Senate report calls for congressional action on for-profit colleges

(Reuters) - U.S. for-profit colleges care more about how much they earn than about their students and need more rules to govern them, according to a U.S. Senate report published on Sunday.

The report blamed colleges, such as Apollo Group's University of Phoenix and Washington Post's Kaplan, for their poor quality of education and wasting billions of dollars of taxpayers' money.

The report - which concludes a two-year long investigation led by Tom Harkin, chairman of the Senate Health, Education, Labor and Pensions Committee - mostly reiterated earlier findings, but called for Congress to take legislative action to control the industry.

"The available evidence shows that many for-profit colleges make decisions that prioritize their bottom line, even when those decisions limit their students' opportunities for academic success," the report said.

For-profit colleges, which received $32 billion in federal aid in 2009-10 to fund student loans, frequently misuse government funds, attract students through deceptive advertising, and burden students with debt without providing them with good job prospects, investigations have revealed.

CONGRESS ACTION

The report, titled 'For profit higher education: the failure to safeguard the federal investment and ensure student success,' blamed Congress for not doing enough to make for-profits accountable for taxpayer money.

"Congress has failed to adjust the unique legislative framework that governs this sector of higher education to ensure that the demands of shareholders and investors do not overrun those of taxpayers and students," it said.

The report called for significant policy changes to govern the sector, which it said were necessary to fill capacity gaps in the U.S. education system.

It said Congress needs to examine placing more rigorous performance-based limitations on access to federal funds and should prevent colleges from spending the funds on marketing.

The report also suggested that colleges should be required to provide a minimum standard of student services, including tutoring, remediation, financial aid, and career counseling and job placement.

BMO Capital Markets analyst Jeff Silber said while the proposals could pass the Senate, it may prove difficult to get them passed through the Republican-controlled House of Representatives.

The U.S. Department of Education had introduced rules last year to improve the quality of these colleges, but some of these were struck down by the courts.

The new rules introduced last year prompted a sharp fall in profits and student enrollments at most for-profit colleges.

(Reporting by A. Ananthalakshmi in Bangalore; Editing by Supriya Kurane)