For Profit or For Students?

This guest post is contributed by Mark Paul and Anastasia Wilson. Both are members of the class of 2011 at the University of Massachusetts-Amherst.

For-profit colleges are expanding enrollments at a rapid pace, but it is questionable whether these revenue-seeking universities give adequate consideration to students’ welfare, retention/graduation rates, and overall economic well-being alongside their bottom line profits.

A new post by Judith Scott-Clayton, a professor at Columbia Teachers College and new weekly contributor to the New York Times Economix blog, explores the merits of for-profit colleges, arguing that in many ways these schools are more efficient at seeking funding opportunities for students and adopting new teaching technologies. These schools procure more Federal dollars per student and employ more cost-saving technologies, in the classroom and online, than their non-profit public and private competitors.

However, the real question is not a matter of efficiency, but instead concerns students and the taxpayers funding Federal loans and grants consumed by for-profits. Are the relative merits of profit-oriented schools, including their comparative advantage in securing Federal funding, being used to improve the return on investment for students or for their shareholders? On the macro level, does the growth of for-profit higher education promote new risks in the economy, as drop-out and loan default rates continue to increase?

The relative efficiency or effectiveness of for-profit schools is not necessarily what has been driving record enrollment rates, which were up 25% just over the past year. The Great Recession has pushed many students and unemployed folk towards higher education, as better credentials often mean better job prospects. With the unemployment rate for those holding a bachelors degree at 4.2%, there are incentives to enroll. In fact, applications and enrollments for colleges are up across the board, perhaps meaning the overflow from more selective schools is being crowded into the fast-growing for-profit institutions.

Though increased enrollment appears to imply increased opportunity, many students are in higher risk of drop-out and loan default when choosing a for-profit college. The for-profit education sector is in large part to blame for the sharp rise in student loan defaults, accounting for almost half of total defaulters. In the graph below, the Department of Education has concluded that despite only having 12% of total enrollments, for-profit schools disproportionally account for 48% of total student debt defaults. Since for-profits are so effective in securing Federal loans and grants for their students, this means that the schools are in essence receiving an indirect subsidy from the government and taxpayers, while leaving students in the red.

While an increasing number of students enroll in for-profits and take on large amounts of student debt, they also increase their risk of drop-out. A report published last year by the Education Trust shows how devastating dropout rates are, with only 22% of students enrolled at for-profit four-year universities graduating within six years, as compared to 55% and 65% at public and private non-profit universities, respectively. Many students enrolling in these institutions are left without credentials and burdened with debt, yet the schools are able to retain their profits made from students’ tuition.

The increased prevalence of for-profit universities, with their dangerous combination of drop-out and default, may be aggravating a looming student debt crisis. Overall, the volume of loans in default grew to $50.8 billion in 2009, up 30% from the year before. As more students enroll in risky for-profit schools, these rates are likely to increase, perhaps leading to another consumer debt crisis similar to the foreclosure fiasco.

Although many are well aware of these alarming facts, our elected officials appear to continue favoring the implicit tax dollar handouts to for-profit colleges. The spending bill recently passed by House Republicans even blocks the Department of Education from enforcing a new rule that could limit for-profit schools’ access to Federal money. While arguments can be made that profit-seeking schools give wider access to higher education, it seems that the profit motive and shareholder loyalty are overtaking concerns for the well-being of students and the economy at large. Instead of allowing Federal dollars to support for-profit education, the money ordinarily received by these schools should be used to increase the capacity of public higher education and provide “finish line” grants to those facing financial struggles in their final year of study.

As the Obama administration seeks to increase enrollment, graduation rates, and investment in higher education, policy makers need to consider redirecting their funding towards students and not into the pockets of shareholders by subsidizing private profits.

85 responses to “For Profit or For Students?

  1. So the Republicans want to keep open the pipeline of Federal dollars to for-profit schools even though they have the worst results. They also want to subsidize bank loans to students rather than direct government loans, which is cheaper for the government. They are also opposed to government spending on waste and fraud–I guess the cuts in medicaid are required to offset the private sector efficiency!

  2. “Though increased enrollment appears to imply increased opportunity, many students are in higher risk of drop-out and loan default when choosing a for-profit college.”

    This is really sloppy analysis. I don’t have the exact numbers, but more students at for-profit universities are nontraditional students financing themselves. Public and private non-profit universities are largely traditional students still receiving considerable financial support from mommy and daddy. So what you are saying is that people over 25 should not be allowed to go back to school.

    Of course this brings us to the unconstitutional federal college loan programs that distort markets and have driven the price of college tuition through the roof (ECON 101 is you subsidize something you increase the gross price).

  3. Unconstitutional federal college loan programs … Really? The constitution was established to provide for the general welfare of the citizenry. All of the other stuff in the document provides some structure for doing for providing for the general welfare. An educated populous makes for a more perfect union. Every effort to freeze the constitution and the the country that embraces it in an imaginary yesteryear, is a little silly and very wrong headed. mtc.

  4. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

    If you claim everything = general welfare then the 10th amendment is pretty meaningless. Then again food produced on a farm for consumption on that farm has been deemed “interstate commerce”. So I guess anything goes. We live in an age where there is no rules for the plutocrats.

  5. “are no rules for the plutocrats”.

  6. secretPullse

    Off topic but please investigate:

    How can an amendment to the current UK banking laws prevent any further crisis when it only ever monitors banks on an individual basis? If all banks get to the same desperate point (near collapse) all at the same time, then none can be allowed to collapse as that would create the panic that we just had.

    No one bank is going to get to a plagued situation without causing panic. Since all head bankers hang out in the same circles they “bet” in the same ways. Therefore the chances of 1 bank getting itself into hot water on its own is very very slim.

    Add to that the fact that the major banks in the world have offices in nearly every country in the world and you have a problem that 1 country on its own can NEVER solve.

    United/worldly oversight is the ONLY way to prevent a re-occurrence. This does not mean a world bank!

    So who is PROPERLY working on this solution?

  7. Obviously the “success” of the for-profit schools demonstrates the efficiency of the free market to always produce the best result… Given the predominance of Republican thought in today’s politics, I think we are all headed in the direction of more, not less private and for profit schools, as well as any other industries that can be privatized. Whether the American taxpayer begins to pay attention to this trend is another story.

  8. There is a total evolution of what education means.

    When US was founded a well educated individual knew Greek, Latin and French along with the Bible, History, and a few books of philosophy and politics.

    At that time, most people were illiterate.
    Move forward to 1840’s and onward when most of the major land grant colleges were formed by states to promote education and develop a society of merchants, businessman etc. These institutions were not create as charity but as a means to push economic progress.

    Also, Teacher’s colleges were founded to provide a pool of teachers to educate these folks to a better future. What has really changed?

    The world is a far more complicated place than it was in 1800’s. The real question can these institutions provide real solutions or are they a scam to fleece money from students and the government?

    There is no sense to pay 100k to get a 25k job? What is a reasonable return on any education investment? This has very little to do with government and more to do with industry that expects big profit and up to moment had very little oversight on the quality of the product namely gainfully employed former students. Caveat Emptor.

    @Jay – …you should read all the legal court rulings from Gibbons v. Ogden to today that federal government has every right to regulated interstate commerce. Saying it is not so…doesn’t make it true.

  9. I thought I should weigh in here because I may be the only regular reader of this blog who happens to be a part-time instructor for the University of Phoenix.

    Much of the criticism of this post is fair. However, a lot of it applies to non-profit higher education as well. UOP has responded to some of this criticism. I assure you that the students I see today are more prepared than the students I saw 6 months ago. Yes, some of these people have no business getting a college degree (they should be plumbers, nursing aides, etc.).

    On a personal note, I absolutely LOVE teaching. It’s definitely my calling (economics, in particular), but there’s just no money in it. From Kindergarten teacher to full university professor, you’re pretty much paid peanuts. People tend to assume that most professors are like the stars that you see on TV or in news columns.

    So, this part-time gig is ideal. I would encourage everyone reading this to look into it if you think you might be interested. Yes, there are problems w/ for-profit education, but I sleep well at night knowing that I am teaching my student valuable economic concepts. And let’s face it, the Great Recession has exposed the economic and finance illiteracy of this country.

    And I wouldn’t want to post on Baseline Scenario without something provocative. . . No doubt, I am benefitting from the tax payer here. Student grants are basically funneled into my pocket. I worked in defense years ago too. You gotta love the government. People just don’t realize how many of us are on the dole. Big finance probably leads the way, but I say if you can’t beat ‘em (the special interests bribing for their kickbacks) join ‘em (get into an industry that is subsidized by the govt.).

  10. As prescriptive instruction for federal issues, I’d agree that the 10th amendment is pretty meaningless. It simply says that states don’t have to receive specific instruction to run the state’s business. State X can build roads where needed and State Y can build canals. The “people” have a federal perspective and a local state perspective. There is a “we the people” to start the constitution and there is a “to the people” in the 10th amendment. That is the trouble with ambiguity, it requires a willingness to embrace subtlety and nuance. Grabbing a part of a phrase as a rallying cry leaves the rest of the point unexamined.

  11. More sacks of gold for the GoldSac boys….one more enormous scam sucking the middle class dry, no kidding.

  12. I find it odd that you call the schools risky. Could it perhaps be that the students are risky?

  13. “This is really sloppy analysis. I don’t have the exact numbers, but more students at for-profit universities are nontraditional students financing themselves. Public and private non-profit universities are largely traditional students still receiving considerable financial support from mommy and daddy. So what you are saying is that people over 25 should not be allowed to go back to school.”

    Your vague assertions (assumptions?) are without any insight. People over 25 can still go to public institutions, ever heard of a community college? Not that that is their only choice, lots of alternatives exist. And then you round out the post with a nonsensical ‘unconstitutional’ charge? ugh.

  14. I make no brief for “for-profit” colleges, but I’m horrified because so many state and private institutions are throwing away money on fancy buildings, dorms that contain amenities far greater than the ones I stayed in, stupid sports programs with millionaire coaches. “Fees” eat up vast sums of money; students get socked for vast loans.

    My parents paid for my first two years of state college, and the GI Bill paid for most of the rest, plus my Ph.D. State colleges now cost enormous sums. I taught for years at state universities, and wasn’t paid very well, but my students, and those of my colleagues, got excellent instruction at a reasonable price. In my day there was no such thing as an “adjunct,” i.e., an underpaid victim of a broken system.

    Our educational systems, from pre-school through graduate school, are in disastrous shape. Education must be free, or we’ll continue our journey to the third world. And the idea that everyone has to have a B.A. is totally wrong. We should get rid of “educators” and so-called experts in the field and leave education to the teachers and students.

  15. Where profit is the principal motivation, Caveat emptor! should be the rule. But the buyers in this case are students/parents desperate to get their ticket-to-the-American-Dream punched. So we behold a classic flim-flam operation, here dovetailing two motivations inimical to what ought to be the content of education, namely, learning what a citizen needs to know to become a free and responsible member of a world already well on its way to profitable perdition. “Grade inflation”–the awarding of grades/certificates without proper merit–is built in to for-profit education. And students do shop around, conducting a cost-benefit analysis of the meanest sort; namely, the most grade for the least effort. Factor in the wave of “performance-oriented” pedagogy–“teaching to the test,” paying teachers based on the testing of those young and hapless excrescences of commercial culture (the students), voucher/charter schools, paying students for grades, etc., and you have a formula for a further degradation of the public mind. And don’t forget the ideological convenience of blaming the victims of unemployment, etc. (as “not educated enough”); then going on to profit from their desperation. In the upshot, you will replicate, indeed advance, the class divide of society, premised upon a narrow technical specialization for the “educated” and poverty for the rest; a society of idiot savants (I think of them as “smart bombs”)at the top trying to stave off outsourcing and their less fortunate fellow citizens. A society in which corporations are legal persons and money is free speech is a society for which making the cultivation of young minds a function of the cash nexus is a plausible, indeed attractive, option.

  16. Typically these for profit and online schools have low barriers of entry compared to four year institutions. While the four years can filter out the “undesirables” the private colleges take in as many students they can regardless of the students educational prowess.

    I’m not attacking this process, if anything I think more people should have access to education, however, I will question reports that fail to isolate those variables.

    I would like to see a report focus on students from roughly equal educational backgrounds and living standards to investigate if the drop out rate is lower for students in four year institutions compared to for profit private colleges. Once I see those factors, then we can make a better decision on the future of private education.

    As for profiting off of education, I believe that’s a non issue. In for profit schools, the money goes to the shareholders, in non profit schools the money goes towards educators inflated salaries, what’s the difference?

  17. These shareholders have lobbyists and a lot of money is sloshing around in the pockets of the Pubs and the Tea Baggers. Of course the Ivy leagues are way more expensive but they are reserved primarily for the rich who don’t need loans. Public universities are pretty inefficient, wasteful, and at a certain size,more of a diploma factory than a search for knowledge. But they were originally founded and funded by state government to provide a technical work force to propel the state economy. The shareholder businesses really are only there to get the fed loans in their pocket and let the taxpayer pick up the defaults. Sort of like, lets see, The Mortgage Industry before the crash.

  18. Lou, I grant that regulating (which is different than providing loan guarantees) interstate commerce is a role for the federal government. My point was there is interstate commerce and then there is the bastardization of a clause to the point that giving your spouse head is defined as interstate commerce because it can materially effect the supply for the sperm bank in the neighboring state.

  19. “These shareholders have lobbyists and a lot of money is sloshing around in the pockets of the Pubs and the Tea Baggers.”

    But there is no lobbyist money sloshing around in the pockets of the Dems? If it is not too late, pull your head out of your ass.

    And if you have enough brain cells remaining process this, if the federal government spent half of what it does today and removed corporate sponsored regulations like the GE sponsored ban on incandescent light bulbs, what incentive would “evil” big business have to spend money on lobbyists?

  20. Bruce E. Woych

    The University without Borders:

    http://en.wikipedia.org/wiki/Open_admissions

    http://www.time.com/time/magazine/article/0,9171,944161-5,00.html

    http://plato.stanford.edu/entries/education-philosophy/
    The Philosophy of Education

    http://en.wikipedia.org/wiki/University
    Background on University & distinctive links to relative ideas

    http://en.wikipedia.org/wiki/Portal:University (reference portal)

    http://www.uni-index.com/ (global index)

    http://en.wikipedia.org/wiki/Tuition

    http://en.wikipedia.org/wiki/Category:Education_finance (***complete index: key link)

    The greatest cultural tradition and the greatest tradition of culture: and ironically these days…
    …it all comes down to finance!

  21. Bruce E. Woych

    http://www.aolnews.com/2010/08/23/opinion-administrative-bloat-drives-college-costs/ (excerpt)
    “Since 1982, the average cost of college tuition and fees has increased by 439 percent, while the typical family’s income increased by a mere 147 percent. College has been put financially out of reach from some students, while crushing others with debt.

    But even more troubling is the cause of these skyrocketing costs: administrative bloat.

    In fact, as a new Goldwater Institute study finds, universities have in recent years vastly expanded their administrative bureaucracies, while in some cases actually shrinking the numbers of professors.”
    (http://www.goldwaterinstitute.org/article/4941){*goldwater link}
    http://www.aolnews.com/2010/08/23/opinion-administrative-bloat-drives-college-costs/

    (2)
    http://www.popecenter.org/news/article.html?id=2408
    “Between 1993 and 2007,” they write, “the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research, or service only grew by 18 percent. Inflation-adjusted spending on administration per student grew by 61 percent during the same period, while instructional spending per student rose 39 percent.”

    One important point that the Goldwater study did not go into is the level of compensation paid to all those administrators. Data in The Chronicle of Higher Education’s Great Colleges to Work For 2010 show that it’s common for college administrators to earn substantially more on average than faculty members do.

    Schools ranging from large public universities to small private colleges responded to The Chronicle’s survey and reported an array of data. Looking at the figures for average salaries for administrators and for full-time faculty members, it’s hard not to be surprised at the disparity. Here are some representative examples:

    Abilene Christian University: administrators– $155,480; faculty–$61,029.

    Athens State University: administrators- -$113,199; faculty–$69,608.

    Blue Ridge Community College: administrators- $79,487; faculty–$57,179.

    Centre College: administrators– $96,241; faculty–$66,250.

    Emory University: administrators– $152,380; faculty–$95,274.

    Georgia Tech: administrators– $194,065; faulty–$94,215.

    University of Mississippi: administrators– $138,870; faculty–$76,847.

    University of Texas: administrators– $123,136; faculty–$85,910.

    Wayne State: administrators– $131,453; faculty–$104,103.

    http://www.popecenter.org/news/article.html?id=2408
    — despite increasing subsidies from government — college administrative costs have exploded. I The solutions advocated by college “administrators” (and their taxpayer-funded lobbyists and government relations professionals) won’t solve the problem!

  22. “despite increasing subsidies from government — college administrative costs have exploded.”

    These figures are like the public employee salaries. Very few “administrators” in higher ed make those salaries.

    The primary reason for administrative bloat, is in hiring low level administrative staff to work in student services.

    When they cut full time faculty, the tenured remainder withdrew from engagement with students–this was a good deal for them, one they were eager to make. Now nearly all academic advising at the undergraduate level is done outside academic departments by “administrators” and tutors making $35-$45K (on a good day).

    R1 schools still staff writing and tutoring centers with grad students. Community colleges hire BA education majors, and prefer to do so because they usually have some background in teaching learning disabled populations, which MAs and PhDs don’t. You don’t put BA education majors on a “faculty” line. You put them on an “administrative” line.

    Dealing with students, especially unprepared students, requires many corresponding bodies. There’s your administrative “explosion.”

    The salaries you cite are for people heading large administrative units, ie., the business dean at the School of Arts and Sciences, at the Engineering School, the HR director, the head of public communications, and etc.

    Sorry, I don’t think those salaries are out of line. These people could make more in private industry.
    And, they report to campus everyday, all year round.

    The administrative “explosion,” OTOH, is underpaid considering they’re standing in for absented tenured faculty.

    Oh, I know. There’s no business functions at the University–that’s not what education is about! Fire the library director and the HR director and hire more tenured faculty! Wah! Wah! Wah!

    There are plenty of extra-educational initiatives at major universities that can be criticized. But misleading information about “overpaid administrators” vis a vis the “poor put upon tenured faculty” does not address it. And poor put upon tenured faculty CAN’T address it, because they’re not on campus enough to know what’s going on.

    In fact, on libraries–this reminds me. Scholarly librarians used to be on faculty lines. With tenureds absenting themselves from campus, librarians are now usually on –you guessed it– “administrative” lines.

    The “explosion” goes on and on…

  23. Herbert Wetherby

    Increased enrollment probably stemed from the easy money student loan packages. Which really mirror the easy money real estate packages of recent days gone by. This coupled with the students inability to be tangibly degreed until the loans are paid back, might make it even harder to secure a job in an already tough economy. And there is no bankruptcy clause for these loans, they come after you aggressively forever. So things may seem rosy but that may just be another blissful illusion, espicially when the federals subsidize the already for profit colleges.

  24. Herbert Wetherby

    Thats fine until a problem crops up within or around Gvt. Truely uneducated people believe that day will never come, so a pseudo fantasy world develops with in their mind and they latch on to the most comfortable situtation. But eventually the rug is pulled from beneith them and then the real heart ache comes on that their belief was a false one.

  25. Herbert Wetherby

    Calm down there Jay, he makes a valid point that you take offence to, unless you are one of those political lobbyists that can’t afford another bubble crash.

  26. @Jay At what point does federal government hand in economic progress stop? If you look at US economic history at the beginning the role was very limited. Prior to civil war, there were periods of booms and busts punctuated by panics. During the civil war and the aftermath, the US Government ran up a major debt and debased the currency to fund those efforts. This policy went on throughout reconstruction to the economic panics in 1890’s in which lead to creation of the Federal Reserve to regulate the economy. The whole 10ther movement would say this blasphemy to spirit of the constitution and have revised history to make their point.

    If you want to live in that alternative universe then you would call United States by another name — Confederate States of America with Articles of Confederation as the blueprint for the constitution.

    If the government did not supply student loans far fewer folks would be able to fund their education; in turn this would diminish future revenue intake from earnings and economic development.

    The really question is does providing student loans promote economic development? Yes, there are definitive studies and economic analysis that state that a person with a bachelors degree make more money.

    Unfortunately, when there is a pot of money you will always find folks who will game the system to get rich.

  27. “For-profit schools”.

    It has a certain “ring” to it, rather like “animals which EAT their young”.

  28. “As more students enroll in risky for-profit schools, [...]”

    I don’t know that this assessment is supported. It seems to work backwards from the default rate to support itself. We’re not given any risk factors for the for-profit schools that non-profit schools don’t have, or any understanding of the difference in student demographics. Perhaps the for-profit schools are simply more willing to take in students with questionable financial arrangements. Without some sort of deeper analysis of the issue, it seems that the implication of the post, that for-profit schools are riskier BECAUSE they are for-profit, cannot be backed up.

  29. Being based in the UK, I’m all for it. There has to be a cheaper alternative to the public sector education system. Can all universities and colleges really claim to give unparalleled support and care to their students welfare anyway? I know that mine didn’t when I went to University.

  30. If you’re interested, ProPublica had several articles and podcasts on the topic a few months back.

  31. There is a simple reason for profits are doing so well. They have high pressured salesman working on commission. All you have to do is visit one of your local for profit schools, and talk to a few recruiters. They are predators and will enroll absolutely anybody. It so happens that most are very low income individuals and thats exactly why they get approved for federal loans. This model will continue to boom for a few years before bursting big time. for profit schools are the next subprime mortgage companies. get ready.

  32. Places like the Heritage Foundation, are having their “intellectuals” deride and decry any need for a public education at the university level, arguing the masses of middle class students are ill-prepared, and do not benefit from the experience.

    Thus, It seems to me that my children ought to start preparing for a career in motorcycle mechanics, and tile-floor installation, because the “rich” are sick and tired of underwriting the costs of these places, via taxation. They just don’t want to pay any taxes, period. Let the slaves pay is their motto.

    Well, lookie here…..we all are not going to sit idly by, while your Nihilism and Reactionary stunts go unchallenged.

    This is class warfare, and you bast*rds are going to see levels of arousal you never dreamed possible, here, and everywhere.

    We’re tired of getting screwed, got it?

  33. Woop, you are adding some salt to this forum. I like it.

    I returned to university in my 50s to do masters work in political science, and I saw a lot that passed me by in my earlier university experience. I was shocked to realize that universities are archaic institutions — the last of the cartels, really — and in their present form they are leeching more from society than they are contributing. They have become self-serving diploma factories, headed not by scholars but by business-brains. Google up photos of the heads of our universities and see for yourself –business faces almost all.

    In this age of internet and communication, we could impart knowledge to each other in much better ways, and certify job abilities in better ways.

    You might think that a business degree (as opposed to, say, liberal arts) teaches real skills which help the student enter into the workplace, but the head of the philosophy department told me most of the philosophy students were hired by banks — bankers preferred not to hire business students because they had to be ‘deprogrammed’ before they could be trained right by the banks. In that same way, universities often prefer home schooled students because they do better than high school graduates. What does that tell us? We have a better kind of intelligence when we learn on our own initiative, or in a work environment, rather than being force-fed by professional instructors.

    The best thing I can say for universities is that they give young people a few precious years of freedom before they enter the work world — but at too high a price. We could offer that four years’ hiatus in other ways, in volunteer communities with a learning dimension, for example, and come out with excellent qualifications for jobs, and references as to our ability to work with others, and without debt.

  34. It IS sloppy analysis. The statement “…at higher risk…when choosing for-profit…” implies that the greater risk stems from the for-profit status of the school. The author has taken a simple correlation and assumed causation without any data to support that assumption. Anyone who deals with statistics should know better.

    The author ignores any other factors that might account for the higher drop-out/default rates. For example, the risk may lie with the students rather than the school. While black and Hispanic students represent ~28% of non-profit student populations, they represent 46% of for-profit student populations. Almost two thirds of students at for-profit institutions are “low-income.” (http://help.senate.gov/imo/media/doc/Asher.pdf) The for-profit schools may well be dealing with a population that has few options, either due to a lack of schools in the area or due to poor admission test scores or poor prior academic performance.

    Many of the for-profit schools rely heavily on on-line courses, which could also be a contributing factor.

    Finally, the remediation efforts are targeted at the profit status at the school and not at the actual problem, high drop-out/default levels. If the author is truly interested in the drop-out/default problem, then remediation efforts should be directed there, regardless of the profit status of the school. For example, tie federal aid to graduation rates: if a schools graduation rate is 40%, then no more than 40% of their students will be eligible for federal grants or loans.

  35. When did it become bad to pay teachers?

    Should we get rid of all these teachers with “inflated salaries” and jut use prison labor to teach our students? Didn’t Wall Street claim they couldn’t cap wages because it wold detract the best talent? Why can’t we pay teachers well and attract the best teachers?

    All this scapegoating of “greedy” teachers is ridiculous and needs to stop.

  36. What do shareholders bring to education that merits them making more than teachers? The simple fact that they have money means they deserve more money?

  37. Yup. Our children’s future is a commodity.

  38. Most likely the same predators that made a fortune pressuring people into bad mortgages.

  39. Andrew, there is no free market in education. It is heavily distorted by subsidies and regulation at all levels. Many political leaders vehemently oppose any vouchers that might allow the poor to enroll their children in the same private schools they have enrolled their own children in. At the post-secondary level, state subsidies for state schools and various government grants and loan programs insulate schools from any real market pressures.

  40. I agree with many of your points. I did college for one year before dropping out due to the realization that another three years and a lot of debt we preparing me no better for my chosen field than my obsessive nerdiness had already done on my own. By the time many of my friends were graduating I already had a burgeoning business that I still head today.

    Just as you highlighted in regard to bankers hiring philosophy students over business ones, the problem is too much of our society deems education as merely a means to an end (i.e. Get diploma = get job) as opposed to the reality of real education being a lifelong pursuit and means of becoming a better human being.

  41. you should read all the legal court rulings from Gibbons v. Ogden to today that federal government has every right to regulated interstate commerce. Saying it is not so…doesn’t make it true.

    The SCOTUS saying something is so doesn’t make it true. Its authority only ever extended as far as it was a servant of the constitution. It has long since abdicated any such legitimacy on behalf of the corporate coup against the constitution and the people’s sovereignty.

    http://attempter.wordpress.com/2011/02/23/relocalization-and-federalism-vs-the-commerce-clause-wickard-v-filburn-and-peak-oil/

  42. So many opinions here, and so little actual knowledge.

    Let me tell you the good, the bad, and the ugly about proprietary schools (not necessarily in that order)

    Proprietary (for profit) schools are often the educators of last resort. They admit students who were high school dropouts, got grades too poor in high school to get into community colleges, or want a purely technical career. Many of these students are among the most disadvantaged imaginable. They would never survive a traditional college setting, even community college. They have reading, writing, and math skills at a seventh grade level. (most of them)

    Proprietary schools have rigid rules for attendance. If you miss more than 3 classes, you’re disenrolled. If you miss even 1 class, a student services advisor will be hunting you down. Many have dress codes. They make their money from retention, so they have extensive student services advisors, tutors, and help from teachers.

    These schools have to refund money to the feds if students default on loans, so Career Services work hard to place them in jobs.

    No university or college I ever went to or worked for makes the efforts that proprietary schools do. If a student at Berkeley stops showing up, drops out, or defaults, Berkeley doesn’t care – unless they’re a minority.

    Now the bad: Proprietary schools have Admissions personnel who are Used Car Salesmen on steroids. They drag in any warm body who can qualify. They get paid on commission. They’ll bring in prostitutes, released felons, homeless people – anyone who might qualify. There is a strong firewall to ensure that students meet stringent admission requirements, but the Admissions people will breach that wall if they can get away with it.

    The students are severely academically challenged, so the teachers have their hands full. Some succumb to the pressure and compromise educational quality to drag students through the wringer. The official line is to maintain academic standards and do more to reach the students. The reality is grade inflation and lower standards. The teachers are super men and women, but they aren’t gods and goddesses.

    Tuition is expensive, but many proprietary campuses still struggle to turn a profit. Almost every student maxes out loans, grants, and personal contributions. For many, it’s doubtful their career – even if they get a job – will pay off their debts in 30 years. One would hope, though, that the proprietary degree and initial placement is a stepping stone and not a lifetime as a veterinary tech, med tech, or security guard.

    So yes, there is a fair amount of valid criticisms of the for-profit model. But they also confront challenges no traditional university can or will face. There are a lot of great teachers and students at these schools. The profit motive does provide good incentives. The shortcomings at proprietary schools are not absent at traditional schools; they are either hidden or ignored.

    Few leftist professors at any Ivy would bother to waste their precious time with any of these kids or career changers. The public school system already failed most of these kids. Many of them failed themselves.

    The failures from these schools might outnumber the successes, but when you consider the inputs, the success rates are truly remarkable.

  43. CBS from the West

    “If the government did not supply student loans far fewer folks would be able to fund their education…”

    I strongly doubt that. In fact, I would argue that the availability of student loans is a major cause, perhaps the leading cause, of the unaffordability of higher education.

    It is a commonplace that back before the 1970’s, the cost of a college education was something that most middle class families could save up for and pay. Also, financial aid in the form of grants was fairly widely available for those who came from more disadvantaged backgrounds. That is no longer true, and tuition charges and fees, etc., have accelerated faster than inflation. The real costs of a college education have skyrocketed. Today only the children of the very wealthy escape without large amounts of debt. Why is that?

    Well, what happens when you inject credit into a market. You get a bubble. I submit that is exactly what has happened to higher education. The quality of higher education is no better today than it was before–many would argue it is worse. So the higher price does not reflect an enhanced product. Faculty salaries are much lower than they were–so the costs of direct production are not going up. The availability of loans has made it possible for universities and colleges to jack up their charges and still get people to pay them. What do they spend this money on? They have a lot more administrators, and they include all kinds of frill programs that didn’t use to exist.

    OK, I’m just speculating here. But in another area, I have direct experience. At one time, I lived in New York and bought a cooperative apartment. That particular coop, at the time, did not permit financing–you had to buy all cash. Interestingly, the prices of apartments in that coop were about half the prices for similar apartments in that same neighborhood. Then, several years after I moved in, the coop began to allow financing, first for 50%, and then ultimately for 80%. With each of those changes, the prices abruptly increased. Once 80% financing was permitted, apartments there were selling for the same amounts as similar apartments in the neighborhood. The notion that loans make something more affordable is dead wrong, and dangerous. Credit makes everything less affordable.

    Probably the best thing we could do to make higher education affordable is outlaw student loans altogether and watch tuitions plummet down to affordable levels.

  44. Bruce E. Woych

    I saw, first hand, the transition to professional administrators in the university system (very similar to the business model in hospitals as well). Tenured professors were seen as a problem and adjunct professors were utilized to fill the gap. Part time adjuncts were and have been exploited at a starvation level (and most of these are heavily in debt from the system that allowed them the privilege of becoming adjuncts …) Departments were downsized or not financed at all. Survival that is interpreted as profit is OK but not when that profit margin is covering “other than” education as its central “product” and traditional educational priorities become marginalized. The truth of market education is that the university system holds leverage over license and credentials over professional careers and has become brokers to a state system that is captured by class interests. Power brokering becomes the primary purpose of college administration and the social construct of class prestige is more important than the discovery and dissemination of “Universal” knowledge.

  45. Bruce E. Woych

    I truly resent the truism of how administrators could “make more money in the private sector…”

    If they could…they would!

  46. Hey Mondo, I like your stuff too! Thanks dude.

  47. I suspect Andrew was being ironic. The notion that a purely free market solution exists for socially-relevant education is indeed grotesque.

  48. Anybody know how they do the higher education in China?

  49. “the reality of real education being a lifelong pursuit and means of becoming a better human being.”

    What a refreshing idea. Better not let it get out, though. Someone will call it a “brand” and sell the naming rights.

  50. “the reality of real education being a lifelong pursuit and means of becoming a better human being.”

    What a refreshing idea. Better not let it get out, though. Somebody will make it a “brand” and sell the naming rights.

  51. “So many opinions here, and so little actual knowledge.”

    Six Ounces: If the length of your post is any kind of valid indication, you may have some actual knowledge of proprietary schools. OR, you may have read a couple of magazine articles on the subject and just be good at B.S.

    How would the reader know if yours is “actual knowledge” or simply another opinion?

  52. Rookie Poster

    Default = drop out or failure to pay loan?

    Could the problem not be that for profit schools give a chance to many students who were spurned by the public school system?

    I attended school abroad where most universities were “for profit” and very few students dropped out or reneged on loans. The difference? Culture.

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  54. fore worded ????

  55. @CBS What a simplistic and innocent way to look at the world. Better yet, you bring in an example of rent control New York apartment to illustrate you world viewpoint — get real.

    Let’s take your world to ultimate extreme…
    Hey, if we get rid of lawyers we would live in perfect place without any crime. What we just forget the whole legal system and just hang all the criminals and let God sort them out.

    If that doesn’t work for you as an answer to your solution try this. Hey, if you get rid of Medical Insurance then medical expenses would become cheaper because no one would could afford to be treated. My answer would be the same in every single case — talent would flee to somewhere they could get pay what they feel they are worth. So no more life saving treatments no more medical anything.

    If you eliminate a competitive salary for professors and so on you will get what you pay for and that pretty much takes away any incentive to work in education. Take a good look at California Community College System and tell me how that is working out.

  56. @The SCOTUS saying something is so doesn’t make it true

    In what universe are talking about…it isn’t this one!

    Article III, section 1 of the Constitution prescribed that the “judicial power of the United States, shall be vested in one supreme Court,” and such inferior courts as Congress saw fit to establish. It made no provision, though, for the composition or procedures of any of the courts, leaving this to Congress to decide.

    Judicial Power mean what they say really matters!!!
    There is no coup, no abdication this is what they do.

    Key features of US Constitution is checks and balances.

    The folks (Congress) that make the law don’t enforce it.

    The folks (SCOTUS) that interpret the law don’t make it or execute it.

    The folks (Executive) that enforce the law don’t make it or interpret it.

    For someone who pounds on the constitution you seem to know very little about it.

    You link is utter trash talk by idiots that get into this Ayn Rand narrative about how constitution is being misused to support all sorts of conspiracies.

    Like food stamps is an evil plot…this is pennies on the C-Notes to what the Bankers did to extort money from the government.

    Wake up!

  57. Bruce E. Woych

    Lou :

    This is a fabulous tip and reference. For everyone else, here is some links to

    What is a great reference and model: this is definitely worth studying: ARE the ARCHITECTS of Wisdom and Engineering LISTENING?????

    (1)
    http://www.cpec.ca.gov/collegeguide/cccsysteminformation.asp

    (2)
    http://aolsearcht10.search.aol.com/aol/search?invocationType=webmail-hawaii1-standardaol&query=california%20community%20college%20system

  58. Well, Carla, since anyone on the internet can claim to be anything they want to be, perhaps you’ll have to take my comments with a grain of salt until you can verify them from independent sources. I welcome your skepticism.

    But as long as I can be whoever I wish to be: I’m a graduate of a proprietary school with an Associates in Applied Sciences Degree in Accounting. I served as a volunteer tutor for my fellow students and worked closely with the Student Services Center and Career Center. I amassed $25,000 in student loan debt.

    I joined the Army and got student loan repayment, tuition assistance, and the GI Bill. I finished an AA in Business on Active Duty. Then I was awarded a scholarship to attend ROTC at Cal (Berkeley) where I became an officer. After a tour in Iraq and Afghanistan, I got out of the Army. I’m now a last semester student in an MBA program at a private, for-profit school. Meanwhile, I teach Math and Business at the proprietary school where I started my post-seconday education.

    So, does that sound like actual knowledge or will you simply continue to dismiss first-hand information as B.S? I leave it up to you and the peanut gallery to decide whether you wish to reject reality and substitute your own.

  59. Both.

    A student who completes a certain proportion of a semester will be charged full tuition and hence accrue the entire debt of student loans.

    Dropping out increases the likelihood of default because you haven’t finished the degree program – unless you drop out to take a job. Those who complete the degree program may also default either because of the inability to find a job, low salaries, or the choice not to repay.

  60. Your regurgitation of kindergarten civics is cute, though pathetic.

    Sorry you’re such a statist that you can’t figure things out, but if you read the piece linked you see it was about the corporate coup against this country, with the rogue SCOTUS one of the most important parts of the machine.

    It’s only on account of the fact that this government you idolize is a kleptocracy which has abdicated sovereignty to the banks that the banks are able to steal the country.

    “Extort money from the government”? How do you extort money from your partner in crime?

    I think you’re the one who needs a wake up call.

  61. oops . . meant “guilds” not “cartels” — guess i needed more schoolin’

  62. CBS from the West

    @Lou: “Better yet, you bring in an example of rent control New York apartment to illustrate you world viewpoint — get real”

    Cooperative apartments are not part of New York’s rent control system. They are traded pretty much like private houses are elsewhere. What you actually buy is shares in the corporation that owns the building and a “proprietary lease” that grants you occupancy of the apartment for as long as you own the shares. There is no “rent control” on them, nor any other regulation of the prices or monthly charges you pay for the common spaces. When people buy them they may get financing in the form of a “coop loan” which is like a mortgage, except that the collateral is not real property but the share certificates. In pretty much all practical respects, buying and selling a cooperative apartment is just like buying or selling a house.

    Your other examples have no analogy with my point. My point is that when credit becomes widely available for transactions in a market, it draws in people who would otherwise abstain or defer market participation, because it gives them pretend money to spend. That pretend money ultimately costs them more than the amount of real money they would have paid–but they get instsant gratification in return. Fair enough–perhaps. But it also bids up the prices because people just aren’t as careful about spending pretend money as they are about spending real money. My experience with the coop apartment demonstrates that: I got a huge windfall owning that apartment because I bought in cheap before loans were permitted and then they changed the rules, allowed financing, and the prices exploded. The price explosion was clearly attributable to the allowing of financing because similar coop apartments in that neighborhood, which allowed financing all along, experienced no comparable price explosion.

    I’m pretty sure the impact of student loans on tuition costs works the same way: blow up the prices with a lot of credit. It’s really hard to explain why education prices have jumped so fast in any other way.

    As for your comment about health insurance, there is, in fact, a bit of truth to it. Health insurance undoubtedly contributes to the health care cost explosion. Without it, health care would be cheaper–there is no doubt, particularly optional health care. But there’s a huge difference: some health care is not really optional. An economist might say that demand for some kinds of health care is not price sensitive. And good quality care for a serious illness would be unaffordable to almost everybody. So you won’t hear me saying that health insurance should be abolished. In addition to funding a great deal of excess, it has also funded remarkable improvements in health care. [You will hear me call for radical changes to the way health care is financed and delivered–but that is a discussion for another day–but pooling the risks associated with illness (or at least some illnesses) is the only sane approach. [Whether private insurers or government or some mix is the best way to do this is also an interesting topic for another day.]

    Your remarks about lawyers and professors have no bearing on anything I said.

    As for profesors, in particular, their salaries are already being eviscerated, and it is, indeed, driving talented people away from academia into other endeavors that pay them decently. Which, I think we both agree, is a very bad thing for society. That has nothing in common with removing credit from the financing of education. The lenders do not produce education or add any value whatsoever to the product. The professors do. And the extra money pumped in by the lenders is not being used to support faculty salaries anyway. It is being used to support extra layers of administration, student-life amenities, and other frills that add little value to a college education.

  63. Bruce E. Woych

    PEOPLE do not go to college because of (debt creation) easy money from loose credit standards. Loose credit standards arrive because the lenders and the sellers want to make it easy to bring people into their gaming plan. What I have seen across the board is that easy credit pushes a false price structure upwards when there is a pooled source of disconnected money fueling incentives. The incentives are all on profiteering, getting maximum gains from the public pool, and sustaining the system of feeding into the pool.
    When chimpanzees were being studied it was easier to attract them to one place all at once by providing a central source of bananas at a base camp. the plan was innocent and it clearly facilitated the process of study. The chimps loved the easy access, the course of least resistance (of course!). What began as an easy street soon became a competition for dominance over the central feeding supply. In addition, because it was a prolonged study over time, it soon became apparent that an unanticipated “dependence” had developed over the supply and the less dominant chimps had trouble going back to loose nit foraging in the original seasonal pattern of territorial feeding strategies. The behavior changed to re-approaching the central supply which ended up increasing aggression over all. An attempt to withdraw the bananas slowly ended up in a classic complex of feeding frenzy aggression and defensive territoriality.
    Pooled money markets of credit is an abstract banana center and it has multiple dimensions.

    The Universtiy without Borders! Teach your children well!

  64. @Russ A least I know the constitution that you have stated every citizen should know. Plus you don’t know what a kleptocracy looks like — take a really good hard look at Bangladesh or Pakistan usually a really successful kleptocracy it way up there in the corruption index. When you open your mouth you make a total idiot of yourself — sadly you don’t realize it. There are laws on the books to enforce these bankers to follow good lending policies but there are no cops on the beat. When too big to fail becomes too big to jail. The problem is that US citizens don’t push their elected officials to a higher standard. If this government becomes a kleptocracy it is because voters allow this to happen not the other way around. As John Adams stated, “There are two types of education. One should teach us how to make a living, And the other how to live.”

  65. Since you refuse to understand even point one about the sovereign constitution (you might have to move beyond those kindergarten civics to some Rousseau and Bailyn), which is that the embodied institutions like the SCOTUS are legitimate only insofar as they carry out the spirit of this constitution, then I can’t help you. Anyone who, even when the point is directly under discussion, keeps saying: “My kindergarten teacher told me the constitution is what the supreme court says it is, so I must obey”, is part of the problem, objectively pro-bank, and beneath contempt.

    I’ll give you a hint: Even the written Constitution is only a formalized version of the constitution, and must also change as circumstances prove it inadequate. By now we are certainly at the point of understanding the inadequacy and fraudulence of representative government itself. But then, if only in retrospect, we know from Federalist 10 and 51 that the system was intentionally set up to be turned into a kleptocracy anytime the elites chose.

    As for your repeated admission that the banks have bought and subverted the system, and yet the system’s not a kleptocracy and there’s nothing wrong with it except that we need “better elites”, I’ll let that contradiction stand as typical of your level of “analysis”.

    I want to get rid of the banksters completely. You want to keep them and (continue to) submit and crawl. Your attempt at an argument proves that.

  66. Worth noting that none of the post-high school “education paradigms” took up the role that unions used to have in “continuing education”….knowing how to do the job depends on learning it from people who actually did the job, and were always aware of how to improve conditions for the worker so that that reflected in increased productivity….

    And none of the education paradigms shape-shifting to support the Useless Class always watching thy neighbor’s crotch to make sure no one rises above slave status

    provide the basic teaching of reading, writing and ‘rithmetic…

    A recent look at the new generation of “home makers” – the 20-30 somethings getting married and having children

    showed that they don’t know how to do anything – at least the vast majority don’t know – they can’t fix a toilet or peel an apple.

    They do know how to charge a fee for minding YOUR “business” and then interpreting “data” before they even learn what is “real”.

    Without a love for learning – which used to manifest in people having interesting “hobbies” like gardening and astronomy and some kind of craftsmanship (ie making useful stuff)

    “schools” are a racket for the “elite” to suck back up their fiat $$$ at the same time they ruin minds…

    Nothing has change since the private Catholic High School expelled 20 guys because of their attitude towards “authority” in the 1970s….anyone interested in hearing about who had the secret-behind-the-scenes “power” to do that in a Catholic High School and what their “secret” business was – the very “authority” the 20 guys had an “attitude” about?

    Didn’t think so – after all, how could the “news” get out that for 50 years of the 100 years of building an oil-based economy there was a dumbing down of scientific progress – the Drug War”…?

  67. Well done bigD. For-profits provide access to a university education for those that wouldn’t otherwise be able to attend a non-profit university. And, regrettably, those not able to attend a non-profit university may/ may not have the skills to deal with the rigors of a University education–is that the fault of for-profts? Wouldn’t the author rather take a risk of financial default to allow people of color/ low SES/ or low academic performance to improve their lives? There is, in a sense, another way to look at this issue: non-profits do not take risks on people, for-profits do. Is there something wrong with that? Or would you rather the federal government mandate that only those that meet the standards of a non-profit university are allowed to take a risk at financing their desires to improve their station?

    On ROI between nons and fors…I posess a MS from Capella University and a MS from Northwestern University. Northwestern, after I graduated June 2010, removed my access to the digital research library. I can get access for $30-$50 or so per year (not sure of the exact cost).

    Capella, a for-profit U, gave me free access to the same digital resource (Ebscohost and others) because they listened to their alumni. I also have access to their website web-based tools. When analyzing ROI for an education, there were quite a few opportunities missed by the authors. Another example of ROI comes to mind: I taught at ITT Tech in Washington State and their 2-year CAD program had 100% job placement at the time I was there (’05-’07). I also still have professional ties with at least one graduate professor from each university.

    So bigD, right on, this article makes the classic mistake of correlation proving causation…thanks for posting your comment.

  68. What you seem to miss is that these for profit schools are able to charge such exorbitant fees because of federal loan assistance. They really are extracting a rent from a positive government program.

    I agree that we need to offer a larger chunk of our population access to higher education, but the way to achieve that is through the community college system and regional campuses of State universities. The demographics that are served by CC’s and for profit schools are very similar, and everyone I know that has gone to a for profit would go to CC if there was space.

    In closing, this is an incredibly distorted market that these institutions are taking advantage of. If the gov. was not supporting the education of students these institutions would not exist.

  69. Final Score: Russ 48 – Lou 3.

  70. Of course, it can’t be the fault of a for-profit institution! They are blameless…by definition…by ideology! Must be somebody else’s fault…the analysis is “sloppy”..all hail for-profit!

  71. I teach at a two-year profit-oriented school. Ben and Six Ounces are on top of things. The classes are so small and the student body so varied that I have been able to/forced to experiment with all sorts of approaches.

    Ben would probably agree that a diploma is more about ‘signaling’ than education; and a two-year degree is a weaker signal than some; but it is a signal of perseverance and some willingness to please.

    Most of school course-work is valueless; what is really important is learning how to think, acquiring means of acquiring more valuable education/knowledge, and meta-thinking – critiquing one’s own thinking.

    The great irony in all this is that the trained self-educators are the ones that go to preeminent schools, while the poorly trained self-educators end up in two-year schools.

    I have become convinced that 9 out 10 dollars in the fees paid for education – especially at two-year schools goes to fend off the accreditation bodies and government compliance hounds.

    All the knowledge in the world is out on-line now. Why are we spending vast sums on those who can already acquire an education, while we knock training for those who are poorly trained in self-education?

    (I’d hire an analytic philosophy major over some business school hack any day of the week! I’d hire a Continental school philosophy major and put him/her in sales just for fun! )

    BTW, the schools are not allowed to pay financial aid/sales reps on commission anymore. That has been the rule for about a year.

  72. Let’s take your world to ultimate extreme…
    “Hey, if we get rid of lawyers we would live in perfect place without any crime. What we just forget the whole legal system and just hang all the criminals and let God sort them out.

    If that doesn’t work for you as an answer to your solution try this. Hey, if you get rid of Medical Insurance then medical expenses would become cheaper because no one would could afford to be treated.”
    __________

    What a bizarre answer.

    The lawyer allegory we can dismiss out of hand… it lacks the elements of an allegory. Lawyers are to crime as federally backed student loans are to rising tuition costs? Huh?

    And so far as the argument regarding medical expenses…

    What Lou dismisses out of hand actually happens in a whole lot of the world. Indeed, when people aren’t backed by public or private insurance, and must pay for their own health care, they exercise a significant pressure on fees and health care is surprisingly more affordable… not because people cease to buy it, but because doctors must compete for price sensitive customers.

    Are some customers locked out in such a system? Yes.

    But that leads to an argument about social justice and careful implementation… it doesn’t disprove the relationship between credit – or in the latter case of medical insurance – and inflation.

  73. Gaelen–

    My Masters at Northwestern would’ve cost me upwards of $48K (I had Volunteer Teaching Corps subsidies) and my master’s degree at Capella cost me $22K. What exorbitant fees are you talking about? I think that is a misconception. I mean, look at the costs associated with non-profit private universities–what’s it now to attend one year of harvard graduate school?

    Also, CC’s do not, last time I checked, offer Bachelor’s degrees. And also, I think that your friends that would go to a CC if there were space sort of counters your argument that CC’s are the answer. Given the current budget crisis, do you see CC’s, which are somewhat government funded, sprawling out all over the country? No, because education is being cut like crazy by politicians but for-profit U’s are having banner years, offering opportunities that wouldn’t exist otherwise.

  74. I really don’t know who else but the government would make a loan to it’s 17/18 yr old. In the same capacity who in their right mind would lend 30yr fix rate/non-recourse loans to buy homes. What would the US be like if neither program exists? Would it be better or worse? Maybe, cost of education or homes would be cheaper but a whole less people would have either an education or a home. Maybe, not everyone deserves an education loan because it doesn’t make economic sense based on their ability to pay it back — as in the same sense as home mortgage — but — it can’t be totally annihilated without bring down whole system down. People have jobs in Education (if you live in a college town the whole economy depends on that institution) just like Medicine, Real Estate and Banking. It is time to look on how to make things better not tear them down.

  75. Ah. That explains it. Your job.

  76. What do you do besides trolling the web and say really stupid things that you know absolutely nothing about?

    The whole debate about profit/non-profit is about making the most from a limited resources. Are you going to be the person that says hey we no longer have the money to support the students that go to your community college that is pretty much all there is in your neck of the woods. Gives people in the community to better their lives through education. It is not about my job — it is about people futures.

    You are totally biased against anything constructive your government does to better people’s lives what does that make you?

  77. ‘Chou talkin’ to me?

    I suppose that if I were to agree with your final proposition, that would make me a libertarian.

    But I’m not one of those either. Let’s just say that I prefer solutions that address the root problem over vague, kick-the-can down the road formulations like, “It is time to look on how to make things better not tear them down.”

    Strangely, that all seems to translate to “let’s throw more public money at the problem.”

    Some things deserve to be torn down. The credit bubble which has made the cost of education grow like kudzu while the wages that pay for it stagnate is an excellent example.

    If YOU actually cared about “supporting the students” – as you imply – you’d see the need for such creative destruction. But you don’t care about them: you care about your sinecure. Which is only human, I suppose.

    It doesn’t matter much: that which can’t be sustained won’t.

    BTW – I have a B.S., an M.A., and an M.B.A… for none of which I or my parents actually paid. It’s an implausible but true story. And frankly, if I had to do it over again – and especially if it were coming out of my own pocket – I’m not sure I would.

    I’m not sure it’s worth it. And while the process is slow… I think people are beginning to catch on. The ROI just isn’t there.

  78. First, throwing money at a problem is and always has been and usually is a bad social policy.

    However, government never mind business is really bad at predicting the future. What predictions they do give is colored by their special interests hence subjective.

    As the mouse said, all I want is to find my way out of this maze so I can have that cheese.

    Unfortunately, you can get BS, MBA and PHD with the wrong specific academic emphasis and end up being jobless. My point is that making bad education decisions is not limited to for-profit schools. So this problem is not limited to for-profit; however, this story seems to happen more often — probably because those students are not given good career consulting advice to begin with and on a continuous basis since as a business they need to push up enrollments– so those students fail to obtain their objective.

    The question is who’s fault is that. I am fine with your Horatio Alger story of self-reliance. But, however — not everybody is you — as individual different people have their own set of talents, deficiencies and needs. Question is how to make that person’s innate abilities and skills into a livelihood and add to society at large. How much should society invest to give that individual and give them the opportunity to pursue their dreams? A quantum event happened when the US government after WWII gave returning vets the GI Bill. In sense, it was like throwing money at a problem; however, you have economic boom in the 50’s and 60’s and the educated brainpower to land a man on the moon. I guess they got lucky.

    Good — Bad — indifferent — government has a role in economic development — it should not be absolute nor should it be absent. It should do as any good business should do — I have all this human capital and how can I educate and leverage that capital to promote prosperity. In the past, 20 years a good chunk of the manufacturing sector has gone overseas and now this is happening in white collar jobs. These events occur very quickly without too much fanfare and there is only so much former employers are required to do. Hence, there is a whole process of re-education to a paying profession and most of the time these for-profit institutions are there to fulfill that need. There are only so many seats in a nursing or pharmacy program and not everybody is suited for that career. So…what is the answer eliminated student loans with a possibility a prolong jobless sub-class or given them opportunity to get educated and find a job. This is not a simple problem with simple answers and in the end — all — everybody — wants is that dang cheese!

  79. “My point is that making bad education decisions is not limited to for-profit schools. So this problem is not limited to for-profit; however, this story seems to happen more often.”

    I never suggested that this problem is limited to for-profit schools. But it’s pretty clear to me which kind of “university” has less regard for the student’s future and more incentive to sell its product.

    “The question is who’s fault is that. I am fine with your Horatio Alger story of self-reliance. But, however — not everybody is you — as individual different people have their own set of talents, deficiencies and needs.”

    Absolutely. Not everybody is as fortunate as I was, and if I had accumulated debt for those degrees, my 1) standard of living would be significantly lower and 2) I would be completely unable to save for most of my working life… most of my labor would be dedicated to feeding the machine, which is just how the machine likes it.

    Unless of course I said – screw it! – as so many do, and moved to, say, Dubai, where I could earn a decent living where the collection agencies wouldn’t find me.

    In which case my fellow citizens would picking up the tab for my government-backed student loan… as they are for bank bailouts, agricultural subsidies, fraudulent medicare claims, blah blah blah.

    How’s the system working for us so far?

    “A quantum event happened when the US government after WWII gave returning vets the GI Bill. In sense, it was like throwing money at a problem; however, you have economic boom in the 50′s and 60′s and the educated brainpower to land a man on the moon. I guess they got lucky.”

    No, they didn’t get “lucky.” They paid a reasonable rate for that education, which in turn was applied in a growing economy.

    Now we’re paying an extraordinarily inflated rate for education in an economy which isn’t growing its manufacturing capacity – engineering, R&D – you know, things that create wealth.

    (Sound like the housing bubble coming apart? Only the most obtuse could miss the parallels).

    Nope. People are putting themselves in hock to get advanced degrees in finance, law, business… that’s where the jobs are, what’s left. Few are making rational choices: when you have NO job, and somebody suggests that you can get one by going back to school… you don’t think about the debt. Desperate people grab at straws.

    Consider the heightened pressure of a clicking tock in a society with a shrinking employment base and employers searching for ways to disqualify applicants. If you can’t get a job now, going to school buys you a year or two, and frees you of the taint of unemployment… you can almost feel the stain on your resume spreading…

    Along comes the for profit school, swearing it can solve your problem… and it can take care of the financing, too.

    Seriously, we are a dumb, shortsighted, increasingly and willfully economically illiterate society. We keep creating bubble machines and passing the damage on to the ultimate insurer, the public treasury.

    We really deserve what’s coming.

  80. We are almost there except for whether education is overpriced? This seems like a Thomas Kuhn question — did the paradigm shift? What old timers said about,”I had a good job with a high school education” or “I could get a whole week of groceries for $10″ or “I could buy gasoline for $0.30 and fill up my tank for $4.00″ or “Buy a candy bar for 5 cents”. Or what you are saying about the cost of an education. Well, sorry to tell you inflation happened and changed the price for products and services. You feel that education is overpriced; unfortunately, education is not just about paying teachers and administration. There are other overhead costs that also have been increasing like Facilities (own or rent), Maintenance, Utilities, Property Insurance, Employee Benefits, School equipment (e.g. computers, other electronic equipment, etc) and so on. These frills have a multiplying factor effect because everyone wants to go to a state of the art facility and have the best instructors etc. Plus, there a bit of keeping up with Jones among these institutions. In true capitalistic spirit lets add on a little more up to what the market can bear.

    IMHO In medicine, the cost is reflective that people live from illnesses that in past would have been a death sentence. Of course, if you are sick you would like to have the very best care. This is a miracle but also a burden — more people who are chronically sick — live on — insurance companies pay for it and pass the costs to all the policy holders. Costs have gone thorough the roof! Plus, the byzantine payment system insurance companies make medical providers jump thorough.

    Yeah, just like education there are these executives at the top that make a good amount of money doing whatever they do. Corporation model is not cheap but I hear that we get a whole lot innovation. But, the State Control model is cheaper if you don’t mind government running these services. Life is full of trade-offs — and stuff government runs doesn’t work out perfectly. Businesses are not always run top notch either — for example, you have winners and losers (e.g. Apple vs some computer company that went bankrupt).

    It doesn’t make sense to me to apply a business true philosophy to student loans (at least they are recourse loans — you can’t bankrupt you way out of the them) — of course, you will have deadbeats that run off to Dubai or some other place and never come back. Then again, people run away from other debits too. Any investment is a gamble and education is an investment — so you are gambling on that person’s education will pay off.

    I guess we can agree to disagree to this whole crazy system. But I do respect your opinion but I have a definitely different viewpoint. It is been fun…nevertheless…cheers.

  81. “Well, sorry to tell you inflation happened and changed the price for products and services.”

    No offense… but I remain unconvinced that your viewpoint is even sincere.

    Seriously, are you really going to dismiss the rising cost of education as simple inflation? That data point merely represents the longing of some old codger for 1950’s prices? You’re not going to index that inflation to something meaninful… like wages?

    Do you hope to be taken seriously with such arguments in a forum that attracts analytical, informed and intelligent readers?

    Here’s a clue: the value of any investment is the net present value (NPV) of future income.

    (Impressive, eh? I spent two years of my life studying that simple proposition… the rest was largely nonsense. 7th grade mathematics! I’m REALLY glad I didn’t pay money for it…)

    So – calculate the cost of the degree. Exclude living expenses – you’d pay those anyways – just sum tuition, books, and other fees with the opportunity cost of lost income. Compare that sum (A) with net present value of your future earnings (B) … your guess on the interest rate is as good as mine.

    If A is greater than B in a whole lot of cases, then people are paying to much for education. And when they figure it out, self interested folks pleading for the government to prop the whole system up are going to find themselves sucking wind.

    I look forward to the day.

  82. This conversation is long over, but should anybody be passing by, I thought the following two articles highly revlevent.

    http://www.businessweek.com/magazine/content/10_19/b4177064219731.htm

    http://chronicle.com/article/Little-Known-Colleges-Exploit/126822/

    Read either, and you will find yourself completely disgusted with the behavior of for-profit “universities,” institutions which hardly deserve the name.

    Nope… just one more college industry dedicated to leveraging political influence to suck our beleaguered treasury dry. We’ve become a nation of “get it while you can,” because not even the parasite can possibly believe this will go on forever.

    Am I suggesting more government regulation? Can we somehow close these schools?

    No. But the government ought not loan money or guarantee loans to any students attending them… if they are “free market institutions,” let them survive in the free market.

    That can be done. But don’t hold your breath.

  83. Bruce E. Woych

    thank you WLL!
    special highlights on the profit margin squeeze from your articles:

    The Bush Administration also sought to unleash online education’s potential. Phoenix now boasts 458,600 students, with more than 200,000 in its two-year online program. Enrollment in for-profit colleges went from 673,000 in 2000 to 1.8 million in 2008. Revenue rose from $9 billion in 2000 to an estimated $29.2 billion this year, says Jeffrey Silber, an analyst for BMO Capital Markets in New York. Operating margins averaged 21% in 2009; schools typically charge $10,000 to $20,000 a year, well above comparable programs at community colleges.

    The industry is now fully mainstream. Goldman Sachs (GS) owns 38% of the for-profit Education Management Corp. in Pittsburgh, which has 136,000 students in programs ranging from fashion to culinary arts, and former President Bill Clinton took a position as honorary chancellor of Laureate International Universities, owned by Baltimore-based Laureate Education. Investors are flocking to the industry, drawn by the stability of government funding and the profit potential of online classes. But some of the unsavory practices that spurred Congress to act are springing back to life, with a new wrinkle or two.

    As usual the argument is that the private sector profit motive will make things more efficient and bring costs down. In all sectors that I have witnessed in my life the opposite is true. The cost and pricing is totally geared towards the progressive dependency on lifestyles, ranking and status. It is a treadmill progression that is heavily rationalized in the blind pursuit of profit and eventually the “cost” gets in the way. Once the band wagon is underway, the sidelines become mirror images of the profit measured institution and, just like walmart knocking out small competitors, the idealists become marginalized and left to atrophy into anonymous history. We are left with another system that is monolithic in design, self serving and lost in its own pride and awe. Look at Boston University as the start of this CEO-itis, and the professional administrators are the neo-con bureaucrats of dependency economics…socially powerful and ranking in political circles; …but knocking down academics and professors to marketed nobility at best.

    There is still greatness in the system…but it is not because of profits…but in spite of it!

  84. Bruce E. Woych

    addndum & correction:
    Please excuse me: The first two paragraphs should be under quotation marks…and the proper citation is your link:

    http://www.businessweek.com/magazine/content/10_19/b4177064219731.htm

  85. Bruce E. Woych

    If you look at college loan systems (called financial aid…) it is essentially Government backed loans just like government backed mortgages for Homes. In the process it also inflates the price structures and eventually converts those loans to a private market that benefits directly from the debt process as well as the higher progressive escalation of college pricing. The system pumps careers like a brokerage firm and the process becomes self perpetuating debt dependency and barriers to professionalized career entry all in one.