New bill targets for-profit college use of funds

Thursday, April 19th, 2012 By

ITT

For-profit colleges may be limited in their use of federal funds, if a new bill passes. Image: Flickr / melindarae / CC-BY-SA

For-profit colleges are difficult for lawmakers; the colleges make millions of dollars of profit from federal student aid. A new bill presented in Congress would limit how colleges, mainly for-profit colleges, utilize federal dollars.

For-profit advertising

A recent federal inquiry studied how much money for-profit colleges spend on advertising, marketing and recruiting. The 15 largest for-profit institutions spent a cumulative 23 percent of their budgets on recruitment of new students. Generally, schools spend between 4 and 12 percent of their budgets in this category. There have been allegations that the advertising from these for-profit schools can be deceptive or inaccurate, though other lawsuits and federal bills are attempting to address this problem.

The difference of for profit schools

For-profit colleges operate differently than nonprofit schools. For-profit colleges tend to be much more career focused, with programs that are intended to put individuals into jobs right away. Nonprofit colleges tend to have more of a liberal arts or academic focus. Nonprofit colleges have been building more comprehensive vocational programs in the last few years, however. Credits and educational degrees from for-profit colleges are often much more difficult to transfer in pursuit of a higher degree.

Bill focuses on for-profit schools

The Harkin bill, presented this week in Congress, would focus on these for-profit schools. The bill requires that schools not use federal money for marketing, advertising, or recruiting. This won’t affect not-for-profit schools very much because nonprofits only spend about 20 percent of their aid on marketing. The sponsor behind the bill made a statement to the media about the bill, outlining that:

“Taxpayers should not be picking up the tab for colleges with dismal graduation rates that spend up to 30 percent of their revenue on marketing machines.”

Chances of change

Though the bill has been presented in Congress, it is not likely that it will eventually become law. Prominent educational groups are split on the issue, with the American Association of Collegiate Registrars and Admissions Officers supporting the bill, with the American Council on Education opposing it. The Association of Private Sector Colleges and Universities, an association of for-profit colleges, called the bill “misguided at a time when the country will depend on such schools.”

[Most college students end up getting personal loans of some form at some time.]

Sources

BusinessWeek
DesMoines Register
Consumerist

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