AG Gansler Sends Letter in Support of Federal Financial Aid Spending Bill
For-profit schools should spend tax dollars on educating students, not marketing
Baltimore, MD ( March 18, 2013) - Attorney General Douglas F. Gansler, joined by 13 other Attorneys General, today announced his support of the federal Protecting Financial Aid for Students and Taxpayers Act, sponsored by Sens. Kay R. Hagan (D-NC) and Tom Harkin (D-IA). The Attorneys General sent a letter to the chairmen and ranking members of key Senate and House committees expressing support for the bill that restricts institutions of higher learning from using federal financial aid for advertising and marketing purposes, rather than student education.
"Public tax dollars should be used to educate students, not for marketing campaigns," said Attorney General Gansler. "When institutions put too many resources towards advertising campaigns, they lose sight of their primary goal -- to educate and prepare current students for post-graduate employment and provide them the skills they need to succeed in life."
"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 (HELP). "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."
Maryland Congressman Elijah Cummings sponsored a similar bill in the House of Representatives last session.
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.
- In fiscal year 2009, these for-profit education companies spent $3.7 billion (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.
- One study indicated that in the corporate world, marketing budgets typically represent between 4-12 percent of sales; 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 1 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.
In addition to Maryland, the letter was also signed by the Attorneys General of Arkansas, Illinois, Iowa, Kentucky, Massachusetts, Minnesota, Missouri, Nevada, New York, North Carolina, Oregon, Pennsylvania and Tennessee.
A copy of the letter is available at http://www.oag.state.md.us/Press/Protecting_Student_SIGNATURES.pdf