[Congressional Record Volume 157, Number 70 (Thursday, May 19, 2011)]
[Senate]
[Pages S3153-S3160]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                     FOR-PROFIT EDUCATION COMPANIES

  Mr. HARKIN. Mr. President, over the past 6 months, I have come to the 
floor several times to discuss the findings of an ongoing investigation 
by the Health, Education, Labor, and Pensions Committee into the for-
profit education sector, and the growing role they play in higher 
education. This investigation has been now ongoing for over a year.
  Today, I want to focus my remarks on our men and women in uniform and 
how the for-profit schools are focusing on recruiting them to their 
schools, and what this means for the taxpayers of America.
  The first GI bill made it possible for many of the servicemembers 
returning from World War II to go to college and get ahead in life. In 
the process, that ushered in a new era of American prosperity. That GI 
bill continued, of course, with Korea, through the Cold War, and 
through Vietnam. I myself used the GI bill after my service time so I 
could go to law school.
  Over the decades, we have built on that success by extending Federal 
financial aid to active-duty members of our Armed Forces, and indeed to 
all Americans who seek to build a better life through higher education. 
On the whole, this has proved to be one of the Federal Government's 
smartest investments--an investment in human capital that has produced 
huge dividends for our Nation. We in Congress have been eager to ensure 
that this new generation of veterans returning from Iraq and 
Afghanistan--those who sacrificed so much for our country--are getting 
the education benefits they earned and the quality of education they 
deserve.
  Led by Senator Webb and others, we have enacted new laws and expanded 
existing programs to provide generous new educational benefits to 
veterans, to active-duty servicemembers, and to their families. This is 
a historic achievement, and I am sure all of us were proud to support 
it.
  Implemented in August of 2009, the post-9/11 GI bill provides that 
veterans who serve 90 days or more on active-duty effort, after 
September 10, 2001, are eligible for up to 36 months of educational 
benefits; and for the first time ever in history, veterans can transfer 
these benefits to a spouse or to a child. Over the last decade, the 
Department of Defense has also expanded aid available to active-duty 
soldiers, sailors, and airmen through its tuition assistance program. 
This program will pay up to a maximum of $4,500 a year toward a 
servicemember's classes.
  Also in 2009, Congress created the military spouse career advancement 
account, designed to expand employment and career opportunities for 
active-duty spouses, and that provides for a grant of $4,000 over a 3-
year period of time.
  When the Congress acted to give new and better benefits to veterans 
and active-duty members and their families, we fully expected that for-
profit schools might have an important role to play in providing higher 
education. Obviously, they are flexible, and some of the primary work 
done is suited to veterans and active-duty soldiers and students 
juggling work and family obligations.
  During my time in the military, of course, we had the University of 
Maryland, which still obviously provides a lot of online work. At that 
time, it was called ``distance learning,'' and you did it by mail. The 
University of Maryland provided a lot of educational benefits for many 
years to active-duty personnel serving in far-flung places around the 
world. Of course, that was not a for-profit school; that was a 
nonprofit school.
  Unfortunately, when we enacted this whole new benefits package for 
servicemembers and veterans and their families, we didn't anticipate 
what would happen by opening up a new stream of funding to the for-
profit schools. We didn't foresee that the for-profit sector, which is 
eager to please Wall Street investors, would go after student funding 
aggressively, in ways not in the best interests of veterans and 
servicemembers. We didn't recognize that by allowing servicemembers to 
combine, transfer, and borrow against these various Federal benefit 
packages we were giving for-profit schools an opening to enroll 
servicemembers, veterans, and family members in very expensive 
educational programs.
  My committee's investigation over the past year has revealed an 
industry dominated by the very same Wall Street companies and equity 
investors who brought about the subprime mortgage crisis. These 
investors are focused on rapid growth and quick profits. In relatively 
short order, for-profit colleges and universities have succeeded in 
enrolling 10 percent of the students and claiming fully 25 percent of 
the Federal financial aid budget, including $7 billion a year in Pell 
grants. So the for-profit sector has 10 percent of all of the students 
in the country and gets 25 percent of all Federal financial aid.
  Many of these companies generate big profits, and there is a big 
problem. The committee has compiled data for 30 companies that own for-
profit schools, including the 15 largest publicly traded ones, showing 
that more than half of the students these institutions enroll drop out 
within the first year. Two-thirds of the students who are there for a 
2-year program drop out in the first year. Some of the worst performing 
institutions have been the most aggressive to enroll servicemembers and 
veterans.
  Because profitability and the for-profit education industry is driven 
by enrollment growth, my committee's investigation has focused largely 
on the extraordinarily aggressive marketing and recruitment practices 
at these schools. Building on the findings of last year's undercover 
investigation by the GAO, which found abusive recruitment practices at 
each of 15 campuses visited, we have uncovered additional evidence that 
misleading and deceptive recruiting tactics are not the exception but 
the norm.
  Several months ago, on the floor of the Senate, I spoke about 
documents uncovered in my investigation. Those documents instruct 
recruiters in tactics designed to manipulate and emotionally exploit 
potential students in order to convince them to enroll. As I will 
demonstrate later in my speech they are going after the military by 
exploiting fear, uncertainty, and doubt.
  We should be concerned that Congress may have unintentionally created 
an opening for the current generation of veterans and active-duty 
servicemembers to be victimized by these abuses simply because of their 
eligibility for expanded Federal aid that we enacted in the Congress.
  My committee found evidence that large for-profit schools are 
aggressively recruiting active-duty servicemembers and veterans 
expressly because of their generous educational benefits packages. It 
is not just that these military benefits provide a new revenue stream 
for the companies. The point is that it is an especially valuable kind 
of revenue stream for these companies--more valuable than even going 
after nonveterans and non-GIs. Why is that?
  Well, military money helps these for-profit schools to meet a key 
statutory requirement that no more than 90 percent of their revenue can 
come from Federal financial programs. That is in the law. No more than 
90 percent of the income coming into a for-profit school can be from 
Federal financial programs. If a school is getting close to that 90 
percent, guess what they do. They go after military people. Why is 
that? Because a military person, active duty or veteran, enrolled in a 
for-profit school doesn't count towards the 90 percent; it counts 
towards the 10 percent. So the school could actually have--and there 
are some--92 or 94 percent of all their money coming from Federal 
financial programs, even though the law says you can only get 90 
percent, because military doesn't count. So you can see why, when close 
to 90 percent, they would want to go after the military. And that is 
exactly what is happening.
  With their eyes on this 90/10 ratio, the for-profit schools have 
moved aggressively to exploit this opportunity. They have created 
marketing plans and a sales force specifically designed to target and 
enroll as many veterans, servicemembers, and family members as 
possible. Schools spend billions on sophisticated marketing campaigns 
and large sales teams to get those students in the door. Documents 
obtained by the HELP Committee paint a picture of an industry with a 
laser-like focus on enrolling military students.
  For example, I have a 56-page document from Kaplan. This lays out 
their strategy for recruiting military students. If you go through it, 
you will see

[[Page S3154]]

their objective. As I said, they have a laser-like focus on enrolling 
military students.
  Objective No. 1:

       Grow our military enrollments to 9,000 per year by 2011.

  At the time, Kaplan signed up about 2,200 military students each 
year. They were aiming at more than a four-fold increase in the 
military. The document goes on to lay out the marketing and sales plan 
for achieving this enormous growth. This is in this document:

       Drive awareness via print advertising in key military 
     publications and targeting key military installations.

  To do this, the document suggests that Kaplan plans to spend $30 
million over 3 years for new military-specific recruiting staff, 
advertising, and public relations--just on the military.
  In a later brainstorming exchange between Kaplan executives, the No. 
1 item on the list of initiatives to deal with Kaplan's 90/10 because 
they were getting close to that 90 percent was:

       Accelerate military billings/collections. Go to DC and pick 
     up the check if you have to.

  Go get that military money so we do not go over that 90-percent 
limit.
  At Education Management Corporation--another for-profit school--the 
story is similar. Let me quote from a 2010 memorandum prepared by a 
consultant to the CEO of EDMC, Education Management Corporation. The 
memo begins:

       Thanks for the call outlining the interest of EDMC in 
     learning more about potential areas of funding that could add 
     revenue that would also address the 90/10 issue.

  No. 1 on the list says:

       Probably one of the most important potential short and 
     long-term targets for EDMC are the 800,000-plus military 
     spouses who have been authorized--

  And this is in italics--

     for the first time in history, for a one-time entitlement of 
     up to $6,000 . . . An aggressive effort to reach these 
     spouses at the military bases with various career fairs, 
     direct communications, and visibility with the Office of 
     Military Families in Washington would be very important.

  A subsequent e-mail message between EDMC's executives recommends that 
the company should be ``leveraging military spouse benefits to the 
fullest extent possible'' in order to overcome the 90/10 regulation.
  Executives of for-profit schools are candid about the value of 
military students in trying to ease investors' concerns about 
regulatory compliance. The CEO of Bridgepoint Education told investors:

       Our military enrollment grew from 1 percent in 2007 to 17 
     percent at the end of September 2009.

  He went on to say:

       We believe that when we are able to report our 90/10 for 
     2009 that it should decrease due to our penetration in 
     particular into the military market.

  We know these for-profit schools, in their own words, are 
aggressively pursuing military personnel and their families. How are 
they enticing them to enroll? A Kaplan training manual entitled 
``Military Learning Modules'' tells recruiters how to utilize fear, 
uncertainty, and doubt in the sales process with regard to competitors' 
offers and teaches them to overcome objections that potential students 
may raise in signing an enrollment agreement.
  This is the one from Kaplan:

       Fear, uncertainty, doubt. This technique was originally 
     created within the computer hardware industry and uses these 
     emotions to attempt to influence perceptions or beliefs. The 
     technique is especially effective when prospects introduce 
     the ``need'' to examine other online schools.

  In other words, a Kaplan recruiter calls up a veteran or a military 
person on Active Duty and wants to get them to enroll. If that person 
says: I have seen some ads for Phoenix, I have seen ads for ITT and 
others, maybe I will look them up, they want to use fear, uncertainty, 
and doubt when prospects introduce the need to examine other online 
schools.
  Statements such as the following:

     instill fear, uncertainty and doubt regarding the features of 
     competitors' programs.

  It is one thing if you are selling a keyboard or hard drive. That is 
one thing. But when you are doing it to enroll a young man or woman 
whose family may never have gone to college--they enlisted in the 
military out of a patriotic sense of duty; they have had no college 
experience whatsoever; maybe they did not do all that well in high 
school, but now they are thinking about what they are going to do, and 
they get hit with this. And I find really objectionable when these for-
profit schools exploit fear, uncertainty, and doubt in our young 
military people.
  I will have more to say about how onerous it is when they do this to 
get them to sign up with their school, to get students take taxpayers' 
money and turn it over to the school, only to find out they do not have 
any support, nothing to help them, and they drop out within a year. 
They have debt. They went through all their military benefits, which 
they can never get back, and the for-profit schools have the money.
  A military recruiter at Colorado Technical University--another for-
profit school--owned by the publicly traded Career Education 
Corporation, told the New York Times:

       There is such pressure to simply enroll more vets--we knew 
     that most of them would drop out after the first session . . 
     . Instead of helping people, too often I felt like we were 
     almost tricking them.

  Robert Songer, the coordinator of all education programs for 
servicemembers at Camp Lejeune Marine Corps Base in North Carolina, 
expressed his reservations to the Bloomberg news service.

       Some of these schools prey on Marines . . . Day and night, 
     they call you, they e-mail you. These servicemen get caught 
     in that. Nobody in their families ever went to college. They 
     don't know about college.

  These recruiting tactics are nothing short of disgraceful. When 
students are enrolled through deception or fear, not only are they 
being tricked, they are also more likely to be unprepared for the 
challenges of college. These strong-arm, emotionally abusive tactics 
are indicative of schools that see students strictly as a means to an 
end of higher profits. They appear to have little or no interest in 
providing students the academic help and support they need to succeed. 
The end result is that servicemembers, veterans, and their spouses end 
up enrolling in high-cost programs, dropping out in staggering numbers, 
often winding up with a mountain of student debt. This often happens 
despite the availability of similar or better quality programs in the 
public and nonprofit sectors of higher education.
  The tactics have certainly paid off for the company's bottom line. I 
released a report last December documenting the absolutely tremendous 
increase in the amount of money these companies are receiving from 
military education programs. Building on the already substantial growth 
in revenues generated from the traditional financial aid programs--
which went, by the way, from $14 billion in 2005 to $29 billion in 
2009--the relentless focus for-profits have brought to military 
recruiting has yielded an astonishing growth in the funds they get both 
from the Department of Defense and the Department of Veterans Affairs. 
Again, keep in mind we are talking about two entities: Active-Duty 
personnel and veterans.
  As the new post-9/11 GI bill was implemented, 18 large for-profit 
operators pushed their intake of VA dollars from $26 million in 2006 to 
an astonishing $286 million in 2010. This is what happened. This chart 
illustrates what happened in VA. Here we are at $26 million in 2006; 
$25 million in 2007; $27.6 million in 2008; and in 2009, when we passed 
the bill, it goes up to $55 million. Look what happened in 1 year, 
2009, $55 million up to $285.8 million in 1 year. That is the amount of 
money they took in. That is just the Veterans Affairs funds.
  The same companies increased their collection of Department of 
Defense benefits by 337 percent--$40 million in 2006 to $175 million in 
2010. Again, this is for Active Duty. We see the steady increase all 
the way into 2010--$40 million in 2006 to $175 million in 2010.
  This did not just happen; it happened because the for-profit 
companies decided they were going to go after the military because they 
were getting close to their 90-percent threshold. Keep in mind, these 
dollars do not count towards the 90-percent, so they can keep under the 
threshold by getting more military students.
  Let's be clear. These exorbitant amounts of Federal dollars are not 
going to small, family-owned institutions. They are going to some of 
the largest Wall Street-owned companies. Out of the $640 million in 
post-9/11 GI benefits that flowed to for-profit schools just in 2009 
and 2010--that is $\1/2\ billion; $640 million, $\1/2\ billion in 1

[[Page S3155]]

year--$439 million went to the 15 publicly traded companies. This 
amount is equal to 69 percent of the military money going to for-profit 
schools and 25 percent of all post-9/11 GI bill benefits.
  Let me repeat that. Let's just say this: 25 percent--one-fourth--of 
all of the GI bill benefits post-9/11 went to 15 publicly traded 
companies. It would be one thing if the for-profit schools were using 
this for educational expenses, but unfortunately the lion's share of 
that money--taxpayers' dollars--went into profits, marketing, and--
guess what--Wall Street executive salaries and bonuses.
  What are we getting in return for this enormous investment of 
taxpayers' dollars? We are getting a lot of questions.
  We know student outcomes for the general population at for-profit 
schools are pretty dismal. On average, 55 percent of students who 
attend these schools drop out within a year, and there is no evidence 
that military students are faring better. Eight of the ten top 
recipients of VA dollars see more than half of the associate degree 
students they enroll drop out within the year, and five of the schools 
see more than a 60-percent drop.
  This is what our investigation revealed. Here are the 10 schools 
receiving the most Department of Veterans Affairs funds. You see ITT, 
and they got the most--$79.2 million, and that is a 1-year amount. Of 
those who enrolled for a 4-year degree program, 44 percent withdrew; of 
those who signed up for a 2-year program, 53 percent withdrew. We look 
down here to Kaplan, and they got $17.3 million. On their bachelor's 
degree, 68.2 percent withdrew--69 percent of the 2-year students 
withdrew in the first year.
  Here is with what is startling. That is bad enough as it is, but our 
investigation showed that neither the Department of Defense nor the 
Department of Veterans Affairs has any method to assess what is 
happening to these students. The money flows out, and neither the 
Department of Veterans Affairs nor the Department of Defense has any 
way to assess whether they are getting a good education.
  I might also add, Senator Carper has looked into this in his 
subcommittee. He has looked into this, and we have discussed the 
possibility of working on something to get the Department of Defense to 
start taking better care of their Active-Duty personnel and the 
Department of Veterans Affairs to take better care of veterans. We need 
to have better assessment of what is happening to these students, how 
much debt they are accumulating, and what is happening to their 
education.
  We are basically handing over huge and growing sums of military money 
to for-profit schools without any ability to assess whether these 
schools are giving our Active-Duty members or veterans the kind of a 
quality education they deserve.
  The complaints I have gathered in the course of our investigation 
point to a deeply disturbing willingness on the part of for-profit 
schools to exploit veterans. I repeat, our investigation shows clearly 
that a number of these for-profit schools are out to exploit veterans. 
I received this letter from a veteran who attended ITT Technical 
Institute, the greatest recipient of VA funds. Here is what he said:

       Unlike other institutions I reached out to, as soon as I 
     expressed interest in ITT Tech, they began to actively and 
     aggressively pursue me. Minutes after I filled out an online 
     form, a recruiter called me. He then called every day, 
     telling me it was urgent for me to enroll.

  The letter writer notes that due to the high cost of tuition, he had 
to take out loans. But he writes:

       The expensive tuition did not seem to go toward a quality 
     education.

  He concludes with this:

       Within 2 months of leaving ITT Tech, they sent me a bill 
     for $2,000 and a transcript that showed clear signs that it 
     was altered in a way to specifically make my positive balance 
     disappear and create a negative balance.

  This letter writer ends with these chilling words:

       I regret attending ITT Tech. The institution provided at 
     best an absolute minimum education and left me with nearly 
     insurmountable debt.

  This is a veteran.
  Here is another veteran who attended Bridgepoint Education Inc.'s 
Ashford University who wrote the following:

       I was extremely disappointed, confused and angry. I felt I 
     had been misled, deceived or even outright lied to in an 
     effort to gain my contractual agreement.

  He was repeatedly assured by Bridgepoint recruiters that his post-
9/11 GI bill benefits would cover the entire cost of his degree, only 
to find out after he was enrolled that he would owe close to $11,000.
  Another student, this one at the University of Phoenix, sent this 
letter to the Arizona attorney general after trying to resolve his 
complaint with the school:

       I have been a police officer for over 20 years. I am also 
     an Iraq war veteran. I believe that the University of Phoenix 
     is using deceptive practices in order to lure students into 
     the school. The enrollment counselors tell students that they 
     should be complete with their course of study in a short 
     period of time fully knowing exactly how long it is going to 
     take. The enrollment counselors eventually tell the student 
     it is going to take a lot longer to finish their program but 
     not until the student has committed all of his financial aid 
     and invested so much money that it would be senseless to 
     leave and waste his invested time and money.

  A letter to the attorney general of Arizona.
  What are the consequences for a student who enrolls at one of these 
schools but is not satisfied with their experience? The post-9/11 GI 
Bill benefit package can be depleted rapidly. If benefits are used up 
without completing a program or for credits that can't be transferred, 
the benefits cannot be recovered. In fact, because of the high tuition, 
many students, have to apply for additional grants or loans to pay for 
school. That means many veterans are pressured into signing up for one 
of these for-profit schools, told they have free money to pay for their 
tuition and then, all of a sudden, they find that is not quite enough 
money. Now they have to apply for a loan. They get a loan, they drop 
out within 1 year or so, the schools keep the money--some of it grant 
money, some of it loan money--and the GI or the military person is left 
with debt and no diploma.
  Here is a letter addressed to the Ohio for-profit school regulator 
that just tears your heart out. This is from a mother:

       Normally, a 26-year-old man doesn't need his mom advocating 
     for him. But this is anything but a normal situation. I 
     expected my son to be changed by his tour of duty in Iraq. 
     But I could not have been prepared for the reality of those 
     changes. My son struggles on a daily basis with symptoms from 
     PTSD (post-traumatic stress disorder) and TBI (traumatic 
     brain injury). He suffers from bouts of depression, anxiety, 
     headaches, nightmares, vision problems, mental confusion, 
     insomnia, and many other symptoms. You have to pretty much 
     ``bottom-line'' your conversations with him. He can't 
     mentally process a lot of details. If you continue with your 
     details, he is done with the conversation, unless you can 
     return to a quick ``bottom-line.''

  The mother goes on:

       It is my belief that the ITT Representative may have 
     quickly figured this out and taken advantage of the 
     opportunity. I remember when he called from ITT because I was 
     on my way out to an important occasion. He said the 
     Representative told him he needed a co-signer just so he 
     could start school immediately, but not to worry about it, 
     because the military was going to pay for everything, even 
     give him money to live on and pay his expenses. He sounded so 
     hopeful, something I hadn't heard from him since before the 
     war. It was really hard for him to admit he couldn't continue 
     going to school. He said he just couldn't retain the 
     material. It became too stressful for him to continue. My son 
     is a proud, young man. He is not looking for pity or charity. 
     He is embarrassed that he believed what he was told by the 
     ITT Rep. He could hardly come around me when he found out 
     that Sallie Mae was calling me for payment of his loan. 
     Veterans with PTSD commonly isolate themselves from family 
     and friends. This made it even worse. As a mother and a human 
     being, I am outraged this kind of predatory lending tactic is 
     used on anyone, but especially on an American soldier who 
     gave everything he had and almost lost his life many times, 
     and who continues to suffer. I will pursue this, on my son's 
     behalf, until someone listens and forgives these loans. Thank 
     you all for all of your effort, it is very much appreciated.

  This situation is unacceptable. It is unacceptable that Active-Duty 
military personnel and veterans using their hard-earned benefits are 
becoming victims of these kind of high-pressure tactics of the for-
profit schools--enticing them to enroll, taking their money, causing 
them to go even further into debt, and then not giving them any support 
whatsoever.
  As I said before, the agencies distributing this money do not 
investigate or

[[Page S3156]]

act on the reported abuses of for-profit schools. They just don't. 
Earlier this month, the GAO released a report concluding that the VA 
still faces numerous challenges in implementing a program to start to 
begin interventions. Many for-profit schools have succeeded in building 
a highly profitable business structure while failing to provide the 
student services, a learning environment, and career services that 
would enable their students to graduate and succeed.
  The Federal Government must be vigilant to ensure that poor 
performing for-profit schools with huge dropout and student default 
rates are not allowed to continue to receive billions of dollars in 
Federal taxpayer money every year. We owe this to taxpayers, but we 
also owe this to the men and women who served and sacrificed for our 
Nation in uniform. That is why I wanted to take the time on the floor 
today to point out this new and disturbing finding of our committee, 
how much these schools are targeting military personnel, how they are 
using high-pressure tactics to get them to enroll because they know 
they can get the money to help keep them below the 90-percent 
threshold.

  It is shameful that these for-profit schools are allowed to get by 
with this. They continue it today. They continue reaping huge profits, 
paying their CEOs and their executives enormous amounts of money. Yet 
our men and women in uniform, our GIs, who are taken in are not 
provided any help or support but now are saddled with a lot of debt or 
have used up their GI bill benefits. Maybe now they want to go to a 
community college, somewhere to really get a good education, and they 
find out they cannot get any more GI bill money. They are done. They 
gave it all to one of these for-profit schools.
  Mr. HARKIN. I ask unanimous consent to have the documents I referred 
to printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. HARKIN. I am delighted to yield to my friend from Illinois, who 
has been a strong fighter for students and also, I would say, over the 
last several years has focused a lot of attention on these abuses of 
the for-profit schools.

                               Exhibit 1

       Excerpts from KHE 267362 Kaplan Military University Agenda 
     Objectives Our Military Value Proposition The Pricing Pilot 
     The phases of the military strategy plan Field team 
     deployment Staffing Plan Appendix A. Pricing Analysis B. 
     Marketing Elements C. Public Relations Marketing D Web 
     Strategy E. American Military University Objectives Grow our 
     military enrollments to 9K per year by 2011 2009 increase 
     from 2.2.K to 6K enrollments 2010 8.8K enrollments 2011 10.5 
     K enrollments Over 3 years: Bring retention rate on par with 
     traditional students (28 to 34) Improve 90/10 by 5% Provide 
     incremental revenue of $XYZ in year 3 Objectives Transition 
     Kaplan into a ``top of mind'' educator within the active duty 
     & veteran military segments, penetrating the key decision 
     maker and influence (education service officers) Evolve our 
     product offering to attract, retain, and better educate 
     military students Transition current low converting lead & 
     poor retaining student base into highly profitable segment 
     Engage DOD/DHS in custom development of Kaplan Inc. solutions 
     Our Military Value Proposition We have dedicated ourselves to 
     serving our military students with advisors at each step who 
     understand military challenges (admission/FA/Academic 
     Advising/Career Counseling) We have designed our educational 
     platform to help you take full advantage of your military 
     training, experience and any previous college credit We are 
     integrated into military educational system, making it easier 
     for you to enroll and attend Kaplan Go Army Ed, SOC, AEX 
     Portal, Air force ABC program We've built in the flexibility 
     a military lifestyle demands Military Friendly LOA and 
     coursework extension policies We're committed to your success 
     and provide innovative tools to help you succeed in your 
     studies and career such as Kaplan MyPath helping you 
     customize your education We value the sacrifice you have made 
     to our country and provide all active duty and veterans 
     tuition packages, so you can get the quality education you 
     deserve and books are included so there are no unforeseen 
     expenses along the way We recognize that serving is a family 
     commitment, and also offer reduced tuition rates to military 
     spouses We support your lifetime learning needs, including an 
     online high school completion programs, professional 
     development programs, and higher degree programs Tactics 
     Drive awareness via print advertising in key military 
     publications and targeting key military installations ESO 
     Relationship Manager ESO outreach effort leveraging, phone, 
     web, DM, and supporting key military events and periodic base 
     events Target veteran and spousal community via key 
     publications and including military elements in traditional 
     student marketing Continuous development of military 
     offerings, providing tools for high conversion and referral 
     rates Leverage MSG field team in regional areas to drive 
     military events Community College Partners Educational 
     Liaisons to attend military events Business Development 
     efforts at Federal and DOD level Business Development 
     Activities DoD Activities Representing All of Kaplan, Inc. 
     Meeting with High Level Pentagon Officers Pursue Deeper 
     Relationships with branches Veteran Associations Financial 
     Plan Growth Projections Enrollments/Rev 2009 2010 2011 
     Expense Enrollment Total 6,196 8,848 10,526 MSGField 
     Marketing Expense Total $7,247,975 $10,139,450 $11,632,550 
     MSG Marketing Net Revenue--Total $4,277,301 $7,957,358 
     $11,768,938 MSG Lead Generation MSGField NonAggregation 
     Marketing 20082009 Military Marketing Impressions Total 
     Investment Print Out of Home Marketing eNewsletter Direct 
     Mail Total Impressions Operational (Events/Sponsorships) 
     CollateralBase & ESO Booth & Graphics Web Integration and 
     Landing Pages Development Costs Research Pricing Analysis 
     $1,596,050 Marketing Staffing Plan Roles & Definitions 
     Director of Military Marketing & Strategy Oversight over 
     all military marketing including: Lead Generation Web 
     strategy DM/EM Print Collateral Campaign management B2B 
     Marketing (ESO/DOD etc) Product Marketing Direct Product 
     Development Efforts Feasibility on new programs SOCAD/
     SOCGUARD/SOCMAR etc Develop Sales Tools VA & other 
     military student programs Single Course Offerings 
     Alternate Delivery Modes Military Newsletter Coordinate 
     Military Research Field Support Marketing Operates on 
     shared services and with 1 direct report Military 
     marketing manager
       Excerpts from KHE 271429 From: [High-level Executive] Sent: 
     Wednesday, November 11, 2009 4:55 PM To: [High-level 
     Executive]; [High-level Executive] Cc: [High-level 
     Executive]; [High-level Executive]; [High-level Executive]; 
     [High-level Executive]: RE: KU 90/10 Issue [High-level 
     Executive], This has been an area of intense focus over the 
     last 30 days. In mid October we ([High-level Executive], 
     [High-level Executive] and I) projected our 90:10 at year end 
     based on current run rates to be 89.6%. We shared our 
     analysis and actions plans with [High-level Executive], 
     [High-level Executive] and [High-level Executive] and the 
     decision was made to switch SES from an automatic submission 
     process to a manual process. We needed the ability to 
     throttle our submissions based on our cash intake. Although 
     we have implemented a number of initial steps that will help 
     us increase our cash intake in the future, we have a larger 
     list of additional initiatives that we are continuing to move 
     forward and I could walk you through those at your 
     convenience. In response to your suggestions we have added 
     comments below: Accelerate military billings / collection at 
     KU. We have streamlined our internal process on timely 
     billings for our military students. The population of 
     military folks that are awaiting TA vouchers is approximately 
     $400K. Although our records indicate that we are current, we 
     are currently reconciling the entire military group to see if 
     we have any legacy items that were not billed correctly. 
     From: [High-level Executive] Sent: Wednesday, November 11, 
     2009 12:07 PM To: [High-level Executive]; [High-level 
     Executive] Cc: [High-level Executive]; [High-level 
     Executive]; [High-level Executive]; [High-level Executive]; 
     [High-level Executive] Subject: KU 90/10 Issue Importance: 
     High Other areas to look at quickly/aggressively before 
     yearend: 1. Accelerate military billings / collection at KU. 
     Go to D.C. and pick up the check if you have to.
       Excerpts from EDMC916000228224 Memorandum Confidential TO: 
     [Director] FROM: [Outside Consultant] DATE: July 8, 2010 
     SUBJECT: Possible Opportunities for EDMC ``90:10'' Thanks for 
     the call outlining the interest of EDMC in learning more 
     about potential areas of funding that could add students and 
     revenue that would also address the ``90:10'' issue. In light 
     of that dual set of interests, let us briefly review the 
     opportunities we see among recurring sources of government 
     funding, plus some other prospects to consider. THE FEDERAL 
     GOVERNMENT There are a number of emerging opportunities that 
     may present short, medium, and longerterm opportunities that 
     should also be carefully considered, given their size and 
     scale. The Military 1. Military Spouses. Probably one of the 
     most important potential short and longterm targets for 
     EDMC are the 800,000 plus military spouses who have been 
     authorized, for the first time in history, for a onetime 
     entitlement of up to $6,000 that can be used for training, 
     as well as for counseling and other ways to assist them in 
     finding work. We are told by the DOD that the largest 
     demand among the spouses is for healthcare related 
     training, although it can also cover almost all other 
     occupational areas. The Department of Defense has also 
     informed military personnel and their spouses that under 
     the most recent G.I. Bill, they can authorize up to 50 
     percent of his/her education benefits for the spouse to 
     continue their education. Therefore, in theory, every 
     spouse has access to two separate sources of funding. As 
     you probably know, military spouses are a particularly 
     attractive group of prospective students. Nearly twothirds 
     have at least some college education. The average age is 
     36, they have strong support systems with the military 
     bases and operations and, of course, they tend to be very 
     stable. The big issue that is driving these new training 
     funds is that

[[Page S3157]]

     when the military do their surveys, the primary reason 
     people give for leaving the military is that their 
     ``spouse is not happy.'' When the military spouses are 
     surveyed, they say the reason they are not happy is that 
     they cannot find a job or, more often, they cannot find a 
     good job for which they believe they are qualified with 
     their background and experience. This is the reason for 
     the focus on providing training and other forms of 
     assistance: so that they can get better jobs and, in turn, 
     encourage their spouses to stay in the military. The ``My 
     CAA'' (My Career Advancement Account) program for the 
     $6,000 entitlement for all 800,000 spouses, however, has 
     been thoroughly bungled. The entire webbased system for 
     enrollment literally collapsed in January. Therefore, the 
     DOD is not authorizing any new CAAs at the moment, and 
     they have spent months trying to restore the system. At 
     least 100,000 military spouses had gained eligibility when 
     the system ``crashed.'' Those are approved for their 
     training. Once My CAA gets up and running, one can safely 
     assume an enormous demand will follow, given all the 
     interest that has been shown by the spouses. EDMC was 
     provided information on becoming a ``Military Spouse 
     Friendly School'' in the past. We would strongly encourage 
     this to be a first step since that is the first stop the 
     spouses see on their websites. No doubt, EDMC is already 
     benefiting from some of this, but an aggressive effort to 
     reach the spouses at the military bases with various 
     career fairs, direct communications, and visibility with 
     the Office of Military Families in Washington would be 
     very important. 2. Enlisted Personnel. Of course, there is 
     the longstanding tuition and other support for most 
     members of the military as an entitlement. 3. Veterans 
     also have a variety of tuition and other benefits, plus 
     preferred eligibility for almost all other Federal 
     programs.
       Excerpts from EDMC916000228222 From: [High-level 
     Executive]: Friday, July 30, 2010 9:22:51 PM To: [High-level 
     Executive] Subject: FW: Possible Opportunities for EDMC 
     ``90:10'' Attachments: [High-level Executive] 0708 re 
     Opportunties.doc Hi I attended the call yesterday with 
     [Director] [High-level Executive] and [High-level Executive] 
     (Strategic Partnerships). The call as expected was to review 
     the areas that had been highlighted on the report as 
     potential opportunities for 90/10 impacting funding sources. 
     The outcome of the call was a followup call with [High-level 
     Executive] and [High-level Executive] on opportunities on 
     the local Workforce Boards and I took the action item for 
     a followup discussion on ensuring we are leveraging the 
     military spouse benefits to the fullest extent possible. I 
     plan to include [High-level Executive] in the next 
     discussion Do you recommend anyone else? [High-level 
     Executive] Original Message From: [High-level Executive] 
     Sent: Monday, July 12, 2010 6:47 PM To: [High-level 
     Executive]; [High-level Executive] Subject: FW: Possible 
     Opportunities for EDMC ``90:10'' [High-level Executive] 
     and [High-level Executive], After you have had a chance to 
     review please give me a call. I know you are probably 
     wondering why the two of you. [High-level Executive] 
     because of the potential match with BMC and [High-level 
     Executive] because of the impact on OHE. [High-level 
     Executive]
       Excerpts from KHE 094984 LEARNING OBJECTIVES Define and 
     demonstrate (through role play) each step in the A.C.T.I.O.N. 
     model Differentiate between Outcome Based and Process Based 
     Selling Utilize Outcome Based Selling language effectively 
     Differentiate between Feature, Advantage and Benefit (FAB) 
     Differentiate between Needs and Wants Utilize Open Ended 
     Questioning and Active Listening techniques Utilize Fear, 
     Uncertainty and Doubt (FUD) in the sales process Handle and 
     overcome objectives Utilize trial close techniques KAPLAN 
     UNIVERSITY A.C.T.I.O.N. FOCUSED SALES MODEL ACTIVATE INTEREST 
     (Introduction) Recognize, Acknowledge, Congratulate Establish 
     rapport and credibility Ask effective questions CONNECT AND 
     DISCOVER Ask open ended questions Dig for motivators 
     Establish needs and wants Listen actively TIE IN THE SOLUTION 
     Satisfy needs and wants Use Feature, Advantage, Benefit 
     technique Use Fear, Uncertainty, Doubt technique Make the 
     solution fit INITIATE AND EXPLAIN THE PROCESS Recognize 
     buying signals Trial close Outline next steps OVERCOME 
     OBJECTIONS Use LISTEN model Use Outcome Based language Show 
     empathy Active listening involves taking note of key points 
     that you can further explore, asking questions, 
     investigating, digging deeper, resulting in longer, more 
     meaningful conversations. For example, the prospect says she 
     is worried about her financial position. The advisor might 
     ask, ``Do you think in a few years, when you decide you want 
     to pursue an education, you will be in a better or worse 
     financial position?'' TRANSITION STATEMENT Confirm your 
     understanding of what the student has told you. ``So if I 
     understand you correctly . . .'' or ``Let me summarize what 
     I've heard.'' TIE IN THE SOLUTION How the Solution Fits 
     Listen for specific information about the prospective 
     student's dissatisfaction with life as it is now, and tailor 
     solutions specifically for him or her. Pique the prospect's 
     interest and arouse enthusiasm! Feature, Advantage, Benefit 
     Feature WHAT IS IT Advantage WHAT IT DOES Benefit WHAT IT 
     DOES FOR ME The Benefit is Important! The features and 
     advantages of individual schools can often look alike. The 
     key is the value. The advisor must address the benefit each 
     feature brings to the students. Not every feature has a 
     benefit for every student. When showing benefits, choose the 
     features that are meaningful and relevant. Presenting 
     benefits paves the way to what the solution offers. INITIATE 
     AND EXPLAIN THE PROCESS It is at the point in the ACTION 
     sales model where the advisor closes the sale. An 
     effective closer pays attention to buying signals, trial 
     closes, outlines next steps and moves toward gaining 
     commitment. OVERCOME OBJECTIONS An objection is generally 
     a reason or argument presented in opposition or a feeling 
     or expression of disapproval. People usually object when 
     they encounter: A misunderstanding Incorrect information 
     Lack of information Fear or doubt Something which is 
     keeping them from making a commitment to move forward. The 
     Admission Advisor's role is to help prospective students 
     overcome objections when making the decision to achieve 
     their educational goals. Types of Objections As a general 
     rule, objections fall under one of five categories: TIME I 
     don't have time in my life to fit school into it. MONEY I 
     can't afford the deposit, much less the tuition. SUPPORT 
     My friends and family don't think I need to go back to 
     school. COMPETITION XXX school is cheaper, faster, easier. 
     FEAR I doubt that I'd be able to succeed
       Expect Objections Objection management is an integral part 
     of the advisor's job. Objections may happen during every step 
     of the admissions process. Advisors encounter objections of 
     varying kinds. Successful advisors are able to approach 
     objections systematically. Overcome Objections with 
     Fundamental Skills Listen Actively--to the student's 
     objections and concerns. Interpret the Objection Repeat 
     objection, then empathize. ``I understand your concern about 
     finding 20 hours a week to study.'' Solve Together Jointly 
     find a solution. Ask probing questions to divulge the true 
     nature of the person's objection. ``How do you spend your 
     time?'' ``Can you walk me through a typical day?'' ``What are 
     you willing to sacrifice to fulfill you dream? Get the 
     student involved in overcoming his own objection. Establish 
     Buy in Gain the student's commitment. Ask reaffirming 
     questions. ``Which of these solutions would work best for 
     you?'' ``Do you feel more comfortable now?'' Move person 
     forward. ``Great, let's move on to the next step.'' Don't 
     hesitate! Next Step Lead student to the next step with 
     confidence.
       Excerpts from ITT00007708 Dear This letter is in response 
     to the concern you filed regarding ITT Technical Institute 
     (``ITT''). In your complaint, you voiced concern over your 
     financial obligation and in particular the Montgomery GI Bill 
     funding you thought you would be receiving. The Board 
     initiated an investigation into this matter and reviewed all 
     of the financial documents involved in your enrollment. In 
     response to the Board's request for information, ITT 
     submitted the attached response to the concerns you raised. 
     The documentation submitted by ITT shows that you completed 
     one term with the school and withdrew late in the second 
     term. When a student withdrawals from school, the school is 
     required to calculate a tuition refund in accordance with 
     Ohio Revised Code Sec. 3332110 and the school may also be 
     required to calculate a refund of federal loan money in 
     accordance with applicable federal regulations. According to 
     the refund calculations, your total financial obligation to 
     the school for those two terms equaled $10,709.68. This 
     tuition charge was financed through two loans for your 
     education, one for $5,760.80 and one for $4,417.00. In 
     addition to the loans that were used to pay your tuition 
     costs, it appears that between March 2007 and July 2007, you 
     received a total of six payments for veteran's education 
     benefits in accordance with the Montgomery GI Bill to 
     subsidize your tuition costs, totaling $6,808.33. For 
     students who receive Montgomery GI Bill funding, It is 
     standard procedure for a school to set up loans or other 
     funding mechanisms for a student before they begin 
     classes. This is due to the fact that the GI Bill funds 
     are dispersed directly to the student after the student 
     has already begun classes. The school cannot control 
     whether the student uses that money to reduce their 
     student loan obligations or whether it is used for other 
     purposes. As such the loans that you applied for while you 
     were enrolled at ITT were properly attributed to your 
     tuition charges and it was within your discretion to use 
     your GI Bill funds to reduce your loan obligations. There 
     is no evidence that ITT is in violation of any law or rule 
     under the jurisdiction of this Board. Finally, I would 
     also note that ITT has served 155 veterans during the last 
     two years and during a visit to the school in December, 
     the State Approving Agency for Veterans Training conducted 
     a review of the ITT's administration of veteran's benefit 
     and nothing out of the ordinary was noted. ITT has offered 
     to meet with you and your mother and assist you in 
     exploring any deferment or forbearance options you may 
     have with your lenders. If you wish to accept their offer, 
     you may contact [Campus Director], School Director, to set 
     up an appointment. Sincerely,
       Excerpts from ITT00007722 I am writing in response to your 
     August 4, 2008 correspondence. I appreciate you bringing your 
     concerns related to your enrollment at our campus to my 
     attention. I am sorry to hear of your difficulties following 
     your service in our nation's military. However, after 
     reviewing the available information, the facts do not 
     substantiate the refund or waiver of the tuition and fees 
     related to your enrollment in the Information Technology 
     Computer Network Systems program. In your letter,

[[Page S3158]]

     you claim you were told that the military would pay for your 
     schooling. This statement cannot be substantiated. While our 
     institution assists students in seeking financial aid for 
     which he or she may qualify, we do not represent to a student 
     that he or she will have their education paid for by a 
     particular entity. The Catalog you received at the time you 
     enrolled at our campus outlined this further. Specifically, 
     the Financial Assistance section of the Catalog states in 
     pertinent part: The school may, from time to time, provide 
     the student with (I) information on federal, state and other 
     student financial aid for which he or she may apply to 
     receive and/or (II) estimates of the amount of federal, state 
     and other student financial aid for which he or she may 
     qualify, but: (a) the federal, state and other authorities, 
     and not the school, determine the student's eligibility for 
     any federal, state or other student financial aid; (b) the 
     federal, state and other authorities, and not the school, 
     determine the amount of any federal, state or other student 
     financial aid the student may receive. . . . As this language 
     states, the school makes no representation or promise of aid 
     which a student will receive. Rather, such a final 
     determination is that of the agency providing the aid. In 
     speaking with the Financial Aid Administrator (FAA) who 
     assisted you, the FAA does not recall any discussions that 
     the military would be paying the full cost of your education. 
     Rather in assisting you with the financial aid process, there 
     were discussions pertaining to your possible eligibility to 
     receive benefits from the Veterans Administration (VA). For 
     your information, I have enclosed a copy of your Enrollment 
     Agreement and related Cost Summary and Payment Addendum 
     (CSPA). The CSPA provides an outline of the expected cost and 
     funding for your first three quarters of attendance at the 
     campus. Further our records also indicate that you did apply 
     for VA benefits. Any such benefits would have been paid 
     directly by the VA to you. Our school does not receive these 
     funds on your behalf. Again I appreciate you bringing your 
     concerns to my attention for review and response. While I 
     sympathize with the circumstances you have endured since 
     leaving the military, I must review each matter based upon 
     its own merits. In this instance, the facts do not 
     substantiate a refund or waiver of tuition and fees. If you 
     have any questions or wish to provide any further 
     information, please do not hesitate to contact me. Sincerely, 
     [Campus Director]

  Mr. DURBIN. I thank the Senator from Iowa. He has led the way. His 
committee investigation on this industry is a clarion call to every 
Member of the Senate of both political parties. Are we going to 
continue to waste taxpayers' money? Are we going to continue to allow 
these schools to exploit veterans and students across America?
  You cannot turn on the local television here in Washington, DC, where 
there are a lot of military families, without running into ITT ads 
trying to lure these young veterans into their programs that are 
virtually worthless, that end up saddling many of them with debt, if 
not saddling the government with debt before it is all over.
  I ask the Senator from Iowa, is it not a fact that when the new 
leadership came into the new House of Representatives, that in the 
first few weeks of activity, one of the first things they did was to 
attempt to stop the Department of Education from regulating this for-
profit school industry?
  Mr. HARKIN. The Senator is right on the mark. The House wanted to 
keep the Department of Education from issuing what we call a gainful 
employment rule, which basically is a rule saying, if you are going to 
take all this money and you are supposed to be educating kids to get a 
job or career, what is happening to them? We want to know if they are 
actually getting jobs. What could be more innocent than that? We want 
to know how they are doing. Yet the Republican leadership in the House 
of Representatives wanted to stop the Department from issuing that 
rule.
  Mr. DURBIN. I might ask the Senator from Iowa, at the end of the day 
is it not true that while these for-profit schools have about 10 
percent of the students in America, they take in almost 25 percent of 
all Federal aid to education?
  Mr. HARKIN. The Senator is absolutely right.
  Mr. DURBIN. Is it not also true that we requested, I think together, 
that the GAO do a study of the amount of money that was being spent on 
behalf of our veterans at for-profit schools, and did we not find that 
the cost to the Federal Government was often two or three times as much 
for the same education that was being offered at community colleges and 
public colleges? Isn't it true that the for-profit industry, by all 
objective measures, is exploiting our GI bill at the expense of our 
taxpayers, our government in debt, and these veterans who are 
unwittingly signing up for these worthless courses?
  Mr. HARKIN. I say to my friend, yes, we did. On December 8, our 
committee issued a report, December 8, 2010, a report on, partially--
what the Senator is saying now, how much more expensive these programs 
are in these schools compared to what they could get, say, at a 
community college or a nonprofit school in their States. The Senator is 
right, it is three to four times as much.
  Plus there is one other thing, I say to my friend. He knows this. 
When these students go to a small not-for-profit school that you would 
have in Illinois or the colleges I have in Iowa, such as Simpson or 
Graceland or Central College--a number of our small private colleges--
they do a great job. They do a wonderful job in helping poor students 
who need a lot of Pell grants. What these colleges do when students 
come in and they borrow money and use Pell grants, is provide a lot of 
support from the university. The university is there to help them with 
their studies, to make sure they get the kind of help and support they 
need. A lot of these students come from families who have never gone to 
college, they never had that kind of experience. They come to college, 
and they get that support. What the for-profits do is they sign the 
kids up, and once they get the money, good luck in ever getting any 
help or support from the for-profit colleges.
  Mr. DURBIN. I might say to the Senator from Iowa, the next time you 
are in Chicago and headed out to O'Hare Airport, right before the 
O'Hare exit, look to your right. You will see a tall office building, 
and on the top it says ``Westwood College.'' This has been one of my 
favorites because I have met many of their so-called students, despite 
their best efforts, who have been exploited by Westwood College. I want 
to share with the Senator one story to show it can go from bad to worse 
in Westwood College.
  There was a veteran named Carlos. He served in Iraq, came home, and 
wanted to get a degree. He saw the ad for Westwood College on 
television. He went to sign up, and they said: Don't worry about it, 
Carlos, because at the end of the day, your GI bill is going to pay for 
everything. He signed up and started going out to this Westwood College 
and was disappointed at how awful the courses were and how the teaches 
didn't teach anything. He didn't feel he was learning anything.
  After a year, Westwood called him in and said: Carlos, you are on the 
road to your degree, but we have run into a problem--the GI bill will 
not cover all the expenses.
  If I am not mistaken, I ask the Senator from Iowa, doesn't the GI 
bill pay about $17,000 a year?
  Mr. HARKIN. That is right. Starting in August, that's about how much 
the GI Bill will pay per year.
  Mr. DURBIN. They said to Carlos: You need to take out student loans 
on top of the GI bill.
  He ended up taking out the GI loans, going $21,000 in debt over and 
above the GI bill, and he couldn't finish. He didn't want to go further 
into debt.
  I might say to Carlos that he got off easy. I had a young woman who 
went to Westwood College for a criminal justice degree. After 5 years 
of extra effort to get her diploma, she ended up with a worthless 
diploma that she couldn't turn into a job anyplace, at any sheriff's 
office or anyplace related to criminal justice. I might say to the 
Senator from Iowa, she was $90,000 in debt at the age of 26, with a 
worthless diploma from Westwood College, this for-profit school. She is 
living in her parents' basement because she cannot get a job that pays 
anything, and whatever she makes goes to the student loans, and she 
cannot borrow a nickel now to get a real education.
  Mr. HARKIN. Of course not.
  Mr. DURBIN. Think about this poor girl. She was doing the right 
thing.
  I will say something to the Senator from Iowa and ask him to comment 
on this. I think the Federal Government is at fault here too. Somewhere 
along the way, Westwood College ended up qualifying for college student 
loans and Pell grants. Who said they are qualified? I would challenge 
that based on these experiences.
  Are we doing our job as a Federal Government to make sure these are 
truly accredited colleges and universities? I ask at this point, is 
there more we can do to make sure these are real

[[Page S3159]]

schools teaching real courses that can lead to jobs?
  Mr. HARKIN. I say to my friend, first of all, Westwood was one of the 
schools that the GAO had an undercover investigation into that had one 
of the most deceptive programs of getting students to sign up. That is 
all documented on film.
  Second, the accrediting agency that accredits Westwood was out at 
Westwood about the same time. Yet they found none of the things the GAO 
found. I talked to them. I had a hearing. I had them before our 
committee. I asked the accrediting agency: How could it be that on the 
one hand the GAO finds out all this, yet you say they are fine and they 
get accredited?
  They did admit there was some laxness or some loopholes, some things 
they were not paying attention to, that they needed to do a better job 
in accrediting.
  I say to my friend, what the Federal Government does is we say to a 
school: To be able to be eligible for Federal financial aid so you 
could accept Pell grants and get the guaranteed student loans, you 
would have to be accredited. The Federal Government doesn't do that 
accrediting. That is done by private agencies.
  Here is another one, I say to my friend from Illinois, that we need 
to look into. Get this. The accrediting agencies that accredit let's 
say a Westwood, do you know where they get their funding? From the 
schools they accredit. Talk about a fox in the chicken coop. They go 
out to accredit Westwood, but it is Westwood that is paying them to 
accredit them.
  This is something that I think we as a Federal Government have to get 
into. To me, this is a system that has kind of run amok, this whole 
accrediting system. I think there needs to be a better system of 
accrediting schools. I can assure my friend this is something else our 
Committee on Education will be looking at in the future.
  Mr. DURBIN. I ask the Senator from Iowa, is it not true that when our 
GAO undercover agents went out to look at 15 for-profit colleges along 
the lines the Senator discussed, they found all 15 made deceptive or 
questionable statements to potential applicants, including recruiters 
at the so-called Westwood College? Investigators found admissions 
representatives at Westwood misstating the cost of the program, failing 
to disclose the graduation rates, even suggesting falsification of 
Federal financial aid forms.
  As with the experience of the young veteran I described, the GAO 
report found the recruiters overstated what it would cost to go to 
public college. On film, as you said--this is on videotape--when asked 
the cost, this recruiter from Westwood said: Well, it depends on the 
program. Usually with a bachelor's program, coming in with no college 
credits, this could be--it could range from $50,000 to $75,000, he 
said. Most schools, more traditional schools, you are looking at 
$100,000, $150,000, $200,000.
  I might say to the Senator from Iowa, isn't it true that to obtain 
the same degree he was offering at Westwood from a public university 
degree in Texas would cost $36,000? Isn't that what the GAO came in and 
said?
  These people are deliberately misleading these youngsters and new 
veterans trying to make a life for themselves, piling debt on them with 
a worthless diploma and ripping off the taxpayers. Why don't we have a 
sense of some rage here in Congress that this is going on?
  I would say to the Senator, it strikes me first and foremost that we 
should protect the young people in America and we ought to make an 
equally high, if not higher, priority of protecting our veterans. We 
created the GI bill with a great source of pride--I know you are a Navy 
veteran yourself--great source of pride that we were standing up for 
this generation of veterans. Senator Jim Webb led the way on that. We 
were good about keeping our word to veterans. Now these same veterans 
are being ripped off because we are not doing our job in Congress.
  I say to the Senator, when it comes to some of these recruiting 
practices that are being used by Kaplan University, what you have 
disclosed here on the floor is embarrassing, that we allow this to 
occur to our veterans.
  Mr. HARKIN. I say to my friend it is. It is embarrassing, and it is 
just shameful.
  I said earlier this is from Kaplan's recruiting. They call it their 
military learning module. They call it ``Fear, Uncertainty, and 
Doubt.'' As I said earlier, they say--now, this is an internal 
document. This is for the recruiters. This is not something they hand 
out through the public. We got this through our investigation. They 
say: This technique was originally created within the computer hardware 
industry and uses these emotions to attempt to influence perceptions or 
beliefs--and on and on.

  As I said earlier, it is one thing to use high pressure tactics to 
sell someone a hard drive or a new computer or something, but when they 
are exploiting fear, uncertainty, and doubt on a GI who may have post-
traumatic stress disorder, who may have served in Iraq, who didn't go 
to college, that is another thing. Young people now, they are worried 
about their future and what is going to happen to their future. Then 
these people come in and put the pressure on them with fear, 
uncertainty, and doubt to get them to sign a contractual agreement and 
turn over their GI bill benefits. It is just disgraceful.
  Mr. DURBIN. Mr. President, I ask the Senator again, this is Kaplan 
University, which owns the Washington Post?
  Mr. HARKIN. I think it is the other way around. The Washington Post 
owns Kaplan University.
  Mr. DURBIN. I see. I also think, for the record, that Kaplan 
University makes more money than the newspaper, but be that as it may, 
they are linked economically.
  Mr. HARKIN. Yes, they are.
  Mr. DURBIN. I have always respected this newspaper. I just wonder how 
they can rationalize this sort of activity--the exploitation of 
students and the exploitation of veterans.
  I am sure the Senator has been visited by so many people who have 
called and said: Senator Harkin, I loved your speech. I loved your 
hearing. I have to get in to talk to you because we are the good guys. 
We are the good school. We are the ones who don't exploit students.
  You know what. I found a couple of them I believe. There are some 
that are good.
  Mr. HARKIN. That is right.
  Mr. DURBIN. But the rest of them, at this point it is an 
embarrassment to me. As a person who couldn't have gone to college 
without a student loan--and I have voted reflexively now in the House 
and the Senate to give the next generation the same chance--I have to 
say to the Senator the party is over as far as I am concerned. The next 
time we have a debate on Pell grants and college loans, I want this 
issue front and center. They are ripping off the taxpayers and ripping 
off the students and ripping off the veterans and we are fools to 
ignore it.
  The House Republicans have announced that they want no part of 
reform, that they are going to take this power away from the Department 
of Education. I think we have to send a different message.
  Mr. HARKIN. I say to my friend, the Senator is right on target. What 
has happened as we have looked at this over the last year and a half 
now is even the good actors are being sucked into this vortex because 
the business model itself is bad.
  For example, how many times has my friend heard from the for-profit 
industry: Well, the reason we have these high dropout rates--for 
example, here is Westwood; 57.6 percent dropped out in the first year. 
Here is Kaplan; 69.1 percent dropped out in the first year--the reason 
we do is because, see, we serve a lot of low-income students. These are 
low-income people we serve, and they have a lot of problems in their 
lives. That is why we have such a high dropout rate.
  What they are not telling us is, because of the business model, that 
is exactly who they go after to recruit. Why do they do that? Because 
the lowest income student gets the highest Pell grant and the most 
guaranteed student loan. So if you are in the for-profit business and 
you want to make the most money, you don't want to recruit Senator 
Durbin's son or daughter. You want to recruit somebody whose parents 
never went to college, who is probably a minority, maybe doesn't even 
speak English all that well, who can get the maximum Pell grant and the 
maximum student loan, and once they

[[Page S3160]]

get the money--well, if they stay, fine; if they don't, no big deal.
  Mr. DURBIN. Let's stay on that point for a second. I ask the Senator 
from Iowa, how long does the student have to stay at the school for the 
school to get the Federal money? If they left and didn't finish, would 
the school still get paid?
  Mr. HARKIN. This is something else we have to look into. Right now, 
the Federal laws are that a student has to be in for at least 60 
percent of the term. If they are in for 60 percent of a term, then the 
school can keep the money.
  Now, I ask my friend from Illinois, what is a term? I ask people 
that, and they say: well, isn't that a semester? Well, a term is 
whatever the school says it is. Some of these schools have a term that 
is 6 weeks long. So you sign up, you turn over your money, you spend 4 
weeks there, you fulfill 60 percent of the term. If you leave, they 
keep the money.
  Mr. DURBIN. And you end up with the student loan.
  Mr. HARKIN. And, by the way, as the Senator fully knows, these 
student loans are not dischargeable in bankruptcy. They are around your 
neck forever.
  Mr. DURBIN. I might also add, I think Congress made a serious error 
in saying that the private loans from the same schools will be treated 
the same way. They are not dischargeable in bankruptcy.
  Here we have someone who could be 19 or 20 years old signing up for 
$4,000, $5,000 or $10,000 worth of student loans. Have they really 
thought and reflected on the fact that that debt they have incurred is 
going to be with them for a lifetime and, at some point in their lives, 
when they can no longer borrow money to go to school, and they are 
still facing default on their student loan, they could have their 
income tax returns attached, they could be prohibited from Federal 
employment? They cannot discharge this loan in bankruptcy. They are 
stuck with it.
  That poor girl living in her parents' basement with a $90,000 debt 
for Westwood College, a rip-off institution, is stuck. She has nowhere 
to turn. The college president wrote to me and said I am just being 
totally unfair with him about her experience. Well, I know her 
experience inside and out.
  I said: You want fairness? You step in and forgive her loan. You pay 
it back. You have the money. You pay it back. Never heard back from 
him.
  They don't have the interests of the students at heart. They have the 
interests of money at heart. That is why I am glad the Senator is 
investigating, and we will continue to speak out.
  Mr. HARKIN. I thank the Senator for his great work on this.
  I just want to add one other thing about the school and about the 
debt of these students. Some have likened what the for-profit school 
industry is doing to the subprime bubble we had. But there is a big 
difference. Even as bad as the subprime mortgages were, a person who 
had a house they couldn't pay for could walk away from that house. They 
could always walk away from it, and that is the end of the debt. You 
can't walk away from this. No way. That is the difference.
  This is not a dischargeable debt, and these students, as the Senator 
points out, might end up alone. They might not be able to go to a 
legitimate school because they can't get any money for that. They could 
be barred from Federal employment. This will follow them for the rest 
of their lives until they pay it off. Yet these companies are making 
almost obscene profits and paying their CEOs tremendous salaries and 
benefits.
  As I pointed out earlier, many of these for-profit schools are owned 
by the same investment firms on Wall Street that brought us the 
subprime problem.
  Well, I say to my friend, we just cannot let this go. There is too 
much at stake not only for the taxpayers of this country but for these 
students, these young kids, these poor kids who are being preyed upon. 
So whenever we hear these schools say: Well, the reason we have this 
problem is because we are servicing all of these poor kids--don't 
forget. That is who they prey on. That is who they go after because 
they get the most Pell grants and the most student loans out of the 
poor kids. Then after they get the money, hey, if they leave, no sweat. 
They don't care. It is not a problem with them.
  I thank my friend from Illinois.
  Mr. DURBIN. I thank the Senator from Iowa.
  Mr. HARKIN. Mr. President, I yield the floor.
  Mr. DURBIN. I ask unanimous consent to speak as in morning business.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

                          ____________________