have to get out of my pajamas, I can go to college.

That is a bad joke, and unfortunately too many people are lured into this belief: I can just log on and get a degree. Well, it turns out many times it is too darned expensive--and it is worthless, if you ever get it.

The stories that come to my office of young people who signed up for these for-profit schools and ended up with more debt than they could ever possibly imagine are horrifying. Imagine a 30-year-old woman in the suburbs of Chicago with over $100,000 in debt and a worthless degree from Westwood College, one of the for-profit colleges in the Chicagoland area.

She watched all these crime shows on television, and they told her she could go into law enforcement with this degree. She spent 5 years, over $100,000 in debt, and not a single law enforcement agency in the Chicagoland area would recognize that degree.

Was she ever told that along the way with all those fancy ads? Never. So I say to students: Think twice about these for-profit schools.

But I want to say a word about one particular instance that bothers me a lot. Corinthian was one of the largest--most people didn't know Corinthian as a for-profit school, but they knew some of the schools that were involved in it. Everest Colleges were owned by Corinthian.

Well, it turned out that Corinthian ran into a problem. Corinthian Colleges was falsifying information they gave to the Federal Government. The Federal Government asked Corinthian Colleges, as it asks all of these other for-profit colleges: How many of your students get jobs after they graduate?

Corinthian was falsifying the students getting jobs. In fact, Corinthian had this arrangement with many companies. They would give them $1,000 and say: Can you hire our graduates for a month? You can let them go, but hire them after graduation for a month or two, and we will give you some money to do it. The companies went along with that, subsidized employees, then they let the employees go.

Then Corinthian would report to the Federal Government: our graduates are working.

Well, when we called them on it and they couldn't produce the real information, Corinthian stock started plummeting and eventually went out of business. It was more than 1 year ago that I wrote to the Department of Education asking them to investigate Corinthian Colleges about falsifying job placement rates. It was originally reported by the Huffington Post. According to the Department, they looked into it. Corinthian was, in fact, lying, falsifying placement rates and creating attendance records at several of its institutions. Corinthian would use inflated placement rates to lure other unsuspecting students into the school. After the Department of Education placed financial sanctions on the company and delayed their title IV disbursements, Corinthian reported they didn't have enough cash flow and would have to close.

That is exactly what would have happened. Unfortunately, the Department of Education kept the school afloat even after this, shoveling hundreds of millions of dollars to the failed Corinthian company, allowing it to continue advertising and signing up students. At a point when private investors were jumping ship, the Department of Education was jumping in. Now, in a transaction blessed by the Department of Education, most of the former Corinthian campuses have been sold to ECMC.

This is a corporation that has served historically as a debt collector for the Department of Education. This is one of the companies that goes after students when they are not paying their student loans. Now this debt collection agency is going to own one of these for-profit colleges, what is left of Corinthian.

We are told this new debt collection university will operate as a not-for-profit entity. That was enticing, and I thought, well, at least they are not in the for-profit world. Despite being a not-for-profit company in name at least, I am troubled that ECMC is already--just weeks into owning and operating these schools--failing to live up to the promises they made to the students and to me.

This is an example. I wrote ECMC's head, David Hawn, in December, asking him to discontinue Corinthian's use of mandatory arbitration clauses as part of the school's enrollment agreement. What are these clauses? These clauses, signed by students, take away the rights of students to bring grievances before a court. And once students end up in arbitration proceedings, they find the rules stacked against them and in favor of the corporate players.

The associations that represent not-for-profit schools have informed me that their member schools do not use these mandatory arbitration clauses.

These clauses are essentially only used by companies in the for-profit college sector. I told Mr. Hawn if he was truly going to run a not-for-profit institution, he should follow the clear model of nonprofit education--no mandatory arbitration clauses for students.

In his response to me, Mr. Hawn certainly said the right thing. He told me that ECMC had ``eliminated Corinthian's policy of binding mandatory arbitration.''

The reason this is important is that if a student has been defrauded, and they signed one of these mandatory arbitration clauses, they can never get their case and their facts before an impartial jury or judge. It is going to be decided in an arbitration hearing instead.

Mr. Hawn summed up their policy and the issue as follows:

Bottom line: We believe that students have an unquestioned right to seek redress for grievances, including the right to file a lawsuit. We will not stand in the way of any student who wants to pursue litigation based on his or her personal experience.

It couldn't have been stated more clearly and better. It meant that this debt collection company that is taking over the failing for-profit school is saying that we are truly not-for-profit and we are truly going to play this on the square. If students feel they have been treated unfairly, they have every legal right to go to court so they do not end up with tens of thousands of debt because we defrauded them.

I felt pretty good about that response. Well, then we read the fine print. We found out that ECMC uses a combination of carrots and sticks to try to keep students out of court. First, ECMC's new enrollment document requires students to irrevocably waive their right to seek a trial by jury and waive their ability to join any class action lawsuit against the school.

That isn't what Mr. Hawn told me was going to happen. In other words, students who were wronged by ECMC have to challenge the school alone. They have to stand by themselves, and they can't make a court case in front of a jury.

Then there are carrots. ECMC's enrollment agreement does everything it can to scare students into arbitration. They offer to pay half the cost of a student's filing fee for arbitration if--and only if--the student waives his or her right to appeal the arbitrator's decision to court or bring a lawsuit against the school. And if a student demonstrates hardship, for example, because the student is saddled with enormous student loan debt and no job, ECMC will offer to pay the entire arbitration filing fee but, again, only if the student will forfeit their right to bring a lawsuit, which means the arbitrator's decision becomes binding.

I see another colleague of mine on the floor, and I know she wants to make a statement, so I will wrap up here.

Meanwhile, Corinthian executives seem to be off the hook. They have faded into obscurity. They took millions of dollars in Federal subsidies, they lured students into worthless schools, and the students ended up with the debt and worthless diplomas. They falsified the results of their activities to the Federal Government. Then they basically went bankrupt, took their million dollar salaries, and faded away. What is left behind? How about all the students with all the debt for the worthless courses at the worthless school?

That is the reality of the for-profit college industry, and Corinthian is exhibit A. It doesn't appear that any prosecution of these individuals who ran Corinthian into the ditch is likely. They have literally taken their money, and they are off to some other pursuit. Maybe they are looking for some new Federal subsidy that can make them rich. But the former students are left with worthless educations and more debt than they can ever repay--students such as Dawn Thompson from my State of Illinois.

Dawn has a parallel degree from Everest--part of Corinthian--but never ever could find a job in her field. She has over $100,000 in student loan debt to become a parallel. How about that? She has Federal and private loans. After graduating, she was working a minimum-wage job now as a bank teller. She tried to file for bankruptcy a couple of years ago and--you guessed it--student loan debt is not dischargeable in bankruptcy. Dawn, it is with you for your lifetime. It is one of the few debts that are not dischargeable.

Dawn Thompson thought at that point her only option was to go back to school. She went back to Everest, the original school she went to. She thought that getting a master's degree from Everest would make a difference. It did. Her student loan debt went from $100,000 to $170,000. She is still struggling to find a job.

How can we stand by and let this happen? How can the Federal Government recognize these as real schools? How can we allow students to be misled into believing these are real colleges and universities? How can we continue to give these outrageous scandalous subsidies to these worthless companies where the CEOs are taking out millions of dollars?

It is time for us to do something about this. Shame on us if we sit here and make speeches about how bad the deficit is and how much we care about struggling students and ignore the obvious. For-profit colleges and universities as an industry are basically an industry that needs to be thoroughly investigated, carefully monitored, and most of their players need to go out of business--and not at the expense of the students.

We are talking about 10 percent of students, 20 percent of the Federal aid to education, and 44 percent of student loan defaults from for-profit colleges and universities. It is time for the Senate, when it reauthorizes the Higher Education Act, to change this.
I yield the floor.

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