WASHINGTON — Students attending for-profit colleges are subject to subprime mortgage-like loans that saddle them with thousands of dollars in debt and waste millions in taxpayer dollars, Democratic lawmakers and education experts said at a Senate hearing Tuesday.

The hearing of the Senate Health, Education, Labor and Pensions Committee came just days after the Education Department issued new rules to deal with the student debt problem at career colleges, rules that those at the hearing said did not go far enough.

“I believe it is going to take more than these rules,” committee chairman Tom Harkin said, to do something about what he described as the “toxic mix” of companies trying to maximize their profits and vulnerable people taking financial risks to improve themselves.

Republicans on the committee, who say Harkin, D-Iowa, has unfairly singled out the for-profit college industry in a series of hearings, boycotted the event. Industry representatives, who take strong issue with the hearings’ findings, said they had not been invited to testify.

“I think this is really the second coming of the subprime crisis,” Harkin said, citing figures that nearly a quarter of students at for-profit schools default on loans within three years and that students at such career schools account for 47 percent of all student loan defaults.

Wade Henderson, head of the Leadership Conference on Civil and Human Rights, also noted similarities to the housing meltdown, saying career schools offer a panoply of financial support programs to people, often minorities or of lower incomes, who are not educated in the consequences of defaulting.

Harkin also noted that large for-profits receive almost 90 percent of their revenue from federal taxpayer dollars, 23 percent of all federal student aid money. He said that in 2009, for-profit colleges received $18 billion in guaranteed student loans.

Meanwhile, 57 percent of students who enrolled in 2008-2009 departed without a diploma and with a high probability of debt.

 


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