Murphy offers harsh assessment of for-profit colleges, backs bill

By:  Don Michak
Journal Inquirer

Legislation that would authorize fines on for-profit colleges that misrepresent their costs, completion rates, students’ job prospects, or loan default rates was introduced Tuesday by Sen. Christopher S. Murphy, D-Conn., and three other Senate Democrats.

Murphy and Sens. Elizabeth Warren of Massachusetts, Sherrod Brown of Ohio, and Richard Durbin of Illinois said their “Students Before Profits Act of 2015” is aimed at protecting students from deceptive practices and “bad actors” in the for-profit college sector.

For-profit colleges currently enroll 10 percent of all post-secondary students but account for 44 percent of all student loan defaults, according to the lawmakers. They cited a Senate study showing that for-profit colleges allocate about 23 percent of revenue to recruiting and marketing, 19 percent to profit, and 17 percent to academic instruction.

Murphy told reporters Tuesday that students at for-profit colleges are getting “a bad bargain” and have become “a commodity” and “source of immense profit.”

“For-profit colleges, which used to occupy a very small share of the higher education market, have grown in such size and such scope to really pose a threat to the way in which we provide education to kids across the country,” he said.

“These colleges are spending more money on marketing themselves than they are on actually providing the education,” he added.

“Congress can’t allow that to happen because these colleges are playing with taxpayer dollars,” he added. “For most of these schools, 90 percent of their revenue comes from the federal government.”

The lawmakers’ measure would use the enhanced civil penalties for for-profit institutions and executives to help defrauded students.

Other provisions would:

• Require the U.S. Education Department to improve its oversight of default rate manipulation and determine whether an institution should be disqualified from participating in financial aid programs;

• Give the department broader discretion to hold the schools’ owners and executives personally liable for financial losses associated with federal funds.

• Discourage “repeat offenders” by prohibiting board members and executive of an institution against which the department has brought an enforcement action from serving in leadership positions at another college.