Office of the Attorney General
Attorney General Conway Announces Support of Federal Bill to Curb For-Profit College Recruiting Abuses

Press Release Date:  Friday, March 15, 2013  
Contact Information:  Shelley Catharine Johnson
Deputy Communications Director
502-696-5659 (office)
 


Attorney General Jack Conway, along with 13 of his colleagues, today announced his support of the Protecting Financial Aid for Students and Taxpayers Act sponsored by Sen. Kay R. Hagan(D-NC) and Sen. Tom Harkin (D-IA). General Conway, who chairs a multistate group of state Attorneys General examining the questionable business practices of some for-profit institutions, sent a letter to the chairs and ranking members of key Senate and House committees expressing support for the bill that restricts institutions of higher learning from using federal financial aid for recruitment, advertising and marketing purposes.

"I support higher education and students who seek a degree to create a better life for their families, but many times I see those dreams turn to nightmares when students fall prey to a fast sales pitch from a for-profit college with a questionable reputation," General Conway said. "The students end up with tens of thousands of dollars in debt and no degree. This bill ensures that scarce federal education dollars will be used to serve and educate students rather than to finance advertising campaigns, recruitment operations and aggressive marketing at colleges that have placed profits ahead of student success."

"I'm grateful for the support of more than a dozen attorneys general from across the country who understand that in these tough fiscal times, it's imperative that every taxpayer dollar be spent wisely and responsibly," said Sen. Hagan, a member of the Health, Education, Labor and Pensions Committee. "I introduced this legislation because taxpayer dollars should not be used on out-of-control marketing, advertising and recruitment budgets. I'm especially troubled that our veterans are being targeted by some for-profit schools, and these deceptive recruitment practices are unacceptable. I will continue working to pass this legislation that will benefit taxpayers, students and veterans in North Carolina and around the country."

For-profit industry facts included in the letter:

  • Fifteen of the largest for-profit education companies received at least 86 percent of their revenues from federal student aid programs, such as the G.I. Bill and Pell grant programs.
  • In fiscal year 2009, these for-profit education companies spent $3.7 billion dollars (23 percent of their budgets) on advertising, marketing and recruitment, which was often very aggressive and deceptive.
  • Together, the 30 education companies examined by the HELP Committee spent $4.2 billion on marketing in 2009 or 22.7 percent of all revenue, which equates to $2,622 per student.
  • According to one study, "in the corporate world, marketing budgets typically represent between 4-12 percent of sales, and in the for-profit education sector, "marketing budgets can approach a whopping 40 percent of tuition revenue."
  • Nonprofit colleges and universities spend an average of one-half of one percent of their revenues on marketing.
  • For the 30 educational companies examined by the HELP Committee, 54% of students who started in 2008-2009 left without a degree by mid-2010. This translates to nearly 600,000 students leaving colleges without a degree.
  • According to the HELP Committee, for-profit colleges collect half of all Department of Defense tuition.
  • Students who attended a for-profit college already account for 47 percent of all student loan borrowers in default.

Other states signing onto the letter include: Arkansas, Illinois, Iowa, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New York, North Carolina, Oregon, Pennsylvania and Tennessee.

A copy of the letter is available at http://ag.ky.gov/pdf_news/financial-aid-letter.pdf.

General Conway Combating Abuse in the For-Profit College Industry

Attorney General Conway continues to lead a national bipartisan effort to examine potential abuses in the for-profit college industry. There are currently 32 states involved in the working group.

As part of this effort, General Conway filed suit in July of 2011 against Daymar College and on September 27, 2011 against National College over allegations that the for-profit colleges violated Kentucky's Consumer Protection Act. He filed a lawsuit against Spencerian college on January 16, 2013 alleging consumer protection violations.

In August of 2011, General Conway's office filed a motion to intervene in a whistle-blower suit against Education Management Corporation (EDMC), the parent company of Brown Mackie College, over allegations that the company illegally paid recruiters based on the number of students they enrolled in EDMC programs. A federal judge declined to let Kentucky intervene. Kentucky's investigation into EDMC and Brown Mackie College continues.

In addition, in June of 2012, General Conway led an effort of 20 state Attorneys General to secure a $2 million settlement with QuinStreet, Inc., the former operators of www.GIBill.com. The website was a funnel, generating sales leads for the for-profit college industry. The website made representations that it was affiliated with the military and the United States Government. Under the settlement, the Department of Veterans Affairs took over the domain name, where it now contains legitimate information about the GI Bill program. QuinStreet also agreed to make sweeping changes to all of its other education-related websites to address the states' consumer protection concerns.