The Protecting Financial Aid for Students and Taxpayers Act, which didn’t make it out of committee when introduced by Harkin and Hagan last year, once again seeks to prohibit the use of taxpayer money — in the form of things like Pell Grants, federal student loans, the Post-9/11 G.I. Bill, among others — for advertising, marketing and recruitment.
While the bill would affect all schools that receive federal aid, whether the institutions are non-profit or for-profit, it’s really the for-profit education industry that stands to feel the impact of this legislation.
Recent studies showed that for-profit colleges, which have received the lion’s share of federal aid, have also been spending inordinate amounts of money on things other than education. According to one report, the 15 largest for-profit education companies spent $3.7 billion on advertising and marketing in 2009 alone; that’s 23% of their budget. These same companies received 86% of their revenue from federal aid of some form. Meanwhile, non-profit schools tend to spend less than 1% of their budgets on advertising and marketing.
Yet for-profit schools have higher dropout rates and higher rates of default on student loans.
“Taxpayer dollars should not be used on out-of-control marketing, advertising and recruitment budgets,” said Senator Hagan in a statement. “I’m particularly disturbed by recruitment tactics employed by some for-profit schools targeting our veterans and service members. Such unscrupulous practices should not be tolerated. This legislation takes the most significant action yet to protect students, active duty military, veterans and their families from deceptive recruiting practices by some for-profit colleges.”
The 13 Attorneys General — representing Kentucky, New York, Arkansas, Illinois, Iowa, Maryland, Massachusetts, Minnesota, Nevada, North Carolina, Oregon, Pennsylvania, and Tennessee — wrote to the legislative leadership [PDF] in the hopes that the 2013 version of the bill will receive the full consideration of the Senate, rather than die a quiet death in committee.
“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,” explains Kentucky AG Jack Conway, who recently sued a for-profit school in his state for allegedly using misleading job-placement information in its marketing. “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.”