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Another concern: definitions such as “marketing” are so slippery such a law would be hard to apply fairly, said BMO Capital Markets managing director Jeff Silber. He noted, for example, that the Ohio State University football team doesn’t get counted as a marketing expense but clearly promotes the school as effectively as any advertising campaign.

Wall Street appeared to agree the bill stood little chance of passing, with stocks of leading for-profit companies such as Apollo Group (parent of the University of Phoenix), Corinthian Colleges Inc., and DeVry Inc. all lower in mid-day trading but not substantially on a day when the market overall was down.

In fact, Silber said most for-profits have been cutting back in recent years on advertising and recruiting budgets. Still, the business model relies heavily on Web and broadcast ads, billboards and well-staffed call centers to drive enrollment.

“Yes, this would be an issue for everybody (in the sector),” Silber said. “Advertising and selling is a fairly sizable component of the business model,” and if spending were limited, “it would limit their growth.”

Figures compiled by BMO show that at the largest for-profits marketing expenses average around 22 percent of revenue but range as high as 29 percent at Bridgepoint Education. Bridgepoint’s Ashford University got only about 20 percent of its revenue from non-federal sources, so conceivably could have to cut back on half its advertising and recruiting under the proposal.

Harkin emphasized the proposal would leave schools free to advertise — just from a separate pot of money that hasn’t come from taxpayers.

Even critics acknowledge that quality at for-profit colleges varies widely, and many are a good fit for students, particularly adult learners looking for flexible scheduling and specialized career training that often requires a certificate but not a degree.

But while comparing graduation rates can be misleading for those reasons, for-profit schools on average have lower success rates than traditional colleges on a variety of measures. A report from Harkin’s Senate committee found that almost 2 million students withdrew from large for-profit colleges over a three year period. Among those who enrolled at 10 large chains in 2008-2009, 54 percent had withdrawn by the summer of 2010.

Meanwhile, the latest figures from the Education Department put the default rate on federal student loans for students at for-profit colleges at 15 percent, compared to 7.2 percent at public nonprofit universities and 4.6 percent at private nonprofit colleges. The industry points out that’s partly because its schools tend to serve lower-income students. But difficulties transferring credits, and having credentials from for-profit colleges rewarded in the job market, also play a role.

Justin Pope reported from Ann Arbor, Mich.