SOCRATES COULD HAVE DIED RICH, IF ONLY HE'D INCORPORATED
By William Boardman Email address removed"> Email address removed
Imagine a business model where the government lends people money to pay you for a service that you may or may not deliver effectively, and no matter what goes wrong, someone else has to pay the government back and you get to keep almost $32 billion a year.
Preposterous, you say! No, in the real world it's called a for-profit college.
"For-Profit College" -- isn't that on oxymoron? Not really, according to the
Association of Private Sector Colleges and Universities (APSCU) in Washington,
DC: "We are supplying a
marketplace that has a growing need for skilled and trained workers in order to
achieve 21st Century global competitiveness." http://www.career.org/iMISPublic/AM/Template.cfm?Section=Home&CONTENTID=25566&TEMPLATE=/CM/ContentDisplay.cfm
And that's not
easy to achieve with a drop-out rate as high as 66 per cent. This creates pressures on admissions
officers to create an "enrollment churn," trying to bring students in faster
than they drop out. During
2008-2009, for example, Corinthian Colleges started with 71,246 students, then
enrolled 120,638 more, but ended the period with an enrollment of only 89,479 students. No wonder Corinthian, with total
revenues of $1.3 billion in 2009, spent almost a quarter of that on advertising
and recruitment. click here;
APSCU is a Washington lobbying
organization with something like 1,900 members (the number varies on the APSCU
website) who have two to three million students (the number varies on the
website). The for-profit student
market has reportedly more than tripled since 2000, when it was pegged at
500,000 people. http://www.huffingtonpost.com/2012/06/04/for-profit-colleges-student-debt-dropout_n_1567607.html
Even so, for-profit college
students represent less than ten per cent of all U.S. students, but they are "elite" in the
sense that they pay much, much more for their courses even though most of their
credits aren't transferable to more traditional colleges. For example, a radiography degree from
a community college or state university might cost as much as $15,000, but would
cost almost three times as much from a for-profit business like Kaplan
University, which is owned by and to a great extent financially supports the
Washington Post. The Post paid the
resigning head of Kaplan $76 million in January 2012.
The sweet part
is that for-profit college graduates and drop-outs alike have more than twice
as much debt on average as traditional college students. They've borrowed money from the
government to pay their for-profit colleges for whatever education they
got. Even though their
unemployment rates are higher than traditional college students, and even
though their employment is less well paid, they are responsible for paying back
those loans. Not surprisingly,
their default rate is high. No
matter what else happens, the for-profit colleges get to keep the money. click here;
For-profit
education has been with us for decades, and early on these colleges could
collect 100% of their income from government grants and loans. An early federal government response
was to limit for-college revenues to only 85% government largesse, with the
balance coming from other sources.
Under George W. Bush, the for-profit margin of government revenue was
raised to 90%, where it is today.
But there's a
loophole, and it's sweet. That ten
per cent non-government money can be loans from the for-profit colleges
themselves. If students default on
those loans, the for-profit colleges can take the hit, like a ten per cent
discount, because the government's 90% is a such huge cushion. Periodically, Congress gets aroused by
this situation, such as the July 30 report by the Senate education committee's
Democratic staff, but so far there has been little change in the for-profit
colleges' government grant-mining operation. http://articles.latimes.com/2012/jul/30/nation/la-na-forprofit-colleges-20120731
The money continues to flow from the government to the students to the
colleges, while the bill stops with the students. And who are these students? They're often poor, of course, and a lot of them are
veterans, and they are disproportionately African-American, Latino, or some
other minority.
Because of
corporate privacy and effective lobbying, the full picture of this transfer of
wealth from the government to the wealthy, by way of the poor, is hard to pin
down. The anecdotal evidence is
horrifying and there is little reason to assume that most of the students who
experience for-profit education are any better off than they would have been
without it. And a large minority,
at least, has gained little but debt.
But this is a
variation on the paradigm of Bain Capital, is it not? Acquire an entity, or student, load it up with debt, pocket
the money, and move on.
Not
surprisingly, Mitt Romney has gone on record in support of for-profit colleges,
arguing with a straight face that they help "hold down the cost of
education." Romney has frequently
praised Full Sail University in Florida, even though the Dept. of Education
says it's one of the most expensive colleges in America. The chief executive of Full Sail is a
major donor to the Romney campaign. http://www.nytimes.com/2012/01/15/us/politics/mitt-romney-offers-praise-for-a-donors-business.html?pagewanted=all
You might have
thought that "free market conservative" sorts of people would be up in arms
about this welfare for the rich program.
You might even think traditional conservatives would consider for-profit
colleges the bane of traditional education. Or you might not.
