LEGAL NEWSLINE

WASHINGTON (Legal Newsline) -- A group of 14 state attorneys general have sent a letter to members of Congress, urging them to support legislation that would crack down on the for-profit school industry's use of federal aid for recruiting, advertising and marketing to students.

In a letter to ranking members of key Senate and House committees last week, the attorneys general of Arkansas, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New York, North Carolina, Oregon, Pennsylvania and Tennessee called for passage of the Protecting Financial Aid for Students and Taxpayers Act.

The bill, sponsored by U.S. Sen. Kay R. Hagan, D-North Carolina, and U.S. Sen. Tom Harkin, D-Iowa, would restrict institutions of higher learning, including the for-profit schools industry, from using federal financial aid for recruitment, advertising and marketing.

Illinois Attorney General Lisa Madigan said in a statement Friday that the bill will help ensure that federal education funding is used to serve and educate students -- rather than to finance advertising campaigns and aggressive student recruitment and marketing operations.

"The tactics employed by many for-profit college recruiters put revenues ahead of student success and often leave students with little to show for their education other than life-crushing debt," Madigan said.

"This federal measure is necessary to ensure that for-profit colleges direct their focus where it belongs -- on the quality of the education they provide their students."

Hagan, a member of the Health, Education, Labor and Pensions Committee, said she was grateful for the support of the attorneys general.

"I introduced this legislation because taxpayer dollars should not be used on out-of-control marketing, advertising and recruitment budgets," she said in a statement.

"I'm especially troubled that our veterans are being targeted by some for-profit schools, and these deceptive recruitment practices are unacceptable."

In their letter, dated March 11, the attorneys general highlighted several trends regarding the for-profit schools industry, including:

- 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;

- Nonprofit colleges and universities spend an average of one-half of 1 percent of their revenues on marketing;

- Together, 30 education companies examined by the U.S. Senate Committee on Health, Education, Labor and Pensions spent $4.2 billion on marketing in 2009 or 22.7 percent of all revenue, which equates to $2,622 per student;

- Of those 30 educational companies, 54 percent of students who started in 2008-09 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; and

- 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.

Last week's letter is the latest effort by Madigan, and other state attorneys general, to rein in the for-profit school industry's abusive practices.

Last year, Illinois filed a lawsuit against the national for-profit school Westwood College, alleging Westwood left many students with anywhere from $50,000 to $70,000 in debt for degrees that failed to qualify them for careers in criminal justice.

Madigan's suit alleges that Westwood downplayed the ultimate cost of attending the college and failed to provide students with sufficient information about their loans.

Also in 2012, Madigan settled a national lawsuit with the company behind GIbill.com for deceptively steering U.S. service members and veterans to use their federal education benefits with the company's preferred clients in the for-profit schools industry.

The Illinois attorney general also has testified before Congress on growing concerns about the industry.

Madigan isn't the only state attorney general concerned about the growing industry.

Kentucky Attorney General Jack Conway filed a consumer protection lawsuit against Spencerian College in January over allegations that it misrepresented job placement numbers.

The for-profit college, owned by the Sullivan University System, has two campuses in the state -- one in Lexington and a second in Louisville.

The suit is the fourth of its kind Conway has filed as part of his own ongoing investigation into the for-profit college industry.

The third was filed in 2011 against National College of Kentucky Inc.

"I support higher education and students who seek a degree to create a better life for their families, but many times I see those dreams turn to nightmares when students fall prey to a fast sales pitch from a for-profit college with a questionable reputation," Conway said in a statement Friday.

"The students end up with tens of thousands of dollars in debt and no degree. This bill ensures that scarce federal education dollars will be used to serve and educate students rather than to finance advertising campaigns, recruitment operations and aggressive marketing at colleges that have placed profits ahead of student success."

Massachusetts Attorney General Martha Coakley, also concerned about the industry, has reportedly expanded her current investigation into the for-profit colleges and trade schools.

Coakley -- who started looking into the issue nearly two years ago -- is now investigating whether a group of colleges and schools in her state misled prospective students about costs, the odds of graduating and finding employment.

"The more we look, the more we see it as a real problem," the attorney general told the Boston Globe last month.

Coakley compared the issue to the increase in subprime mortgages during the housing boom, telling the newspaper that it has potential to be a "predatory business."

To view a copy of the letter sent by the attorneys general, click here.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.