For-Profit Colleges Put Investors Ahead of Students, Senate's Harkin Says
Wall Street investment firms’ pursuit of short-term gains interferes with the educational goals of the for-profit colleges they invest in, said U.S. Senator Tom Harkin, chairman of the education committee.
Goldman Sachs Group Inc., which owns 39 percent of Education Management Corp., is among Wall Street firms that “have no interest in the long-term educational outcomes of the students attending the schools,” Harkin, an Iowa Democrat, said today on the Senate floor.
About 1.5 million students are enrolled in for-profit colleges owned by 15 publicly traded U.S. education companies, and another 33 for-profit educators are partially or fully owned by private equity firms or hedge funds, Harkin said. Unlike nonprofit universities and public institutions, for-profit colleges are legally bound to work in the interests of investors, he said.
“The result is that the vast majority of for-profit schools have prioritized growth over education to satisfy the demands of investors,” Harkin said.
Harkin, the U.S. Government Accountability Office and state prosecutors have been investigating misleading recruitment practices and high student default rates at for-profit colleges.
A call to Education Management spokesman Steve Forde wasn’t returned, and Andrea Raphael, a spokeswoman for Goldman Sachs, didn’t respond to a call and an e-mail seeking comment.
Harkin’s speech was “another inaccurate anti-business attack on for-profit education,” said Lanny Davis, spokesman and counsel for the Coalition for Educational Success, a Washington-based industry group. Harkin is ignoring the stories of millions of for-profit college graduates who get good educations and jobs, he said.
“For-profit higher education is succeeding because our students are succeeding,” Davis said in an e-mail. “These students seek out our schools because they want what we can offer: A path to a new or better job through effective skills training and focused job placement assistance.”
The Education Department has issued rules for for-profit colleges that will take effect next year, and Harkin has said he plans to file legislation to further restrict education companies. Republican Representative John Kline, who will become chairman of the House education committee in January, has said he opposes more industry regulation.
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