Attorney general supports federal bill to curb college recruiting abuses

FRANKFORT, Ky. (March 18, 2013) — Attorney General Jack Conway supports a federal bill aimed at restricting institutions of higher learning from using federal financial aid for recruitment, advertising and marketing purposes.

College can be a costly endeavor.
College can be a costly endeavor. Kentucky Attorney General Jack Conway publicly announced his support Friday of a federal bill aimed at restricting institutions of higher learning from using federal financial aid for recruitment, advertising and marketing purposes. (Photo courtesy of stockfreeimages.com.)

Conway and 13 of his colleagues support the Protecting Financial Aid for Students and Taxpayers Act, sponsored by Sen. Kay R. Hagan, D-North Carolina, and Sen. Tom Harkin, D-Iowa. Conway, who chairs a multi-state group of state Attorneys General examining the questionable business practices of some for-profit institutions, sent a letter to the chairs and ranking members of key Senate and House committees expressing support for the bill.

“I support higher education and students who seek a degree to create a better life for their families, but many times I see those dreams turn to nightmares when students fall prey to a fast sales pitch from a for-profit college with a questionable reputation,” the attorney general said Friday. “The students end up with tens of thousands of dollars in debt and no degree. This bill ensures that scarce federal education dollars will be used to serve and educate students rather than to finance advertising campaigns, recruitment operations and aggressive marketing at colleges that have placed profits ahead of student success.”

Hagan, a member of the Health, Education, Labor and Pensions Committee, introduced the legislation because “taxpayer dollars should not be used on out-of-control marketing, advertising and recruitment budgets,” she said.

“I’m especially troubled that our veterans are being targeted by some for-profit schools, and these deceptive recruitment practices are unacceptable,” Hagan said.

The attorney general’s letter

In his letter of support, Conway says:

♦ Fifteen of the largest for-profit education companies received at least 86 percent of their revenues from federal student aid programs, such as the G.I. Bill and Pell grant programs.

♦ In fiscal year 2009, these for-profit education companies spent $3.7 billion dollars (23 percent of their budgets) on advertising, marketing and recruitment

♦ Together, the 30 education companies examined by the HELP Committee spent $4.2 billion on marketing in 2009 or 22.7 percent of all revenue, which equates to $2,622 per student.

♦According to one study, “in the corporate world, marketing budgets typically represent between 4 to 12 percent of sales, and in the for-profit education sector, “marketing budgets can approach a whopping 40 percent of tuition revenue.”

♦ Nonprofit colleges and universities spend an average of one-half of one percent of their revenues on marketing.

♦ For the 30 educational companies examined by the HELP Committee, 54 percent of students who started in 2008-2009 left without a degree by mid-2010.

♦ According to the HELP Committee, for-profit colleges collect half of all Department of Defense tuition.

♦ Students who attended a for-profit college already account for 47 percent of all student loan borrowers in default.

Other states signing onto the letter include: Arkansas, Illinois, Iowa, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New York, North Carolina, Oregon, Pennsylvania and Tennessee. A copy of the letter is available here.

Combating abuse

Conway continues to lead a national bipartisan effort to examine potential abuses in the for-profit college industry. There are currently 32 states involved in the working group.

As part of this effort, the attorney general filed suit in July of 2011 against Daymar College and on September 27, 2011, against National College over allegations that the for-profit colleges violated Kentucky’s Consumer Protection Act. He filed a lawsuit against Spencerian college on January 16, 2013, alleging consumer protection violations.

In August of 2011, the attorney general’s office filed a motion to intervene in a whistle-blower suit against Education Management Corporation (EDMC), the parent company of Brown Mackie College, over allegations that the company illegally paid recruiters based on the number of students they enrolled in EDMC programs. A federal judge declined to let Kentucky intervene. Kentucky’s investigation into EDMC and Brown Mackie College continues.

In June of 2012, Conway led an effort of 20 state Attorneys General to secure a $2 million settlement with QuinStreet, Inc., the former operators of www.GIBill.com. The website was a funnel, generating sales leads for the for-profit college industry. The website made representations that it was affiliated with the military and the United States Government. Under the settlement, the Department of Veterans Affairs took over the domain name, where it now contains legitimate information about the GI Bill program. QuinStreet also agreed to make sweeping changes to all of its other education-related websites to address the states’ consumer protection concerns.

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