[Congressional Record Volume 159, Number 23 (Wednesday, February 13, 2013)]
[Senate]
[Pages S666-S668]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FOR-PROFIT COLLEGES
Mr. DURBIN. Madam President, the President's State of the Union
Address is an annual event where each President comes forward, talks
about the agenda, the plans, and what we hope to achieve in Washington
during the course of the next year.
There were many elements in the President's State of the Union
Address last night. There was one in particular I was struck by. He
talked about establishing a college scorecard. He talked about the
challenges families are facing across America paying for college
education. It has become an enormous expense. It is the fastest growing
debt in America--$1 trillion in student loan debt.
Sadly, many students are getting in too deeply. They are getting too
far in debt, and they may not be able to get a job to pay it back. Many
students are defaulting on those loans because they don't have an
income. Sometimes their parents help them go to college and sign the
papers. Sometimes the efforts to collect the money go beyond the
defaulting student to the parents--in fact, sometimes to grandparents.
There was a case reported of a grandmother who wanted to help her
granddaughter, so she signed the student loan application. The
granddaughter didn't get a job, perhaps didn't finish school. There
came a time when, in collecting the student loan, they actually
garnished the Social Security check of the grandmother. That is the
most extreme case I have heard.
When it comes to indebtedness and student loan default, there are
different categories of debt. Some students are lucky and don't have to
borrow a penny. Most do, and those who borrow money, we find, borrow
the lowest average amount from public universities--community colleges
and public schools. Next come private universities and then a special
category--the for-profit colleges. This is an incredible industry of
which most Americans are not aware.
When we think of for-profit schools, we should remember three things,
three numbers. Twelve percent of students coming out of high school go
to for-profit schools. The biggest ones, the most well-known schools,
include the University of Phoenix, DeVry University, and Kaplan
University. There are a number of names which, when we hear them, we
say: I have heard a lot about those. They advertise a lot.
Twelve percent of the students coming out of high school go to those
for-profit schools. However, those for-profit schools receive 25
percent of all of the Federal aid to education--12 percent of the
students, 25 percent of the Federal aid. Why? Because they are
expensive. For-profit schools are very expensive, and the tuition is
high. So a student, to be able to go there, may qualify for a Pell
grant, which is an actual grant of money for students from low-income
families. Then, for loans beyond that--and it turns out that 25 percent
of all of the Federal aid to education goes to for-profit colleges that
have 12 percent of the students.
That is not the most important number to remember--not 12, not 25,
but
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this final number: 47 percent of all the student loan defaults come out
of for-profit schools, which means that students who start at those
schools either don't finish and then can't pay back their loans or
finish and can't find a job to pay back their loans. For-profits
schools, 47 percent of the student loans default.
The stories are heartbreaking. Imagine, 19, 20, 21 years old, papers
are being shoved across the desk in the financial office at a for-
profit school, and a student is basically told: Well, you can start
school next week; all you have to do is sign up for these loans.
What is a student to think? I have been told my whole life to go to
college. Mom and dad are counting on me to go to college. This is the
way to get a good job. I will sign up. I want to start.
What the student doesn't know is whether that school is worth the
money. How could they know? I think back to those days when I started
college. I hate to go back that far in time, but I didn't know whether
borrowing $1,000 in those days was a good idea or a bad idea. I knew a
lot of my fellow students were borrowing. But now students are getting
in much more deeply. It isn't just $1,000 or $5,000 or even $10,000. At
the end of the day, it turns out to be much, much more.
I have come to the floor a number of times to tell the stories about
these for-profit schools to warn students and their families to be
careful. Some of these schools are good; many of them are awful--just
plain awful.
Last night the President said he wanted to create a college
scorecard. I want to hear more. I hope there will be a scorecard and a
Web site, maybe, where students--high school students or others across
America--can take a look at every college opportunity, not just their
pretty catalogs or their great Web sites but to find out how many of
these students who graduate from this college actually get a job, and
those who get a job, how much do they actually get paid. Of the
students who borrow money to go to this college, how much do they
borrow? How many of them fail to make the payments on their student
loans later in life?
Oh, there is one important thing I left out. Here is what you are
going to learn about loans to students. They are different than other
types of loans. You see, if I decide to buy a home and a car and a boat
and then lose my job and go broke and cannot pay them back, under the
most extreme cases I can go to court and put all my debts on the table
in front of a judge and say: Here is all the money I owe and here is
all the money I have. I do not know where to turn--and go through
something called bankruptcy.
In bankruptcy, the judge says: Well--let's say you have $10,000 in
the bank and you owe $50,000. You are going to lose your $10,000. You
cannot pay back the $50,000, but you no longer have an obligation to
pay it. You are judged bankrupt. You start over, wipe the slate clean.
Not a lot of people do that, but when things get really bad, they
have to. Guess what. When it comes to student loans, they are not
dischargeable in bankruptcy. The debt that a 19-, 20-, and 21-year-old
student signs up for is a debt for life. They pay it back forever--
until it is paid. So these are serious debt obligations, and it is hard
to imagine that many young people without a great deal of life
experience really know what is too much debt, really know whether that
school is any good.
Let me tell you a story of one student.
Ramon Nieves attended the American Intercontinental University, a
for-profit college owned by Career Education Corporation. Like many who
attend for-profit colleges, Ramon was the first person in his family to
go to college. The recruiters at these for-profit schools look for
these students.
Without guidance from his family--a family that had no experience
with college--he trusted the school when they advised him about student
loans. He said the school just told him to sign his name. That is all
he had to do. They never explained the difference between the kinds of
loans that students could take out; that there are government loans,
Federal loans, and then there are loans from private financial
institutions. He was never told what his balance would be--how much he
owed--or what he could expect his monthly payments to be when it was
all over.
He signed up. He wanted to get started with college. And he kept
signing and signing, semester after semester, year after year, until he
graduated. He graduated from this for-profit school with $90,000 of
debt--$90,000.
He works several jobs, almost 80 hours a week, so he can pay his
monthly student loan payments, which are $1,000 a month, right off the
top.
His student debt is a constant burden for him and his family. He owns
a home, and he thinks he is going to lose it because of the student
loans. He decided to try to file for bankruptcy because he was in debt
so deeply, but he learned the hard way that the bankruptcy court cannot
help him when it comes to student loans.
Ramon says he wishes he had not gone to college at all; that he was
better off before he got that deeply in debt. Now he is at a community
college--a community college--trying to get an education because the
$90,000 in the for-profit college turned out to be a waste of time. He
is now where he should have started.
Students who are not sure, start at a community college. You are near
home. You can commute. They offer a lot of options. They are not
expensive. You will learn a lot about yourself, about your education,
and your dreams by sitting in those classrooms and going through
community college courses. After a year or two, if it sounds right and
feels good for you, it is time to move on to another college or
university, and you will move on to that third year of college without
a lot of debt. Start at a community college.
Ramon ended up at a community college finally trying to get the
education the for-profit school failed to give him. He says he wishes
he had known that at the beginning--starting at that community college
instead of the American Intercontinental University. Then, he says, he
would have received the same education but without $90,000 of debt.
Why does he have so much debt? According to a recent committee report
in the Senate, the American Intercontinental University costs 250 times
more than a nearby community college--250 times more.
Federal student aid cannot cover the tuition costs, so students are
forced to turn from Federal student aid, government loans, which are
low-interest loans, to private student loans, which are high-interest
loans. Some students do not know, as they are sitting there, the
differences between a 3.2-percent annual rate of interest and an 18-
percent annual rate of interest, and that can be the difference between
a government loan and a private loan.
To put it in shorthand from someone who has paid off loans, the
higher the interest rate, the more your monthly payment is going to the
bank rather than reducing the amount of money you owe.
Federal student aid cannot cover the tuition costs. The private loans
are signed up for, and they do not come with any consumer protections.
Government loans do. Government loans allow you to consolidate.
Sometimes they take into consideration the job you end up with in life.
Sometimes there is forgiveness of government student loans. It is a
much more flexible, low-cost program than private student loans.
Sometimes students will need private student loans, but for-profit
colleges are using these private student loans for another important
reason to them. For-profit colleges encourage students to take out
private loans, at least in part, because private loans allow these
schools to continue to get more Federal funds. It is a complicated
formula, but in order to get the maximum amount of Federal dollars, the
for-profit schools push kids into private loans even when they are
still eligible for the better government loans.
The rule I am talking about is the 90/10 rule which requires for-
profit colleges to receive at least 10 percent of their revenues from
sources other than the Federal Government--10 percent of their revenues
from sources other than the Federal Government.
If you took the Federal money we send to for-profit schools in
America--roughly $32 billion a year--if you took that money and
translated it into a Federal budget, for-profit colleges in America
would be the ninth largest Federal agency--$32 billion going to this
sector of the economy.
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When they push the kids into the private loans that are not as good,
not as generous, much more expensive, that covers the 10 percent they
have to come up with in real money as opposed to government money. It
means that 90 percent of the revenue of these extremely profitable
schools comes right out of the Federal Treasury.
Even though for purposes of this rule Federal revenue includes only
funds from the Department of Education's Federal student aid programs--
GI bill funds, for example, are not even considered Federal funds--many
for-profit schools are close to 90 percent of their revenue coming from
the Federal Government. If you add in GI bill funds, sometimes it is
closer to 100 percent.
Where is the accountability? If these schools are dragging kids
deeply into debt, if the kids are defaulting at rates twice as fast and
twice as serious as those going to public and private schools, where is
our responsibility? How is a student--a high school student in Illinois
or in North Dakota--supposed to know whether that Web site about that
college is true?
How would they know when that school says ``we are accredited,'' that
the accreditation is phony? Most of these for-profit schools belong to
an organization that accredits all the schools that are for-profit
schools. They take care of one another. They ignore the obvious when
these schools are failing the students and their families.
The Federal aid is keeping the doors open for these for-profit
schools. Can we afford that? Can we afford to get students across
America deeply into debt for a largely worthless education? Do we have
that much money sloshing around here in Washington when it comes to
helping students get through school?
That is why the President's statement last night about student debt,
about the rising college costs, and a scorecard for colleges and
universities is right spot on. It is time we tell families across
America the truth about colleges and universities, and it is time for
those same colleges and universities to wake up to a reality. The
reality is the sky is not the limit when it comes to the cost of higher
education.
I have talked to a number of them--respected institutions--that give
good degrees, good diplomas, and I have told them the same thing: You
just cannot keep raising the cost of higher education. Middle-income
families, working families do not have a chance. Madam President,
$20,000, $30,000, $40,000 a year to go to school? It is just something
that ordinary families cannot even consider.
Congress needs to act now to stop this for-profit school industry
from exploiting students and their families and taxpayers. Why we are
spending so much money--money we can no longer afford--to subsidize
these highly profitable schools is beyond me. I cannot explain it.
These schools that leave these kids high and dry break my heart.
Every time I fly out to O'Hare Airport, on the Kennedy Expressway in
Chicago, right before I get to the Cumberland exit, I look up at one of
these office buildings, and up there in big, bold letters is ``Westwood
College.'' Wow, the campus of Westwood College.
I know a little bit about that college. I have met students who have
gone to that college, and let me tell you, I want to put a sign right
under there that says, ``Please Avoid This Ripoff.''
A young lady who went to Westwood College testified in Chicago. She
watched a lot of shows on TV about forensic criminal investigation, and
she wanted to get into criminal investigation. She signed up at
Westwood College. It took her 5 years to finish.
When she finished, she had a debt of $90,000. But she wanted a degree
in law enforcement. She wanted to be on CSI in the real world. Guess
what happened. She went to every law enforcement agency in the
Chicagoland area, and they pushed it back and said: Westwood is not a
real college. You have wasted your time--5 years--and your money.
Here she sits now living in her parents' basement at a time in life
when she thought she would be starting her own career, her own life.
What is she doing? She is paying back a loan for a worthless education
from Westwood College.
I have been after these folks for a long time. They exploit these
kids day in and day out. Sadly, we subsidize them. We send them
millions of dollars in Federal funds to continue this exploitation of
students.
This has to come to an end. This is not the kind of thing we need to
encourage if America is going to have well-educated and trained
students so they have good lives and America continues to prosper.
One of my colleagues, Senator Tom Harkin of Iowa, has been a leader
on this issue. As chairman of the HELP Committee, he has had hearings
on for-profit schools, and I commend them to anyone interested in this
subject. Take a look at Tom Harkin's hearings. I could go on for a long
time--Tom could too--about the schools across America that are
exploiting students.
We owe it to the students to tell them the truth. We owe it to their
parents. And we beg teachers and high school counselors and others, who
really care about young people: Look long and hard at these for-profit
schools before you recommend them to a student.
I encourage all my colleagues to take a look at legislation that Tom
Harkin and I have introduced. We are trying to drop the Federal subsidy
to these for-profit schools just a small bit. It will be hard to do.
These for-profit schools are pretty powerful in Washington. But if we
are going to do our job to protect families and students across
America--following the President's lead from his State of the Union
address to make sure we are sensitive to student loans, student
indebtedness, that we hold colleges and other training institutions
accountable for what they are doing to and for students--it is time for
us to turn the page and join the President.
The President's speech last night is a challenge to all of us on both
sides of the aisle, both sides of the Rotunda, to take this student
debt crisis seriously.
Madam President, I yield the floor and suggest the absence of a
quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Ms. Baldwin). Without objection, it is so
ordered.
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