Why “free market” for-profit colleges aren’t working

For Profit Colleges

A recent FRONTLINE report on for-profit higher education has brought light to bear on some flagrant abuses in the system.

The boom in for-profit higher ed came into flower with the recession of 2008. As time went on and people remained out of work, they began, instead, to seek ways of bettering their job prospects… through education. They bought into a belief that only through higher education and college degrees could they prosper and achieve financial security for themselves and their families – which was understandable, and laudable. So they took to the internet, seeking opportunities. They did not need to look very hard. Virtually anyone who has ever answered a product survey or entered a sweepstakes online has gotten email advertising: Take advantage of this opportunity for a better life! A college degree is within your reach! You qualify for government loans, grants!

Is it any wonder that many took the bait? With the best of intentions tens of thousands of young working or out-of-work men and women took the chance, grabbed the brass ring, and made the commitment to furthering their education and broadening their prospects. They signed on to large government-guaranteed student loans; loans that were ultimately impossible to get out of even through bankruptcy; loans which were collected on through every kind of means, from wage garnishment to interception of tax refunds, suspension of various government benefits, etc; loans which, until paid in full, compromised rather than brightened their futures.

It was like leaving the door to the liquor store unlocked at night. What could be easier than signing up vulnerable young people who desired a better life by getting them to commit to massive loans – for which they were manifestly unqualified – then, letting Uncle Sam underwrite and collect on them while these schools took the money up front and delivered virtually nothing in terms of real education or training.

The stories were many: young women who signed up for almost $30,000 in loans for nursing programs in which they never saw the inside of a hospital; young inner city black men who took on enormous debt in the hope that this “investment” would lead them to work as design specialists, and on and on. The usual cost ran about $30,000 each, payable for the rest of their lives.

Most of these people could not have passed entrance exams to get into ordinary colleges in all likelihood. This wasn’t the measure for these for-profit schools. Their measure was as simple as whether the victim could withstand the sales pitch – and it is understandable that someone who sees only a bleak future would be an easy mark for these slick salesmen.

Why is this free-market education system so pernicious? Why so predatory? There is a simple answer here and it has nothing to do with the marketplace. At all. The corruption, the canker, in this system of “for-profit” education is not the private sector part of it – it is the government loan guarantee part. There are two things that would weed out the corruption in these education scams:  1) Tighten up accreditation and impose heavy penalties, including jail time, on those who make false claims regarding accreditation. Hold these schools to the same standards as any other school. 2) End all government underwriting of loans, placing all lending for education on a private basis, as well.

This would put a lock on the door of the liquor store and the cash register. You privatize the loss, as well as the profit, and leave the taxpayer out of it entirely. This is how capitalism used to work. Of course, getting anything done on this will not be easy because once they got the money flowing in through these guaranteed loans, they could do as Donald Trump has always done: buy influence to keep it that way.

There is no reason why a private for-profit, like, say, Evergreen, should sell education as though it were a business, yet guarantee payment by the government as though it were a state-funded institution. This is utter nonsense. See what an easy fix this could be? Of course, the profits would not allow these promoters to take the money and run quite so easily or so quickly. And by demanding the same high quality standards of them as we do of publicly-funded and non-profit institutions, students would be guaranteed a better prospect of future employment. If a state-run community college can get a student through a nursing program with a respectable degree for $3,000 – $5,000, there is no reason why a for-profit can’t do it for under $10,000.

There are other for-profits out there that do not impose upon vulnerable students to this extent and probably serve a worth-while purpose. Some offer pay-as-you-go plans where a working person could earn credits through correspondence or online while paying the school directly an agreed-upon and reasonable amount. Some of these were originally set up to offer servicemen an opportunity for distance study, and then developed programs for others. Some of these offer fairly demanding high school courses, also.

Frontline called their segment “Subprime Education” and this was an inspired title. Just as the housing bubble created chaos by forcing lenders to give money to unqualified borrowers in the housing market, the government standing by to act as a debt collector for unqualified students for the for-profit college rackets has created mischief that is pitching its victims – the students and the American taxpayers – into another vortex of madness.

These for-profit schools, unlike Trump University, prey upon young men and women, and single mothers all struggling to gain a foothold in life; people who are encumbering their futures with insupportable loans for which they could never qualify without student loan guarantees. These wrongs could be addressed through stringent accreditation requirements and ending any government participation. The latter has been an open invitation to abuse of the victims.

Trump U, while of the same fraudulent character, needs to be addressed with a dose of sunshine. Here we have people who are sacrificing their life savings, their whole-life insurance, even their homes in a hopeless attempt to make enough money to see them through their last years in dignity. Instead they lose everything they had earned in a lifetime of work and investment. We’re not dealing here with government-guaranteed loans at least. We can hope at least here that the justice system will provide redress of Trump U’s victims’ grievances and have a chilling effect on similar scams.

In either case, the abuses of these few give the free market a bad name – unearned, in the case of the for-profit colleges because they are tainted with government participation, which is the corrupting factor. It is indeed ironic that, while Donald Trump has been able to protect himself numerous times through bankruptcy and general avoidance of payment of debt, the innocent victims of the for-profit college scams are never freed of their debt. It follows them through an entire lifetime.

Public institutions are also guilty of jacking up tuition and other costs to match the available student loan guarantees. Just compare the costs of a college education before and since the advent of government student loan guarantees. A quick look at comparative annual costs in 1960 and 2008 (federal student loan guarantees began in 1965) will provide valuable insight.

Comparative Annual Costs

While these are not all-inclusive, they provide a concise illustration of what government involvement in loan guarantees means to those saddled with the debt. The cost of higher education has far outstripped the increase in other costs of living in the United States. Incomes increased by 10x from 1960 to 2008, on average. The tuition is only the tip of the iceberg here. Along with the tuition, the cost of textbooks also takes up this loan money, as do other hidden costs. There is now a great incentive for planned obsolescence in the textbook industry with meaningless changes every year so that used textbooks are worthless. The government loan guarantees encourage this pointless inflation.

There is no reason to bring an end to for-profit institutions. What is needed instead is to quite simply divorce these for-profit colleges from any participation of the federal or state governments. There is obviously a great need for some kind of program such as they have promised. The problem is tying them to a government boondoggle at the expense of taxpayers and defrauding the students. It is definitely worth overhauling.

It has been proposed, and to some degree implemented, that there needs to be greater government “oversight,” including some requirement of job placement. Obviously, no college can guarantee this, and a job is not the possession of the college to give away. So unless and until job placement is “required” for ALL colleges, there is no reason to expect it here. No college can be held responsible for the many factors that go into an employment decision by someone else! No, the solution is to take government OUT of the equation, tighten the nuts and bolts in accreditation, and hold these schools to a high standard with regard to transparency and honesty in advertising. Then it really comes down to caveat emptor. This should be a non-problem. Instead, as per usual public involvement with it, it is a gigantic and tragic problem.

* http://www.clearpictureonline.com/1960-Food-College-Income.html

Sally Morris

Sally Morris is a political commentator and writer for The New Americana and the Dakota Beacon. Raised in a very conservative environment where politics were the common topic of discussion at home, she began early to develop critical thinking skills and follow political news and events. At 15 she was drawn to her local Republican headquarters where her typing skills were put to work preparing canvass sheets, poll sheets, maintaining files. She was precinct committeeman in her state district and chaired two committees in a state Republican Convention. The deterioration of Republican Party principles has been a concern throughout her years as a Republican. In 2009 she organized the first tea party event in her city, which spawned a core group of activists. Today Ms Morris defines herself as a “constitutional conservative independent”. She has also written for newspapers under the names “Kathleen McCarty” and “Ellen Jones.” As a property owner she took on the city council’s plan to destroy her historic neighborhood and subsequently authored the first successful nomination to the National Register of Historic Places of a linear resource (Granitoid Pavement) for its engineering and design. It was also placed on the State Registry (North Dakota). She has also seen first-hand the corruption of the eminent domain principle when her Minnesota home was seized for development of a project which never, in fact, materialized, although the home was demolished. This experience brought into sharp focus eminent domain abuse as well as other corrupt practices in local government. (Another reason why she opposes Donald Trump and Haley Barbour). A devotee and performer on Celtic Harp she has also presented discussions on topics of Irish history and music at the Fargo/Moorhead Celtic Festival. She and her late husband, Clyde Morris, homeschooled their three children, now grown and also published authors and musicians.

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