WASHINGTON -- A wide-ranging examination of for-profit colleges by the U.S. Senate has homed in on how the schools recruit and educate veterans -- a lucrative source of federal funds for Downtown-based Education Management Corp.
From August 2009 to July 2010, EDMC -- which runs the Art Institutes, Argosy University, South University and Brown Mackie College -- took in about $60.5 million from the Department of Defense and Department of Veterans Affairs. According to data compiled by the Senate Health, Education, Labor and Pensions Committee, EDMC was the third largest recipient of such funds in that span, behind Apollo Group Inc. -- which runs the University of Phoenix -- and ITT Technical Institute.
The HELP Committee, led by Sen. Tom Harkin, D-Iowa, has been holding hearings on the practices of for-profit schools -- exposing aggressive and sometimes fraudulent recruiting tactics, and the high debt loads and failure rates of their students.
The for-profit industry argues that it has been unfairly maligned with a focus on a few bad apples and that the colleges fill an important niche for non-traditional and low-income students.
With a Dec. 8 report and a hearing likely in the coming weeks when Congress reconvenes, Mr. Harkin has turned his attention to the explosion in federal funds flowing to these schools to educate veterans. The spark was the 2008 passage of the Post-9/11 GI Bill, which gives most service members who served since Sept. 11, 2001, up to 36 months of tuition payments -- and help for their spouses as well.
The GI Bill funding is even more enticing to schools because it doesn't count against the Department of Education requirement that schools receive no more than 90 percent of their funding from federal grants or loans.
As a result, military money going to for-profit schools spiked dramatically. At EDMC, funding from the Department of Defense and Veterans Administration climbed from $2.04 million in fiscal 2009 to $52.4 million in fiscal 2010, according to data compiled by the HELP committee. Including the GI Bill money, 86.2 percent of EDMC's revenue comes from federal sources.
"We, in good faith, passed legislation to make it easier for present GIs and their families to get educational benefits, and now what we're finding out is for-profit schools are seeing this as a new source of profits for them," Mr. Harkin said in an interview. "And so they've gone after them and using the same kind of deceptive advertising and high-pressure tactics that they're using in other places."
Two former admissions officers at EDMC in Pittsburgh told the Pittsburgh Post-Gazette that the company formed new teams to recruit veterans once the Post-9/11 GI bill became law.
"The official hype was, it was all patriotic: 'We're going to look after our veterans, and we're going to take special care of them because they have special needs,' " said Kathleen Bittel, who testified about the company's recruiting practices at a HELP committee hearing in September.
"I think the key was because they were going on the GI Bill. It takes a different process, so what they were looking to do was create a group of experts who knew just how to deal with that."
EDMC spokeswoman Jacquelyn Muller downplayed any effort at military recruitment.
"If we are conducting outreach to that specific segment, it is a very small percentage of our efforts," she said.
"We participate in the program, but it's important to note that the veterans who enroll in our schools do so because they've chosen our school for one reason or another. And I think that the quality and the flexibility of our programs is a reflection of our sincere commitment to military students."
EDMC and other for-profits have mounted a hefty public relations and lobbying effort against any potential legislation arising from Mr. Harkin's probe, as well as the Department of Education's efforts to restrict funding to the colleges.
The department has proposed to deny federal funding to schools with graduates facing high proportions of debt related to their salaries. The so-called "gainful employment" rule has been the subject of a severe backlash from the industry and its allies in Congress, including a television advertising campaign.
EDMC and other companies formed a lobby group called the Coalition for Educational Success, and retained Lanny Davis, former White House counsel to President Bill Clinton, as an advocate. In an interview, Mr. Davis complained that the Department of Education and Mr. Harkin have a double standard when it comes to for-profit schools, as low graduation rates and high debt are a problem everywhere.
"[Mr. Harkin] generally believes there's something wrong with the profit motive associated with higher education," Mr. Davis said.
"If that's the case, how much money is put into recruiting by Big 10 football coaches? There is excessive and sometimes fraudulent activity to recruit students, whether it's the profit motive or the athletics motive. ...
"If I am a for-profit school and I have a record of scamming students and actually not finding them jobs, I'm going to lose my customers. If I am a community college, I don't care because I have a captive audience" of taxpayer-subsidized students.
But Mr. Harkin and others remain troubled at the tales of students who are given the hard sell on coming to the school by admissions officers who are paid based on how many students they get to sign up -- with each new student assigned a point value. Former students and admissions officers at EDMC spoke of a high-pressure culture to get students in the door, with little in the way of support in finding a job once they left.
"We talk to those students so fast they don't even know what they're signing up for," said Monte Banks, a former EDMC admissions officer who said he was encouraged to hound "leads" at all hours from his cell phone.
Lynn Stein attended the Art Institute in Pittsburgh to study photojournalism, and when she graduated -- saddled with $80,000 of debt from there -- she said the only thing her career services counselor did was pass along job opportunities that clearly had been copied and pasted from Craigslist. When Ms. Stein confronted the counselor about it, she said the counselor asked Ms. Stein to recommend other job websites that would be good to check.
"These for-profit schools just have to start being more like schools, so they can provide support services for low-income kids and others who maybe don't have a history of much education," Mr. Harkin said.
"But that costs money and that interferes with their bottom line. But that's what they've got to do. They've got to become more like a college."
Daniel Malloy: email@example.com or 1-202-445-9980. Follow him on Twitter at PG_in_DC.