For-profit education is one of fastest-growing industries in the United States, even during a time of economic downturn. And Sen. Tom Harkin, D-Iowa, has called for an investigation into how it is affecting students and taxpayers.
Democratic lawmakers requested the U.S. Government Accountability Office for a full probe into the controversial institutions, such as the University of Phoenix and ITT Tech, which aim to provide students with a convenient and accessible way to gain degrees.
Harkin — the chairman of the Senate Health, Education, Labor, and Pensions Committee — will hold a series of hearings in Washington on the issue of for-profit colleges starting today.
U.S. Department of Education data show enrollment in for-profit institutions has skyrocketed in recent years. Around 364,000 Americans were enrolled in for-profit institutions in 1998, a number that grew to nearly 1.5 million by 2008.
What make the data particularly troublesome is that up to 90 percent of high tuition costs at some for-profit institutions are covered by federal student-aid loans. And if defaulted upon — which is occurring at an alarming rate by students who have attended these institutions — the loans are repaid by taxpayers.
“Pell Grants and student loans now provide more than $20 billion to for-profit education companies every year,” Harkin said in a release. “We owe it to students and taxpayers to make sure that these dollars are being well spent.”
Harkin’s office has also noted as many as one in five students who have left a for-profit college in 2007 have since defaulted on their student loans.
Five for-profit institutions — either based in or with offices in Iowa — were asked for statements on the recent government interest in their institutions on Wednesday. Only one institution, Ashford University in Clinton, returned comment.
Larry Libberton, a tuition supervisor at Ashford, said the school’s yearly average tuition is $15,720 and that financial aid is made available for students “just like any other university.” Ashford offers both online and in-person classes.
Among the witnesses to be called in today’s hearing is Steven Eisman, who has gained fame for predicting the economic downturn in the wake of the subprime-mortgage crash.
Eisman, who works as a portfolio manager for FrontPoint Financial Services Fund, has been an outspoken critic of the for-profit education sector. In a speech given at an investment research conference in May, he called the industry “as socially destructive and morally bankrupt as the subprime-mortgage industry.”
He also speculated in the speech that if federal loans given to students at for-profit institutions continue to be issued at the present rate, it will cost the government $330 billion by 2020.
Linda Perlstein, the public editor of the Education Writers Association who has researched for-profit institutions, said that despite comments from authorities such as Eisman, there has not yet been significant research into the for-profit education sector.
“It’s not necessarily the nonprofit versus profit status of an institution, but it’s the institution’s quality that’s the prevailing issue,” she said. “[Institutions] want good reputations, but they don’t have good default rates among their students.”
Some UI students agreed that the quality of a degree from for-profit institutions may not be as valuable in the job market as a degree from more traditional schools.
“Iowa is a larger university with well-rounded points of view,” said sophomore Taylor Steenblock. “There are generally higher standards with more unique experiences than a smaller or for-profit university.”