Illinois Democrat Sen. Richard Durbin warned Wednesday that the world of higher education could experience its own version of the subprime mortgage crisis if Congress does not take steps to regulate federal loans given to students at for-profit universities.
“The goal seems to be to bring in as many students as possible — regardless of their ability to succeed or graduate — load them up with loans, and leave taxpayers on the hook if students default,” Durbin said.
Durbin, the majority whip, told an audience at the National Press Club that he wants to partner with Sen. Tom Harkin, Iowa Democrat, to craft regulatory legislation to introduce late this year or early next year.
When asked whether he thinks he can win support among his colleagues, Durbin said, “We’ll see.”
“It’s not going to be easy,” Durbin said. “There’s a lot of federal money involved here, and they have bought all the lobbyists in town, which is their constitutional right.”
“Just as with the subprime mortgage crisis, private companies rake in the profits, and taxpayers bear nearly all the risks,” Durbin said. “What makes this doubly frustrating is that we’ve been through this before.”
According to the Department of Education, students at for-profit colleges make up only 7 percent of the people receiving higher education, but 44 percent of those defaulting on federal student loans, Durbin said.
Tuition at for-profit schools is about five times the price of community colleges, and about twice as much as public four-year colleges, according to a report from the College Board.
For-profit universities such as the University of Phoenix and DeVry University received $4.3 billion in Pell grants and $19.6 billion in Stafford loans, according to a Senate report that came out last week.
Durbin and Harkin have asked the Government Accountability Office to assess how effective for-profit schools are.
The Department of Education is pursuing regulations that would require for-profit schools to disclose graduates’ success rates.
“There are many good trade schools and for-profit colleges, and they serve a vital purpose,” Durbin said. “But there are also a lot of bad for-profit schools that are raking in huge amounts of federal dollars while leaving students poorly trained and over their heads in debt.”
WATCH DURBIN’S COMMENTS HERE