Durbin Challenges Nonprofit Colleges to Back For-Profit Rules

U.S. Senator Richard Durbin today called on public universities and private, nonprofit colleges to support regulating how government money is spent on for-profit schools.

Durbin, an Illinois Democrat, has criticized for-profit institutions, saying they fail to prepare students for jobs and saddle them with debt. For-profit colleges such as Apollo Group Inc.’s University of Phoenix, DeVry Inc. and Washington Post Co.’s Kaplan University received 25 percent of Pell Grants, federal aid to students based on financial need. The maximum Pell Grant for the 2010-11 award year is $5,550.

Durbin supports regulations that would help prevent schools’ profiting from federal aid while their graduates fail to earn enough to pay off student loans. He challenged community colleges, state universities and private institutions to fight lobbying efforts against such rules.

“You cannot come to Congress to ask for more funding for Pell Grants while looking the other way as billions of dollars of our current investment are wasted,” Durbin said in a speech at the annual meeting of the National Association of Independent Colleges and Universities in Washington.

Durbin’s remarks were “not as bad as feared” for the for- profit industry, Jeff Silber, an analyst with BMO Capital Markets in New York, said in a note to clients today. “No new proposals were made” and Durbin’s call to all universities to earn their Pell Grants may “take some of the pressure off the for-profit sector,” he wrote.

Apollo Group, the biggest U.S. education company by enrollment, rose 89 cents to $42.16 today on the Nasdaq Stock Market and DeVry gained $1.54 to $53.65 in New York Stock Exchange composite trading. An index of 13 for-profit college stocks has fallen 21 percent during the past 12 months.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.

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

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