Law Would Forbid Colleges From Using Federal Money For Advertising

The nation’s 15 largest for-profit colleges get nearly 90% of their annual revenue from federal aid programs for students. New legislation introduced in the U.S. Senate today would prevent any of that money being used on advertising, marketing and recruitment.

The Protecting Financial Aid for Students and Taxpayers Act (PFASTA) is a joint effort from Iowa Senator Tom Harkin and Senator Kay Hagan of North Carolina (which is one of our two favorite Carolinas). The intention of the legislation is to “maximize federal student aid by prohibiting the use of Pell Grants, federal student loans, the Post-9/11 G.I. Bill, and other federal education funds” for purposes that aren’t directly tied to educating and supporting students.

“In these tough economic times, we need to protect taxpayers’ investment of billions of dollars in student financial aid by ensuring that it is used to help students succeed in college, not on out-of-control advertising, marketing and recruitment budgets,” said Senator Hagan.

Senator Harkin is Chairman of the Senate Health, Education, Labor and Pensions Committee, which recently looked into the use of federal funds at the nation’s colleges.

“Our Committee’s investigation revealed a staggering amount of money is being spent on advertising and recruiting from for-profit colleges that fail their students,” said Harkin. “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.”

Other tidbits from that HELP investigation:

*In Fiscal Year 2009, the 15-largest for-profit education companies spent $3.7 billion dollars, or 23 percent of their budgets, on advertising, marketing and recruitment, which was often very aggressive and deceptive;
*These colleges not only outspend other institutions of higher education in their efforts to secure student enrollments, but such spending is highly disproportionate when compared to American businesses overall.

The HELP Committee also noted that marketing budgets outside of the academic world “typically represent between 4-12 percent of sales.” Non-profit colleges and universities are only spending about 1/2 of 1% of their revenues on marketing, while for-profit schools have “marketing budgets [that] can approach a whopping 40 percent of tuition revenue.”

“Schools should use federal taxpayer dollars to provide quality education for their students – to hire more teachers, provide career guidance, and help students find jobs,” said Ioana Rusu, regualtory counsel for Consumers Union. “But some for-profit schools with low graduation rates are spending big bucks on TV ads and hiring thousands of recruiters to pressure students into signing up for their programs. Those expenses shouldn’t be on the taxpayers’ tab, and that’s why Congress needs to pass this bill.”

We would be all for using federal funds on college ads if they were all like this:

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  1. osiris73 says:

    If you take the top 15 state colleges/universities and calculated how much they spend on sports programs (which I find as unnecessary an unappealing as a for profit school spending money on advertising), I wonder what that figure would be? Not that I’m against this new bill; I think it’s a great thing, but I think we need to look at how much the state schools are spending on their sports programs as well.

    • Ryno23 says:

      Just read this blog post a few weeks ago:

      http://reason.com/archives/2011/10/14/stop-funding-college-sports

      • Cat says:

        FTFA:

        Most college athletic departments are a net drain on the budget. Three years ago, the NCAA issued a report that found most athletic departments operate in the red. A more recent analysis by Bloomberg found the same thing: 46 of the 53 schools it looked at subsidized their sports programs. The money usually comes from sources such as student activity fees, such as that charged at Virginia Commonwealth University. Earlier this year VCU jacked up its fee by $50 to help fund the Rams basketball program.

        galm666, take note.

        • Cat_In_A_Hat says:

          Thankfully I went to a university that voted against funding the athletic department through student “fees”. Go Bears!

        • bhr says:

          There are some pretty big gaps in the methodology there though, as they count scholarships as a cost, which no other department in a school uses.

          • CoachTabe says:

            NCAA scholarships are actually paid at full-price by athletic departments so it’s absolutely correct to count them as a cost.

        • vivalakellye says:

          This is certainly the case in a number of situations, but there ARE specific grants/funds that go toward sports and cannot be used for academic purposes.

    • galm666 says:

      Those are pretty large amounts, but the top 15 university athletics programs are also doing two other things:

      1. Generating revenue that’s more or less self-sustaining.
      2. Bringing in a lot of attention to the universities, bringing up funds for both the athletics and academics of their respective universities.

      Don’t forget that in many states, academic and athletic funds are separate from each other and can’t cross over.

      • nishioka says:

        > Those are pretty large amounts, but the top 15 university athletics programs are also doing two other things:

        You can’t extend that all the way down to all the other athletics departments, though. Once you step outside of that group of schools that both spend AND make a crapload of money, you’re left with schools that spend a crapload of money to try to keep up with the arms race, but don’t bring in enough money to offset all that. Those are the ones who have to take loans from the host institution to fire the coach who went 5-7 in football. Or worse, retain the guy because they can’t afford to fire him, which further lessens interest in the program, causing the budget gap to get even wider.

        I went to Nebraska. The model works great here. Everywhere else, not so much.

  2. Back to waiting, but I did get a cute dragon ear cuff says:

    Another win for accounting departments. So all they need to do is paper trail it so that no federal funds go to those expenses. Fed funds only go to allowed uses, and non federal funds are reduced from those and used more for the non federal allowed purposes.

    Reminds me of the lottery discussions here. Lottery funds will go to the schools and help them out. Oh good, we can cut tax dollars going to the schools by the amount they are getting from the lottery.

    • Gman says:

      This. +1.

    • TuxthePenguin says:

      Or, to say it more simply, money is a fungible good.

      • TasteyCat says:

        This. Ron Paul keeps making this point, but nobody pays him any attention. Hence, Greece, part 2.

    • catastrophegirl chooses not to fly says:

      that happened in florida when i was growing up. i actually started a protest about it
      the lottery came and was supposed to go to schools
      suddenly the teachers in my county were hit with a 3% pay cut “because of the funding cuts”
      i made a lot of calls and found out that school boards and governments will tell a cute, sweet voiced high school girl “doing a paper for economics” the truth that they won’t tell her parents at the school board meetings.
      the lottery funds to the school were 28 cents on the dollar from the lottery revenue.
      the powers that be had anticipated higher allocation of lottery funds and cut the budget 60 cents for every anticipated lottery dollar. not only did ticket sales fall short of the estimation but the disparity in percentage allocated vs cut ended up dealing a blow worth about 30% of the county school budget

    • longdvsn says:

      This isn’t mathematically possible if 90% of revenue comes from the gov’t while 40% of total revenue is spent on advertising, etc.

      You can’t hide a 30% gap with nifty accounting. Well, you can try – but hopefully there would be massive penalties for all owners if such fraud was detected.

  3. Gman says:

    “Non-profit colleges and universities are only spending about 1/2 of 1% of their revenues on marketing, while for-profit schools have “marketing budgets [that] can approach a whopping 40 percent of tuition revenue.” “

    Hmm…Compromising for something for profits? I mean seriously. This is the education equivalent of purchasing an expensive German or Italian car to keep in your driveway to give your neighbors the impression you are totally rich and not an empty shell filled with broken promises.

    • galm666 says:

      Truth be told, it’s hard to see where the money goes with for-profit colleges. The campuses are often small, lack amenities, a community atmosphere, and additional services to students.

      Actually, I know exactly where the money goes with for-profit colleges – it goes to shareholder pockets.

      Did any of us think it’d go to the students?

  4. nicless says:

    My initial thought is, wouldn’t it have been better if they removed “Financial” from their name so their acronym could be PASTA?!

    My secondary thought is I’m hungry.

  5. phonebem says:

    Wow, just when I thought our elected officials couldn’t get any dumber… They honestly think this will be anything other than taking money out of one pocket to put it into your wallet?

    • Derigiberble says:

      There’s only so much shuffling that these companies can do, short of straight up money laundering, when 90% of their income comes from federal funds and 40% of that income goes to marketing.

  6. gStein_*|bringing starpipe back|* says:

    North Carolina = best Carolina.

  7. Foot_Note says:

    I went to itt-tech and nows i am yer bwain surgeon!

    • mbz32190 says:

      Those ITT Tech commercials are a joke…every one is just so obviously fake and scripted using random people that work in an ITT Tech phone/computer center (notice they never mention specifically what kind of job they have)

  8. Matthew PK says:

    … Yet nobody wants to consider that if we don’t like where the recipients of these government grants and loans spends money then perhaps we ought to restrict the issuance of such monies?

    No, incur more debt, but make sure it only goes to popular places….

  9. wojonet says:

    heh. p, fasta.

  10. D007H says:

    Guess enough people finally got tired of hearing the Everest College guy berating them in a the middle of a parking lot at night for not going to college.

  11. framitz says:

    Based on TV commercials it seems that some small for profit schools spend more on advertising than they make on tuition.

    I bet they mark up the books by 1000% to make up for it.

    But of course many of THOSE schools are designed to take your money and teach you basics that won’t help you find work in a field that is saturated by 125%.

  12. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    As a nod to catastrophegirl, please note the above ad states the area is “raccoon free”. Perhaps you could get some pointers? :)

    • catastrophegirl chooses not to fly says:

      my roommate tells me she saw a dead raccoon on the road a quarter mile away. sadly, i know that’s unlikely to be my raccoon since the woods are chock full of critters.
      i would like to know the story behind the area being raccoon free and why they make a point of it

      • D007H says:

        Reminds me of my college days where the raccoons would roam free in broad daylight around the residential dorms. Almost got attacked once when I interrupted 2 of them when they were digging through a garbage can.

      • Whtthfgg says:

        That would be from the TV show Community :)

      • pecan 3.14159265 says:

        It’s from “Community,” which is a show about a group of students at Greendale Community College.

        Go Human Beings!

    • El_Cheapocabra says:

      No, the ad says they COULD be Racoon Free by 2014 “with your support.”

      Beat that, Dartmouth.

  13. vicissitude says:

    This isn’t about what it seems. This is about killing advertising for schools and eliminating taxes. It’s a ‘Texas think tank’ thing piped through corrupt political salespersons in North Carolina, etc. This won’t be the last of it either, there’s more to come. Things like children working to pay their school debt, even before they’ve accrued any. You’re looking at the complete destruction of the American public educational system, in favor of it’s new matrix, all corporate schooling. Enjoy your tea!

  14. dicobalt says:

    Colleges that advertise on tv… they are the ones you know you don’t want to go to.

  15. edububble says:

    It’s not just for profits. I see just as many ads from the not-for-profits. And don’t forget that many schools consider their D1 teams to be advertisements for the schools.

  16. SamEBates says:

    Does this mean I’ll finally stop getting junk mail from Tri-C and National College and Akron Institute? The only ads I ever see for Stark State are billboards. Poorly thought-out billboards at that.

  17. The hand that feeds, now with more bacon says:

    “…and Senator Kay Hagan of North Carolina (which is one of our two favorite Carolinas).”

    I stopped reading after that.

  18. SPOON - now with Forkin attitude says:

    I would never want to go to a school without raccoons.