U.S. Sen. Tom Harkin sees the mission of a typical university as helping students learn and graduate.
But a federal investigation led by Harkin seems to show that for-profit universities such as Davenport-based Kaplan Higher Education and Clinton's Ashford University are focused on making money, and about 87 percent of that revenue comes from the federal government, he said.
After holding a series of public hearings over the past year in Washington, D.C., Harkin, D-Iowa, just held his final one last week and is beginning to write legislation to change how for-profit schools are funded.
"This is an industry that needs some very careful oversight and some regulation or changes in law to make this industry more accountable to both students and to taxpayers," Harkin said. "The information we've uncovered, it's just really startling.
"We are already starting to prepare legislation because this is an area that just cries out for something to be done."
Kaplan University President Wade Dykes said his for-profit school tends to serve nontraditional students facing risk factors that make graduating tough, including juggling jobs, children and other responsibilities. But many do overcome those challenges, and he's proud to work at a higher-education institution that helps them in that quest, he said.
In answer to some of Harkin's criticism, Dykes points to the "Kaplan Commitment," a program geared to protect students by requiring them to show they can handle their courses academically in the first several weeks before officially enrolling them and accepting their money.
"This is a strong answer to this sort of criticism," Dykes said.
Officials at California-based Bridgepoint Education, which is the parent company of the for-profit Ashford University in Clinton, Iowa, did not provide a response last week. Bridgepoint has a website in which it responds to the issues: bpitransparency.com.
Using taxpayer dollars
Harkin's office launched the investigation a year ago in June, when the senator - who serves as chairman of the Senate Committee on Health, Education, Labor and Pensions - decided to look into how for-profit schools serve students and taxpayers who pay $24 billion to the schools each year.
Harkin has released three reports as a result of his investigation. His findings showed that more than 87 percent of total revenues from the 30 schools under investigation came directly from the federal government, but 57 percent of the students enrolled between 2008 and 2009 dropped out without a diploma.
He said at least a half-million students dropped out between 2009 and 2010.
Harkin also said these colleges account for 10 percent of higher education students in the U.S., but they receive nearly 25 percent of the financial aid budget, which accounted for $30 billion last year.
He also questions the academic quality of many of these schools.
Changing their focus
Harkin said for-profit schools need to change their model. Right now, many of them are mainly concerned with profits "because they're owned by hedge funds, by Wall Street investment houses," he said.
"They want to make a high rate of return. Helping students get a diploma is secondary," he said. "Some of these larger schools like Bridgepoint (the parent company of Ashford University), their focus is on making money. They need to be more focused on helping students."
But instead, California-based Bridgepoint receives more than $600 million per year from federal taxpayers, which they're using to pay their investors, Harkin said.
"They paid $20.5 million per year to their CEO last year, if I'm not mistaken," he said.
Many of the country's for-profit colleges got their start as vocational-type trade schools, teaching people to drive semitrailers or become beauticians. They filled a niche in society, Harkin said.
"Then they morphed into these distance-learning institutions, teaching history and English and political science and all that," he said. "I think they took advantage of that and recruited students who might be a good student for a trade, but may not be the best student for a liberal arts education."
When Bridgepoint bought the former Mount St. Clare College in Clinton in 2005, it had 332 students. Now, it has 78,000 students, and 99 percent of those are online, Harkin said.
"Of course, they want to have the campus, because when they advertise, they show this beautiful campus," Harkin said. "They don't tell you only 1 percent of their students attend there."
The investigation accuses the for-profit schools of recruiting students who aren't necessarily fit or ready for college, signing them up for online courses and then providing them support for several weeks. Then, when the deadline passes for them to withdraw from their courses without getting penalized on their federal grants and loans, the schools tend to stop helping them and the students drop out, Harkin said.
Meanwhile, the colleges get to keep their money, and the students still have to pay back their loans, he added.
"You want to make the most profit under this business model by going after the poorest people," he said. "They get the maximum Pell grants and student loans.
"Many of these people, maybe they didn't do too well in high school. They don't have a culture of studying and knowing how to study online. When they recruit these students, they make it sound like pie in the sky, that it's nice and easy."
At Bridgepoint, 84 percent of its two-year students and 63 percent of its four-year students have dropped out in recent years, Harkin said. At Kaplan, 69 percent of its two-year students are gone within the year, he said.
Harkin said there also is disparity in course costs between for-profit and nonprofit schools.
He said at Kaplan in the Quad-Cities, an information technology program - a two-year associate's degree - costs $33,390 to complete. That same program costs $6,528 at Scott and Clinton community colleges, Harkin said.
"These are Pell grants and student loans," he said. "These student loans are debts they have for the rest of their lives. They can't discharge them in bankruptcy. They have this hanging around their necks forever."
Along those lines, Harkin said he also is looking into placing restrictions on where Pell grants can be used, possibly making it tougher for for-profit schools to accept them. With pressure to reduce Pell grant funding in Congress, it's important to use the money carefully, he said.
"We were able to keep the Pell grants up this year, but I'm not certain about next year," Harkin said. "These for-profits account for a little less than 10 percent of all higher education institutions, but they get
25 percent of all the Pell grants and almost 50 percent of the loan defaults. How could this be happening?"