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March 15, 2013

Miller Announces Support for U.S. Senate Bill thatTargets For-Profit College Recruiting Budgets

Protecting Financial Aid for Students and Taxpayers Act would forbid all colleges from using federal education funds for recruitment, advertising and marketing

(DES MOINES, Iowa)  Attorney General Tom Miller today announced his support for a U.S. Senate bill that would restrict institutions of higher learning from using federal financial aid for recruitment, advertising and marketing purposes.

The Protecting Financial Aid for Students and Taxpayers Act, sponsored by Sen. Tom Harkin (D-IA) and Sen. Kay R. Hagan (D-NC), would prohibit the use of Pell Grant funds, federal student loans, the Post-9/11 G.I. Bill, and other federal education funds for advertising, marketing and recruitment.  The legislation would require all colleges and universities, whether public, private or for-profit, to fund such activities with non-taxpayer dollars.  The bill is similar to a current law that bans the use of federal higher education dollars for lobbying.

“This bill ensures that for-profit colleges that place dollars ahead of degrees can’t use our scarce federal education funds to get students into the door, at the expense of teaching them,” Miller said.  “This legislation rightly changes the focus from recruiting to educating.”

Miller, along with 13 state attorneys general, sent a letter supporting the bill to the chairs and ranking members of key Senate and House committees.

“It’s heartbreaking when I see complaints that reach our office from Iowans who are working hard to pursue their dreams through higher education, and end up learning some hard lessons about how many for-profit colleges really work,” Miller said.  “These students end up with tens of thousands of dollars in debt and nothing to show for it,” Miller added.  “And I’m also troubled by complaints from our veterans who were taken in by aggressive for-profit schools that take advantage of them through the G.I. Bill.”

Harkin and Hagan re-introduced the legislation Tuesday.  Last year the bill passed out of committee but died in the Senate.  Harkin serves as chair of the Senate Health, Education, Labor, and Pensions Committee.

“More than a dozen attorneys general have now joined the fight to safeguard taxpayers and students in Iowa and around the country against colleges that choose to focus on spending federal dollars on advertising rather than education,” Harkin said.  “Attorneys general have seen the devastating impact of predatory and aggressive marketing in their own states and are joining us to put an end to wasting precious resources while students are left without degrees, but with mountains of debt and shattered dreams,” Harkin added.  “I applaud their courage to stand up to the powerful interests that oppose reform and support this critical legislation.”

For-profit industry facts included in the letter:

  • Fifteen of the largest for-profit education companies received at least 86 percent of their revenues from federal student aid programs, such as the G.I. Bill and Pell Grant programs.
  • In fiscal year 2009, these for-profit education companies spent $3.7 billion dollars (23 percent of their budgets) on advertising, marketing and recruitment, which was often very aggressive and deceptive.
  • Together, the 30 education companies examined by the HELP Committee spent $4.2 billion on marketing in 2009 or 22.7 percent of all revenue, which equates to $2,622 per student.
  • According to one study, “in the corporate world, marketing budgets typically represent between 4-12 percent of sales, and in the for-profit education sector, “marketing budgets can approach a whopping 40 percent of tuition revenue.”
  • Nonprofit colleges and universities spend an average of one-half of one percent of their revenues on marketing.
  • For the 30 educational companies examined by the HELP Committee, 54% of students who started in 2008-2009 left without a degree by mid-2010. This translates to nearly 600,000 students leaving colleges without a degree.
  • Students who attended a for-profit college already account for 47 percent of all student loan borrowers in default.

State attorneys general from the following states joined Miller in signing onto the letter: Arkansas, Illinois, Kentucky, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New York, North Carolina, Oregon, Pennsylvania and Tennessee.

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