For-Profit Colleges Seeking Loans `Rob' Students, Senate Testimony to Say

For-profit colleges leave students with high debt and inadequate educations that can harm them for years after they graduate or quit school, witnesses are scheduled to testify today at a Senate hearing in Washington.

Recruiters enticed Danielle Johnson, a mother from Iowa, to enroll in Washington Post Co.’s Kaplan education unit, saying she could train at home to be a nurse, a claim that turned out to be untrue, she said in testimony prepared for today’s Senate Health, Education, Labor & Pensions Committee hearing. Kaplan refused to release her transcripts, preventing her from transferring into a cheaper community college, she said.

While working students must have access to programs that fit their schedules and training requirements, they also need protection from the predatory recruiting programs and lending fraud uncovered by a government probe of education companies, said Arnold Mitchem, president of the Council for Opportunity in Education, in prepared comments for the hearing.

“Access is critical, but access to what?” Mitchem said in the prepared testimony. “Mountains of debt?”

For-profit colleges represent about 12 percent of U.S. college students, according to the Association of Private Sector Colleges and Universities, a Washington-based industry group formerly called the Career College Association. Those students account for about a quarter of U.S. student loan dollars, said Lauren Asher, president of the Institute for College Access and Success, an advocacy group based in Oakland, California, in comments prepared for the hearing.

‘Severe’ Consequences

About 43 percent of all former students who defaulted by 2010 on loans they began paying off in 2008 were from for-profit colleges, Asher said. The consequences of those defaults are “severe and long-lasting,” she said in her remarks.

“You will likely be hounded by collectors, and your debt will increase significantly because of default and collection fees,” Asher said in her prepared comments. “You cannot get federal grants or loans to return to school, and the debt can follow you until you die. There is no statute of limitations, and the government can garnish your wages, seize your tax refunds, and eventually take a slice of your Social Security check.”

For-profit colleges have helped improve the lives of many students who earlier failed at traditional, nonprofit universities, said Harris Miller, president and chief executive officer of the for-profit colleges’ trade group.

‘Anecdote Game’

“We can all play the anecdote game,” Miller said in a telephone interview before the hearing began. “We have plenty of students who would be glad to tell the committee how our schools have turned their lives around.”

About 1,500 students, teachers and administrators rallied in front of the U.S. Capitol building yesterday to oppose proposed industry regulations that would force for-profit colleges to show that graduates are repaying their loans and make enough to afford repayment.

“All State does a great job of preparing you to present yourself for a job,” said Sarah Martin, 22, a student at All State Career School in Baltimore who rode to Washington on one of six buses the college sent to the rally.

“It’s up to you to take advantage of the situation,” Martin said.

For-profit colleges have come under fire since a government report released Aug. 4 found that recruiters at 15 colleges misled students to boost enrollment. Senator Tom Harkin, the Iowa Democrat who heads the education committee, said he plans to hold another hearing the first week in December. Harkin said he will release information at today’s hearing collected from education companies.

No Degree

“The companies get the profits, and the students get the debt,” Harkin said in a telephone interview before the hearing. “And many times they don’t even get a degree.”

Deceptive marketing has hurt low-income, minority students across the U.S., Mitchem said in his prepared testimony. Mitchem’s group submitted a list of stories from students who said they had been misled by recruiters and administrators.

D’angelo Walker, a former student at Hoffman Estates, Illinois-based Career Education Corp.’s Sanford-Brown College whose story was included in the submission, said his degree failed to help him get a job, and other colleges won’t accept the credits he earned.

Starting Over

“I feel like I’ve been robbed,” Walker said in the testimony. “Every school is telling me that I will have to start over.”

Almost half of the students at for-profit colleges are minorities and about two-thirds of the schools’ students have incomes below the median for all undergraduates, Asher said. These students are three times as likely to borrow to pay for their education as those attending nonprofit colleges, Asher said.

“The data clearly show that across levels of income and categories of race/ethnicity, for-profit college students borrow more than those who attend elsewhere,” she said in her testimony.

Kathleen A. Bittel, who works in Education Management Corp.’s Art Institute of Pittsburgh online division, also is scheduled to testify at the hearing. The company assembled deceptive career-placement data by counting entry-level jobs at Toys “R” Us, Starbucks and a convenience store as related to students’ degrees, Bittel said in a letter to Congress obtained by Bloomberg News. The company investigated Bittel’s claims and determined they were unfounded, Education Management said yesterday in a statement.

Education Secretary Arne Duncan said in August that he will beef up his department’s enforcement arm to help stamp out predatory recruitment practices. The Education Department is preparing to publish rules that strengthen sanctions for recruiters who mislead applicants, and require for-profit colleges to tell students how many students graduate and get placed in jobs.

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.

To contact the editors responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net.

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