ABC News’ Arlette Saenz (@ArletteSaenz) reports:
In a hearing on Tuesday, Senate Democrats criticized new proposed regulations on for-profit colleges for not going far enough to protect college students from taking on crippling debt.
“The answer is that for-profit colleges have distinguished themselves by asking a higher percentage of their students to borrow, more than any other sector of higher education,” Sen. Tom Harkin, chairman of the Senate Committee on Health, Education, Labor and Pensions, said. “The difference between the subprime and the mortgage interest and this is if you got a bad house, you got a bad deal, you could walk away from it. You can't walk away from these loans.”
At the age of 27, Eric Schmitt, a father of two from Hampton, Iowa, enrolled in Kaplan University, a for-profit college owned by the Washington Post Co., and drew thousands of dollars in loans to obtain an associate’s and bachelor’s degree. Kaplan University told Schmitt he would be able to find a job paying $30,000 upon completion of his degree, but Schmitt never found work in his chosen field as a paralegal.
Since his graduation, Schmitt has only found temporary work, such as a janitor job which pays $10.50 an hour. He now owes $45,000 from his education at Kaplan University.
“I feel that returning to school to get my degree has put me further away from my goals than before I started my education,” Schmitt said. “The lifetime promise of a college degree has become a lifetime burden that I only can hope I bear alone. The debt and the magnitude of my mistake is with me like a constant weight. I have lied awake at night dreading what I might to do to save my family from this burden.”
Martha Kanter, under secretary of the Department of Education, defended the proposed regulations, saying it protects students by establishing criteria for for-profit colleges to meet in order to receive federal aid. These conditions include ensuring loan payments do not exceed 12 percent of a former student’s earnings and 35 percent of their former students are repaying their loans.
For-profit schools account for 10 percent of all higher-education students but account for 47 percent of loan defaults. Compared to community colleges and four-year private and public institutions, a much higher proportion of students at for-profit colleges borrow money to pay for their tuition. Ninety-six percent of students at for-profit colleges obtain loans to pay for their education compared to 13 percent at community colleges, 48 percent at four-year public and 57 percent at four year-private institutions.
“It is seriously troubling that companies would find it acceptable to make these loans with the knowledge that such a high percentage of their students will be unable to repay them,” Harkin said. "Well, while the school knows these loans are a terrible investment, the student has no idea they are more likely to wind up with ruined credit than a college degree and a good job. They don't know that these loans will hang around their necks for the rest of their lives.”
No Republican senator attended the hearing, and there was not a representative for the for-profit schools on the panel, a problem lamented by Sen. Al Franken.
“It would have been nice to have someone here to represent the for-profit schools,” Franken said.