August 4, 2010 / 3:42 PM / 9 years ago

U.S. senator lashes out at for-profit education

* Chairman Harkin says industry practices “disturbing”

* Hearing cited names of 15 schools investigated

* Shares of industry index up less than 1 percent

By Emma Ashburn

WASHINGTON, Aug 4 (Reuters) - The head of the U.S. Senate’s education panel lashed out at the for-profit education sector in a congressional hearing on Wednesday after government investigators uncovered deceptive practices.

Chairman Tom Harkin pointed to a Government Accountability Office (GAO) report released Tuesday that found staff at the controversial colleges urged potential students to fudge their income on loan forms and give misleading information about costs.

“GAO’s findings make it disturbingly clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight,” Harkin said at a hearing by the Senate’s Help, Education, Labor and Pensions Committee.

“To the contrary, the evidence points to a problem that is systemic to the for-profit industry,” the Democratic chairman said.

The committee asked the GAO to investigate the marketing practices of for-profit colleges. GAO, the independent investigative arm of Congress, investigated 15 U.S. for-profit schools and found they encouraged fraudulent recruiting practices and made deceptive statements

Among the schools probed were Apollo Group’s APOL.O University of Phoenix in Arizona, Corinthian Colleges Inc’s COCO.O Everest College in Arizona, Washington Post Co WPO.N unit Kaplan’s Kaplan College in California and Education Management Corp’s EDMC.O Argosy University in Illinois EDMC.O.

Harkin pointed out “a cruel irony” in that for-profit colleges “seek out and enroll large numbers of minority and low-income students, offering them opportunities they wouldn’t otherwise have.”

But ranking Republican member Mike Enzi said, “In focusing only on for-profits, we are not being objective, and we are ignoring the bigger picture of what is happening across all of higher education.”

The S&P 1500 education services sub industry index .15GSPEDUS initially was slightly lower than the overall market at the start of the hearing, though it recovered later. It was up 0.8 percent in late morning trading while the overall S&P 500 index .SPX was up 0.3 percent.

The Career College Association, which represents mostly for-profit occupational colleges, has said the GAO report is troubling and vowed to improve training and standards.

Enrollment in for-profit colleges has grown from about 365,000 students to almost 1.8 million in recent years, according to the GAO report.

Congress will extend between $300 billion and $350 billion in next the 10 years under the Pell grant program for education grants.

“If current enrollment trends continue, a huge portion of those dollars will flow to students attending for-profit schools,” said Harkin, who also serves as head of the Senate Appropriations subcommittee that allocates money for education grants. (Reporting by Emma Ashburn; additional reporting by Jon Lentz; Editing by Susan Heavey and Matthew Lewis)

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