For Immediate Release - March 18, 2013

AG Coakley Supports Federal Law to Curb For-Profit College Recruiting Abuses

Proposed Bill Would Stop For-Profit Colleges from Spending Taxpayer Money on Marketing

BOSTON – Attorney General Martha Coakley announced her support of a bill that targets abusive spending of taxpayer dollars by for-profit colleges and heavily restricts institutions of higher learning from using federal financial aid for recruitment, advertising and marketing purposes.

AG Coakley joined 13 other attorneys general in sending a letter last week expressing support for the Protecting Financial Aid for Students and Taxpayers Act, sponsored by Sen. Kay R. Hagan (D-NC) and Sen. Tom Harkin (D-IA). 

“Our office has seen firsthand how students seeking a better life through higher education can sometimes find themselves heavily in debt with few opportunities, all because they signed up after an aggressive sales pitch from a for-profit school,” AG Coakley said.  “This bill will ensure that scarce federal education dollars are used to educate students rather than to finance marketing campaigns and recruitment operations at schools more focused on making a profit than assisting students.”

“I’m grateful for the support of more than a dozen attorneys general from around the country who understand that in these tough fiscal times, it's imperative that every taxpayer dollar be spent wisely and responsibly,” said Senator 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.
  • Students who attended a for-profit college already account for 47 percent of all student loan borrowers in default.

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

The AG’s Office has a history of efforts aimed at providing good information for consumers and curbing abuses by for-profit schools.

Last May, AG Coakley testified at a Boston City Council hearing convened for the purpose of examining issues relevant to for-profit schools. In June 2012, the AG’s Office obtained $225,000 for the state in a multistate settlement with QuinStreet which resulted in the deceptive for-profit marketing website GIBill.com being taken down and handed over to the U.S. Department of Veterans Affairs.  In January 2013, AG Coakley announced that her office is investigating the recently shuttered American Career Institute, among other for-profit educational institutions operating in the Commonwealth.

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