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: