For-Profit Colleges Face Limits On Recruiting Under Senate Bill

Senate Bill Targets Multi-Billion Dollar Ad Spending At For-Profit Colleges

The rapid growth of for-profit colleges over the past decade has been aided by billion-dollar ad campaigns on daytime television, the Internet and highway billboards across the country.

Those hefty advertising budgets are now the focus of two senators looking to curb the amount of federal dollars directed toward marketing at many for-profit schools, which derive the vast majority of revenues from taxpayer dollars. Sens. Kay Hagan (D-N.C.) and Tom Harkin (D-Iowa) are introducing a bill Wednesday that would prohibit all colleges from using federal aid programs to pay for advertising, recruiting and marketing expenses.

"It's unacceptable that colleges are using billions of taxpayer dollars on promotional activities unrelated to an educational program," Hagan said Wednesday. "American taxpayer dollars should be used to invest in a brighter future for our students, not expensive marketing campaigns."

Critics of for-profit schools have long argued that federal student loan and grant dollars should be spent on educating students, not recruiting them. Some of the largest corporations that own for-profit colleges spend nearly 30 percent of their operating budgets on marketing and recruiting prospective students.

The bill would apply to all colleges, but representatives of traditional public and private colleges said they did not expect the bill to affect operations if it became law.

The Apollo Group, which owns the for-profit University of Phoenix, was listed in Advertising Age as one of the top 100 spenders on U.S. advertising in 2009. The $377 million spent that year outpaced Apple Inc., according to the magazine.

At the same time, studies have shown that for-profit institutions spend much less money on student instruction than traditional colleges and universities. For-profit schools on average devote less than a third of the money that public universities do toward instruction, and less than a fifth of the money spent by private non-profit institutions, according to U.S. Department of Education data.

Up until last summer, recruiters at for-profit colleges could receive periodic raises based on the number of students recruited. Current and former recruiters at a number of for-profit institutions, including schools owned by Education Management Corp. and Bridgepoint Education Inc., told The Huffington Post about misleading sales pitches to entice new students to enroll.

The proposed legislation would require all colleges to report the amount spent on marketing and recruiting to the federal government every year. That sum would then be compared to the percentage of federal aid dollars in the school's budget.

The 15 largest, publicly traded for-profit education companies on average received more than 85 percent of revenues from federal dollars, and directed 23 percent of operating costs toward marketing and advertising, according to an analysis of company documents by the Senate Health, Education, Labor and Pensions committee.

"There's nothing wrong with advertising and marketing," Harkin said. "Schools are free to spend as much as they want, as they choose. What we're saying here is that you just won't be allowed to use taxpayer dollars to do so."

Enrollment at for-profit colleges has grown more than fivefold over the past decade, far outpacing student growth at traditional colleges and universities. But federal data has shown that students at for-profit schools default on federal loans at significantly higher rates than those in other sectors of higher education.

Although the legislation would apply to all colleges, language in the proposed bill was clearly directed toward for-profit institutions.

Representatives for the Apollo Group and the Association of Private Sector Colleges and Universities, an industry trade group, did not immediately respond to requests for comment on the legislation.

Spokesmen for groups representing the nation's community colleges, public universities and private non-profit colleges said the legislation would have very little impact on their schools because their marketing budgets are a much smaller proportion of overall spending -- less than 5 percent in most cases.

"A very high percentage of our institutional budgets go to education and student services, not to recruitment," Tony Pals, a spokesman for the National Association of Independent Colleges and Universities, wrote in an email.

Prospects for the bill's passage appear slim, particularly in the Republican-controlled House, which has supported several measures to repeal or block funding for regulations on for-profit colleges over the past year. Another bill to regulate government aid to for-profit colleges, introduced by Harkin and Sen. Dick Durbin (D-Ill.) in January, has not made it out of a Senate committee.

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