U.S. Spends $32 Billion on For-Profit Schools Despite High Drop-Out Rate

NEW YORK (CNNMoney) -- U.S. taxpayers spend more than $30 billion a year on for-profit private schools, despite the sector's relatively high drop-out rate, according to a congressional investigation released Monday.

$32 billion in taxpayer money was spent on the for-profit sector last year, according to the Senate Committee on Health, Education, Labor and Pensions.

But during the 2008-2009 school year, which is the most recent data available for withdrawal rates, 54% of for-profit students dropped out without a degree. That translates to more than half a million students in one school year.

The report also found that for-profit schools charge tuition that is much higher than their public counterparts. Bachelor's programs at for-profits costs 20% more than public schools, while an associate's degree at a for-profit institution is four times the cost.

For-profit schools were also fingered for spending far more on marketing and recruiting than on actual instruction: $4.2 billion compared to $3.2 billion during the 2008-2009 school year.

The report said that for-profits "devoted less [money] to actual instruction costs (faculty and curriculum) than to either marketing and recruiting."

Many students enrolled in these schools are military veterans attending on the GI Bill, the report said. The Department of Veterans Affairs bankrolls four years of higher education for veterans who have served since Sept. 11, 2001. The GI Bill covers all tuition at public schools and up to $17,000 a year at private schools.

The Association of Private Sector Colleges and Universities, the industry group representing for-profit schools, dismissed the congressional report as an inaccurate, politically motivated attack.

"Unfortunately, [this] report continues in the tradition of ideology overriding reality," said the APSCU, in a response on its website. "The report twists the facts to fit a narrative, proving that this is nothing more than continued political attacks on private-sector colleges and universities."

Ernie Gibble, a spokesman for DeVry University, one of the most prominent for-profit schools, said issues outlined in the congressional investigation were part of a wider problem with education in America, not just with for-profits.

"While this [investigation] has identified some problems that must be addressed, many of these issues, including improving graduation rates, ensuring ethical recruiting practices, reducing student debt and addressing the educational needs of underserved populations requires the whole of higher education's attention and action," said Gibble in an email to CNNMoney.

The Senate committee, which is chaired by Senator Tom Harkin of Iowa, said that unless reforms are imposed on for-profit schools, "the sector will continue to turn out hundreds of thousands of students with debt but no degree, and taxpayers will see little return on their investment."

Earlier this month, the Consumer Financial Protection Bureau announced that Americans have racked up $150 billion in private student loan debt.