U.S. Senate report criticizes for-profit college industry

But industry officials say the report is based on outdated information and lacks credibility.

The staff report, released Monday by Sen. Tom Harkin, D-Iowa, paints a critical picture of the nation's for-profit education industry. The report outlines a series of failures, including a disproportionately high rate of student loan defaults.

According to the report, students at for-profit colleges represent 13.2 percent of the nation's college students. But that minority accounts for 46.8 percent of the country's student loan defaults. Nearly a quarter of all students who attend for-profit colleges default on their federal student loans within three years of leaving school.

In a news conference Monday, Harkin said many for-profit institutions do “real, lasting harm” to their students. Of the students who enrolled in for-profit colleges during the 2008-09 academic year, 54 percent withdrew by summer 2010 without earning a degree, according to the report.

Although they didn't have a degree to show for it, nearly all of those students left with another reminder of their time in school: student debt that they can't discharge even in bankruptcy.

That debt load is made worse by the fact that tuition at for-profit colleges is “grossly out of line” with comparable public schools, Harkin said. According to the report, average tuition at a for-profit institution is about six times that of a comparable community college and twice as high as at a four-year public school.

The report is the product of a two-year investigation that looked at 30 for-profit education companies. During the 2009 fiscal year, those companies spent 22.4 percent of their revenues on marketing, advertising, recruiting and admissions staffing, while devoting just 17.7 percent to student instruction, according to the report.