July 24, 2020

Harris, Hassan, Warren, Durbin, Brown, Colleagues Oppose COVID-19 Bailout for Predatory For-Profit Colleges

For-Profit Colleges Have Boosted Enrollment, Taken Advantage of Pandemic with Deceptive Advertising Campaigns to Lure in Vulnerable Students 

WASHINGTON, D.C. – U.S. Senator Kamala D. Harris (D-CA) on Thursday joined Maggie Hassan (D-NH), Elizabeth Warren (D-MA), Dick Durbin (D-IL), and Sherrod Brown (D-OH), and 5 of their colleagues in calling for upcoming COVID-19 relief legislation to exclude federal funding for predatory for-profit colleges. If legislation does include support of for-profit colleges, the Senators’ raise specific limits that should be included in the legislation to hold for-profit colleges accountable.

Many for-profit colleges have troubling track records of misleading students – including service members and veterans – about potential job prospects and graduation rates, and often saddle students with crippling debt.

“As you prepare additional legislation to alleviate the health and economic impact of the coronavirus pandemic (COVID-19), we respectfully reiterate our request that you exclude for-profit colleges from any additional emergency funding intended for institutions of higher education,” wrote the Senators. “Further, in the event that students who attend for-profit colleges are eligible for higher education emergency student aid in the next package, we urge you to include strong accountability policies to support students and protect taxpayers, including policies to prohibit for-profit colleges from using funding for any purposes beyond emergency financial support to their students.”

The Senators’ letter comes as for-profit colleges have seen an uptick in enrollment due to the economic downturn caused by the COVID-19 pandemic. “We remain concerned that for-profit colleges received over $1.1 billion under the CARES Act because according to recent reports, many for-profit colleges have used the pandemic and the resulting historic levels of unemployment as an opportunity to make money, using marketing and recruitment to boost online enrollment,” wrote the Senators.

The Senators continued, “For-profit colleges have a demonstrated record of capitalizing on economic anxieties to turn a profit…We urge you to protect students and not provide additional taxpayer money, especially without accountability to for-profit colleges —especially when the needs among public and non-profit institutions of higher education are so great.”

In addition to Senators Harris, Hassan, Warren, Durbin, and Brown, the letter was signed by Chris Van Hollen (D-MD), Chris Murphy (D-CT), Sheldon Whitehouse (D-RI), Jeff Merkley (D-OR), and Richard Blumenthal (D-CT). The letter follows up on an earlier call from these Senators and colleagues in April to bar COVID-19 relief funds from predatory for-profit colleges.

Read the Senators’ letter HERE or below.

Dear Leader McConnell, Leader Schumer, Chairman Shelby, Ranking Member Leahy, Chairman Alexander, and Ranking Member Murray:

As you prepare additional legislation to alleviate the health and economic impact of the coronavirus pandemic (COVID-19), we respectfully reiterate our request that you exclude for-profit colleges from any additional emergency funding intended for institutions of higher education.  Further, in the event that students who attend for-profit colleges are eligible for higher education emergency student aid in the next package, we urge you to include strong accountability policies to support students and protect taxpayers, including policies to prohibit for-profit colleges from using funding for any purposes beyond emergency financial support to their students.

It is clear that the global public health emergency and economic crisis caused by COVID-19 continues to jeopardize the health, learning, and livelihoods of millions of students and threatens the financial stability of public and private, nonprofit colleges and universities across the country, creating historic challenges for college leaders, faculty, and staff.  We are grateful that, on a bipartisan basis, Congress established the Higher Education Emergency Relief Fund in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) to aid students and to help colleges and universities address the initial costs of this crisis. We urge you to provide additional funding to support students and stabilize public and private, nonprofit colleges and universities in future recovery packages.

In April, we urged you to exclude for-profit colleges from any additional emergency funding intended for institutions of higher education, and we continue to believe that it is critical that future packages explicitly direct additional emergency funding for institutions of higher education to public and nonprofit institutions.  We remain concerned that for-profit colleges received over $1.1 billion under the CARES Act because according to recent reports, many for-profit colleges have used the pandemic and the resulting historic levels of unemployment as an opportunity to make money, using marketing and recruitment to boost online enrollment.

The purpose of emergency higher education relief is to directly assist students and to help institutions of higher education cope with additional costs due to COVID-19.  For-profit colleges have a reduced need for these resources due to their recent enrollment patterns and because many operated largely online before the pandemic, so they do not have additional costs associated with changes to the delivery of instruction from in-person to distance learning.  Moreover, these for-profit companies are still free to seek emergency aid available to other businesses made available in the CARES Act and administered by the Department of Treasury, the Federal Reserve System, and the Small Business Administration.

For all of these reasons, we again urge you to exclude for-profit colleges from any additional emergency funding intended for institutions of higher education.  However, if students who attend for-profit colleges are eligible for higher education emergency relief funding in the next relief package, we strongly urge you to prohibit taxpayer dollars from being used to increase profits to for-profit college executives and investors.  Specifically, we request that the following accountability policies to support students and protect taxpayers be included:

  1. Require for-profit colleges that receive higher education emergency relief funding to spend one hundred percent of the funding on emergency financial aid to students.  Such funding should come with a prohibition on for-profit colleges raising tuition or cost of attendance for at least one year to prevent them from padding their bottom lines with this emergency aid money intended to help students.
  1. Consider any funds made available to for-profit colleges under any COVID-19 emergency relief legislation as federal revenues for the purpose of enforcing compliance with the 90/10 rule.  In addition, require the Department of Education (ED) to publish in its annual 90/10 report to Congress the amount of funding made available under the Higher Education Emergency Relief Fund and any future COVID-19 related aid to each for-profit college.
  1. Prohibit for-profit colleges from using any higher education emergency relief funding for any form of equity extraction through executive compensation, dividends, stock buybacks, or other removal of equity by owners or executives.  This policy would align to restrictions Congress has already enacted for other businesses that receive taxpayer emergency aid under the CARES Act. Additionally, Congress could ensure this by expanding to for-profit colleges the requirement that recipients of aid freeze executive compensation for at least one year after the receipt of funds.
  1. Preserve the CARES Act provision prohibiting for-profit colleges from using emergency relief funding for “payment to contractors for the provision of pre-enrollment recruitment activities.”  This provision is critical to prevent for-profit colleges from using emergency higher education relief funds for any advertising, marketing, or recruitment purposes.
  1. Require for-profit colleges provide a detailed report of how they distribute any emergency student aid funding to their students.  Congress should also require ED to report how for-profits spent relief funds, both in the aggregate and per institution.

We are grateful that many of these policies were included in the Coronavirus Child Care and Education Relief Act. In addition to these policies, Congress should consider additional provisions to protect students and taxpayers in the face of COVID-19, including the Coronavirus Emergency Borrower Defense Act, which would provide emergency Borrower Defense loan discharges for students who have been defrauded by for-profit colleges.  Congress should also require that any non-profit colleges that may be forced to close due to the current economic crisis not enter into teach-out arrangements – agreements with other institutions to ensure that their current students can complete their education program – with for-profit colleges. Finally, Congress should give the Secretary of Education the authority to require any for-profit college that violates the legislation’s restrictions and requirements to repay taxpayers for misused or misspent funds.

Recent history gives us a warning about what the result of supporting this industry with federal dollars during a crisis: the last recession, which also decimated state budgets and left millions of Americans without jobs, allowed for-profit colleges with big marketing budgets and too often deceptive advertising campaign to lure in vulnerable students—often low-income, veterans, and students of color.  This led to a for-profit college boom, which included massive and unstable growth, widespread fraud, and poor outcomes for students, contributing to the historic student debt crisis we face today. For-profit colleges have a demonstrated record of capitalizing on economic anxieties to turn a profit. With millions of Americans still out of work or forced to stay home as a result of COVID-19, we do not wish to see history repeat itself. 

We urge you to protect students and not provide additional taxpayer money, especially without accountability to for-profit colleges —especially when the needs among public and non-profit institutions of higher education are so great.  Thank you for your consideration of this matter.

Sincerely,

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