Chairwoman DeLauro Opening Remarks for House Appropriations Subcommittee on Labor, Health and Human Services, and Education Hearing on “Oversight of For-Profit Colleges: Protecting Students and Taxpayer Dollars from Predatory Practices”
(As prepared for delivery)
Good morning. I would like to welcome everyone to the Labor, HHS, and Education Appropriations Subcommittee, for our oversight hearing on predatory for-profit colleges.
We are going to have two panels, first with Senator Durbin of Illinois, followed by our second panel. I will introduce them before their remarks. But, first, let me thank them for being here:
- Eric Luongo, who was formerly a student at a for-profit college;
- Marc Jerome, of Monroe College;
- Kevin Carey, of New America; and
- Robert Shireman, of The Century Foundation.
I am pleased Senator Durbin could join us today. He is a tireless leader, with regards to promoting public education and affordable access to higher education. A fellow appropriator, Senator Durbin and I have worked side-by-side on oversight issues, with respect to the Department of Education. We co-led a letter in February about an Office of Inspector General Report about potential waste, fraud and abuse at for-profit colleges including various Art Institute programs. We have also partnered on a food agency bill and other FDA relates issues like direct-to-consumer advertising.
At the conclusion of his remarks, we will move to the second panel.
At the signing of the Higher Education Act (in 1965), President Lyndon Johnson said the law would, quote, “swing open a new door for the young people of America. For them, and for this entire land of ours, it is the most important door that will ever open—the door to education.”
We have a duty to be examining predatory for-profit colleges. One, because this subcommittee is charged with oversight of the Department of Education. Two, because we fund the Pell grant program. And, for-profit colleges receive nearly 14% of all Pell Grant funding. Last year, the University of Phoenix was the largest recipient of Pell Grants—not just among for-profits but all colleges and universities (they received more than $200 million). Phoenix has committed a number of violations, including deceptive or unfair targeting of military veterans in the advertising, marketing or sale of products or services. As a result, the Department of Defense suspended the University of Phoenix’s ability to recruit on U.S. military bases and its access to Title IV funds.
So, it is our responsibility in this arena to be sure we shine a light on those bad actors, who seek to scam students and taxpayers, and thereby block that door to education.
I would note that our Republican colleagues agree on jurisdiction, having pushed for riders to remove accountability measures, with regards to for-profit colleges.
So, this is in our purview. And, it is an area we must address. Because, predatory for-profit colleges are scamming students and taxpayers out of millions of dollars. And, Secretary Betsy DeVos is helping them get away with it.
Predatory for-profit schools have lower graduation rates and higher default rates than public and non-profit schools. According to the Department of Education, the 6-year graduation rate is 59 percent for public institutions, 66 percent for private nonprofit institutions, but only 26 percent at private for-profit institutions. And, while accounting for only 9 percent of all students enrolled in postsecondary education, they account for more than a third of all defaults.
Corinthian was an example of the worst kind of predatory for-profit school. Corinthian engaged in deceptive marketing, lied to the government about its graduation rates and folded almost immediately when the federal government turned off the spigot. A for-profit, private business that could not survive for three weeks without federal assistance.
The collapse of Corinthian Colleges wrecked the lives of tens of thousands of students, leaving them with high debt and useless degrees. Dawn Thompson attended undergraduate and graduate programs through a Corinthian subsidiary, Everest. Less than a year after completing her online M.B.A, Corinthian closed. And Dawn was left with $250,000 in loans for degrees from a defunct college.
Particularly alarming is how predatory for-profit colleges built their business model on targeting those who they deemed to be particularly vulnerable. The Senate Committee on Health, Education, Labor & Pensions chaired by Senator Tom Harkin investigated for-profit colleges in 2012. They uncovered internal recruiting documents from the institutions, including lists of who they targeted. Quote, “welfare moms with kids, pregnant ladies, military—active and retired, [those who] experienced a recent death, and [those who were] physically and mentally abused.” The list goes on.
This is not a new issue.
And, it is not just who they target, but how. Predatory for-profit colleges train their employees on the “Pain Funnel.” It is a technique to wear down prospective students and coerce them into sham programs at these institutions.
That includes veterans. Under current law, for-profits are only allowed to receive up to 90 percent of their revenue from federal financial aid through the Department of Education. However, through what is called the “90-10” loophole, DOD and GI Bill benefits do not count. As a result, schools aggressively recruit veterans, servicemembers and their families to get around this accountability provision and to extract more public dollars. A Department of Education analysis found that 200 for-profit colleges received between 90 and 100 percent of their revenue from taxpayers when DOD and VA benefits were counted as federal assistance.
Our witness Eric Luongo will share his story. After being honorably discharged from the Navy, Eric attended DeVry for web graphic design. They promised he could make $80,000 year. But, as he will testify, they scammed him, repeatedly misleading him in order to get him to enroll and to take out loans, despite their promises to the contrary. He now owes $101,000. And, the DeVry degree is worthless. Eric searched for a job unsuccessfully for a year because the DeVry program did not prepare him for a career web graphic design. Now, he is back in school at Medaille University for a bachelor’s in Business Administration Information Systems.
The 90-10 loophole gives predatory for-profit colleges a perverse incentive to target veterans and servicemembers like Eric. That is why groups such as the Iraq and Afghanistan Veterans of America, Student Veterans of America, Paralyzed Veterans of American, and Vietnam Veterans of America support closing the 90-10 loophole. The behavior of predatory for-profit colleges is egregious. They are private companies that can subsist entirely on federal dollars. I would think that my colleagues who decry crony capitalism would particularly object to this, especially since it comes at the expense of veterans, students, families and taxpayers.
Yet, the Trump administration and Secretary DeVos have rushed to let these predatory programs off the hook. In particular, Secretary DeVos is working to rollback two protections: the Gainful Employment rule and the Borrower Defense rule.
The Higher Education Act requires all career-oriented and for-profit programs receiving federal student aid to, quote, “prepare students for gainful employment in a recognized occupation.”
The Gainful Employment rule expanded accountability and transparency to fulfill that requirement, thereby protecting students from programs that charge too much and deliver too little.
The Education Department itself estimated that eliminating the GE Rule would cost $4.7 billion dollars. And supporters of the GE Rule include 33 military and veteran organizations, state attorneys general, and student, consumer and civil rights groups.
Secretary DeVos missed her deadline for rolling back the strong rule. But, we expect the Department of Education to finalize their effort in 2019. I will note this subcommittee under the Republican majority repeatedly yet unsuccessfully proposed to block funds to implement this rule.
Meanwhile, Secretary DeVos is also refusing to follow loan forgiveness started under the Obama administration. Students attending these worthless institutions should not be required to bear the burden of this student loan debt. And, the Obama administration’s Borrower Defense rule created a process for students to apply for relief. The Department of Education’s own Inspector General found the Borrower Defense rule would improve the Department’s procedures for, quote, “mitigating harm to students and taxpayers.” Supporters of the rule include state attorneys general, veteran and servicemember groups and organizations dedicated to fighting for students, consumers, civil rights, faculty, staff and college access.
Yet, as of September 2018, more than 139,000 loan forgiveness claims were still awaiting action, including Dawn Thompson, who I mentioned earlier, and our witness, Eric.
And, Secretary DeVos is even siding with the predatory for-profit colleges at the staff level. She has hired more than a half a dozen staff who worked for profit colleges and who have had oversight of them at the Department. This includes the former dean of DeVry University to lead the Department’s Student-Aid Enforcement Unit. And, the senior political appointee behind her efforts to deregulate higher education is a former employee of for-profit colleges. Talk about the fox guarding the henhouse.
Our nation’s students are striving to improve their lives. It is our responsibility to ensure that they do not have to worry about being taken advantage of while they seek to invest in their own skills. So, we will continue to fight for students and taxpayers and demand the Trump administration enforce the strong Gainful Employment and Borrower Defense rules.
And today, I am looking forward to hearing from our witnesses about the oversight we must be conducting. Because we need to be protecting students and taxpayers from predatory for-profit colleges.
We must ensure that door to education, which President Johnson cited all those years ago, is not sealed shut by for-profit colleges who seek to profit at the expense of students’ education.
Now, let me turn it over to my good friend from Oklahoma, the Ranking Member, Mr. Cole, for any opening remarks he cares to make.