Harkin Report: Loans to Pay Off and Nothing to Show For It

Equal Justice Works

For-profit colleges can help meet the demand for higher education and the needs of non-traditional students, such as those who can only attend part time or are returning to school as older students.

When they fulfill those roles well, they can provide degrees and opportunities for people who otherwise might have not have had them.

Unfortunately, however, for-profit colleges are failing far too many students. The reasons for and consequences of this failure are documented in "For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success" (or the "Harkin Report"), produced by Sen. Tom Harkin (D-Iowa) and his Health, Education, Labor and Pensions (HELP) Committee staff over the last two years and released in July.

The most poignant parts of the Harkin Report are the voices of the student loan borrowers that pepper it. "'I went to school to better my life, and when my loans become due, I will actually be in worse financial shape then I was before I attend[ed] school,'' one wrote.

Another borrower "took out student loans 'in the hopes of improving my knowledge so that I could improve my worth in society, for a higher paying job. Instead now I have a loan to pay off and absolutely nothing to show for it.'"

[Consider two new ways to pay off student loans.]

But the report's real value is that it draws attention to the deferred dreams and lost opportunities of hundreds of thousands of borrowers, like these, caught in a systemic breakdown, and it provides specific recommendations on how to start improving outcomes for students at for-profit colleges.

According to the Harkin Report, Congress has "failed to counterbalance" the demands of investors in for-profit colleges with "requirements that hold companies accountable to taxpayers for providing quality education, support, and outcomes" and "align the incentives of for-profit colleges so that the colleges succeed financially when students succeed." The result of this failure can be devastating for students.

For example, most for-profit colleges cost more than equivalent community college and public university programs. As a result, 96 percent of for-profit students take out loans (compared to 13 percent at community colleges, 48 percent at 4-year public colleges, and 57 percent at 4-year private nonprofit colleges).

[Find out how to determine what to borrow for college.]

The for-profit colleges examined in the report also rarely set tuition under the federal aid limits, leading to students needing additional aid. Because many of these students cannot obtain loans from private lenders, they turn to loan programs offered by the for-profit colleges themselves. These loans have interest rates that can be double or triple those of Stafford loans, don't offer the protections of federal loans, and have default rates as high as 80 percent.

Students also drop out of for-profit colleges at high rates (54 percent of the more than 1 million students enrolled in for-profit colleges in 2008-09 had withdrawn by 2010), leaving them with the student debt but without improved job prospects.

According to the Harkin Report, students at for-profit colleges drop out at these high rates not only because they face competing demands like work, family, and financial limitations but also because many for-profit colleges fail to invest in student support services shown to help students succeed.

The Harkin Report also found that for-profit colleges aggressively (and sometimes deceptively) market their colleges to students, and devote less to funding to faculty and curricula than they do to advertising, recruiting, or pre-tax profit.

In addition, some schools have substandard curricula; fail to adequately support enrolled students (a particular necessity for the low-income first generation students that for-profit colleges often serve); don't sufficiently staff career placement services; and do not adequately disclose that their programs lack programmatic accreditation for particular professions.

Sens. Jeff Merkley (D-MD), Barbara Mikulski (D-MD), and Harkin have introduced legislation to address that last point. If passed, Senate Bill 3474 (the Protecting Students from Worthless Degrees Act) would not allow programs to receive federal financial aid if they do not provide the state licensure requirements and programmatic accreditations necessary to enter an occupation.

[Find employers hiring grads from your school.]

The Student Loan Ranger urges you to contact your Senators and ask them to co-sponsor Senate Bill 3474 and to read and take action on the Harkin Report. You can help prevent more students from having loans to pay and nothing to show for it.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works' educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.