S. HRG. 111–1160 FOR-PROFIT SCHOOLS: THE STUDENT RECRUITMENT EXPERIENCE HEARING OF THE COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION ON EXAMINING FOR-PROFIT SCHOOLS, FOCUSING ON THE STUDENT RE- CRUITMENT EXPERIENCE, AND UNDERCOVER TESTING TO OBSERVE MARKETING PRACTICES AUGUST 4, 2010 Printed for the use of the Committee on Health, Education, Labor, and Pensions ( Available via the World Wide Web: http://www.gpo.gov/fdsys/ U.S. GOVERNMENT PRINTING OFFICE 78–780 PDF WASHINGTON : 2013 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS TOM HARKIN, Iowa, Chairman CHRISTOPHER J. DODD, Connecticut MICHAEL B. ENZI, Wyoming BARBARA A. MIKULSKI, Maryland JUDD GREGG, New Hampshire JEFF BINGAMAN, New Mexico LAMAR ALEXANDER, Tennessee PATTY MURRAY, Washington RICHARD BURR, North Carolina JACK REED, Rhode Island JOHNNY ISAKSON, Georgia BERNARD SANDERS (I), Vermont JOHN MCCAIN, Arizona ROBERT P. CASEY, JR., Pennsylvania ORRIN G. HATCH, Utah KAY R. HAGAN, North Carolina LISA MURKOWSKI, Alaska JEFF MERKLEY, Oregon TOM COBURN, M.D., Oklahoma AL FRANKEN, Minnesota PAT ROBERTS, Kansas MICHAEL F. BENNET, Colorado CARTE P. GOODWIN, West Virginia DANIEL E. SMITH, Staff Director PAMELA SMITH, Deputy Staff Director FRANK MACCHIAROLA, Republican Staff Director and Chief Counsel (II) CONTENTS STATEMENTS WEDNESDAY, AUGUST 4, 2010 Page Harkin, Hon. Tom, Chairman, Committee on Health, Education, Labor, and Pensions, opening statement ............................................................................... 1 Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, opening statement .............................................................................................................. 3 Prepared statement .......................................................................................... 6 Kutz, Gregory D., Managing Director, Forensic Audits and Special Investiga- tions, Government Accountability Office, Arlington, VA .................................. 10 Prepared statement .......................................................................................... 13 Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 38 Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia ....................... 40 Casey, Hon. Robert P., Jr., a U.S. Senator from the State of Pennsylvania ...... 42 Burr, Hon. Richard, a U.S. Senator from the State of North Carolina ............... 44 Goodwin, Hon. Carte P., a U.S. Senator from the State of West Virginia .......... 45 Mikulski, Hon. Barbara, a U.S. Senator from the State of Maryland ................ 47 Bennet, Hon. Michael F., a U.S. Senator from the State of Colorado ................. 50 Hawkins, David, Director of Public Policy and Research, National Association for College Admission Counseling, Arlington, VA ............................................. 52 Prepared statement .......................................................................................... 54 McComis, Michale S., Ed.D., Executive Director, Accrediting Commission of Career Schools and Colleges, Arlington, VA ...................................................... 69 Prepared statement .......................................................................................... 71 Pruyn, Joshua, Former Admissions Representative, Alta College, Inc., Denver, CO .......................................................................................................................... 81 Prepared statement .......................................................................................... 83 Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee ................ 99 ADDITIONAL MATERIAL Statements, articles, publications, letters, etc.: Ingnorance by Degrees, article ........................................................................ 5 Senator Bennet ................................................................................................. 120 Response by Gregory D. Kutz to questions of: Senator Enzi .............................................................................................. 121 Senator Hagan ........................................................................................... 125 Senator Alexander ..................................................................................... 126 Response by David Hawkins to questions of: Senator Enzi .............................................................................................. 127 Senator Hagan ........................................................................................... 139 Senator Alexander ..................................................................................... 140 Response by Michale S. McComis, Ed.D. to questions of: Senator Enzi .............................................................................................. 141 Senator Hagan ........................................................................................... 146 Senator Alexander ..................................................................................... 148 (III) FOR-PROFIT SCHOOLS: THE STUDENT RECRUITMENT EXPERIENCE WEDNESDAY, AUGUST 4, 2010 U.S. SENATE, COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, Washington, DC. The committee met, pursuant to notice, at 10:03 a.m., in Room SD–106, Dirksen Senate Office Building, Hon. Tom Harkin, chair- man of the committee, presiding. Present: Senator Harkin, Mikulski, Casey, Hagan, Merkley, Franken, Bennet, Goodwin, Enzi, Alexander, Burr, and Isakson. OPENING STATEMENT OF SENATOR HARKIN The CHAIRMAN. The Senate Committee on Health, Education, Labor, and Pensions will come to order. This is the second in a series of hearings by this committee focus- ing on the growing Federal investment in for-profit colleges and universities. This industry has grown at an extraordinary pace. Over the last 10 years, enrollment has increased from 600,000 stu- dents to over 2 million students. Federal financial aid to students at for-profit colleges has ballooned from $4.6 billion a decade ago to more than $23 billion a year, today. The question is: What is driving the explosive growth in this industry? As you may know, I also chair the Appropriations Subcommittee that funds the Pell grant program. And CBO has given me some figures here that are quite startling. For example, in 2006, our obli- gation on Pell grants was $12,826,000,000. Last year, it was $26 billion, next year it will go to $30 billion—$30.6 billion that our Ap- propriations Committee will have to come up with just to fund the Pell grant program. And so, this explosive growth at a time where we have huge defi- cits, and we’re trying to get our budgets in order, causes us real concern. The question we have to ask with this explosive growth, and with CBO estimates that over the next 10 years we’ll spend somewhere close to $300 billion to $350 billion just on Pell grants, we have to ask the question, Are the students—and the U.S. tax- payers—getting a good value for the billions of taxpayers dollars they are investing in these for-profit schools? In our first hearing, in June, this committee heard testimony from witnesses about the pressures for for-profit companies to re- lentlessly enroll more students in order to increase profits and, in the case of publicly traded companies, to meet the expectations of (1) 2 investors. The committee issued a report showing that, in order to boost recruitment, many publicly traded for-profit schools spend huge sums of title IV dollars. Title IV dollars, which are taxpayer dollars. They spend a huge amount on TV advertisements, bill- boards, phone solicitations, and Web marketing, and as we shall see shortly, an aggressive sales staff. According to the Chairman’s report, an analysis of the eight pub- licly traded schools shows that, on average, they spend 31 percent of revenues on recruiting and marketing. Thirty-one percent. This spending by for-profit schools sets them radically apart from other colleges. By contrast, community colleges typically spend just 1 or 2 percent on marketing; a tiny fraction of the money spent by publicly traded for-profits. However numbers only tell a part of the story. Much can be re- vealed, too, by the experience that students, who are perhaps the first in their family to go to college, have when they sit down to talk to a recruiter or admissions officer. That is why I asked the Government Accountability Office to investigate this key encounter during the recruitment process at for-profit institutions. GAO’s findings make it disturbingly clear that abuses in for-prof- it recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight. To the contrary, the evidence points to a problem that is systemic to the for-profit industry: a recruitment process specifically designed to do whatever it takes to drive up en- rollment numbers, more often than not to the disadvantage of stu- dents. There is a cruel irony, here, that deserves special focus. One os- tensibly admirable aspect of for-profit colleges is that they seek out and enroll large numbers of minority and low-income students, of- fering them opportunities they might not have. In choosing to en- roll in a for-profit college,