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Sen. Tom Harkin (D., Iowa) said he will propose legislative changes to curb abuses at for-profit colleges, though he won't introduce anything to the Senate Committee on Health, Education, Labor and Pensions until after the mid-term election.
Harkin, speaking at a HELP committee hearing entitled, "The Federal Investment in For-Profit Education: Are Students Succeeding?" said the committee would hold another hearing in early December and will propose legislation in the new year.
"There is irrefutable evidence that something has gone wrong with this industry," Harkin said, outlining a system in which schools take money from taxpayers via federal loans and grants and funnel it through "poor kids" on which they prey with aggressive marketing campaigns, ultimately pocketing the profits.
Harkin released a report Thursday morning showing that for-profit schools have high dropout rates and their students take out loans at rates higher than their counterparts in non-profit and public schools. He had commissioned data from 30 for-profit schools after the U.S. Government Accountability Office last month released the results of an undercover investigation showing representatives at all 15 schools that agency visited had offered misleading or even fraudulent information to boost enrollment.
Schools' stocks traded higher Thursday afternoon as the hearing exposed tension within the committee over whether future discussions should focus just on the for-profit sector or be opened up to criticism of student outcomes at non-profit and public institutions, too.
Sen. Mike Enzi (R., Wyo.) walked out in protest after issuing his opening statement, and Sen. John McCain (R,. Ariz.) only appeared to read his prepared remarks. McCain said he hoped the hearings would have a different tenor in January.
Shares of ITT Educational Services Inc. (ESI) were recently trading up 7% to $70.25, while Bridgepoint Education Inc. (BPI) was up 4.7% to $15.49 and Corinthian Colleges (COCO) gained 8% to $7.07.
The U.S. Department of Education this summer proposed a series of new rules governing a number of topics in higher education, including recruiter compensation and the measure of a credit hour. The department is also planning to issue a rule that would penalize programs for graduating students with high debt loads, an attempt to measure how well programs prepare students for gainful employment in a recognized occupation. The department will issue final rules for 13 of the 14 topics in November, waiting until early 2011 to publish the "gainful employment" rule. A number of programs could lose access to federal student aid, from which they derive much of their revenue, if the rule is implemented as proposed.
-By Melissa Korn, Dow Jones Newswires; 212-416-2271; email@example.com