Educating for Profit

Image via Wikipedia

In the face of the economic mess, American states and the federal government have been cutting education spending. In some cases, this is no doubt a matter of legitimate necessity. In other cases the economic woes have been used as a cover to “justify” certain policy changes. Regardless of the cause, American public schools are experiencing serious budget woes. Interestingly, college enrollment is up and this makes things even worse since schools must do ever more with ever less money for the actual process of education. As might be suspected, the administrative side of most schools is generally doing great in terms of numbers employed and salaries.

In contrast to the woeful state of public funded schools, the new for-profit schools have been doing quite well. For example, 20 for-profit schools saw their income from military benefits alone (acquired by taking military personnel as students) increase 683% over four years (from $66 million to $521 million). These for-profit schools also get a significant percentage of their income from public money, namely federal student aid.

Given that for-profit schools are making profits off public funding, one might wonder why public schools are suffering budget cuts and are thus less able to serve the public good by providing high quality education to students. After all, it does not seem to make any sense to funnel public money away from public institutions so that for-profit schools can make a profit at the expense of taxpayers.

Of course, one can try to counter this sort of concern by the stock mantra of the private sector proponents: the private sector is better than the public sector. That is, the for-profit schools are doing a better job and hence it makes more sense to turn public dollars into private profits rather than turning public dollars into public education.

If the for-profit schools were doing a better job, this would make at least some sense. After all, if the goal is to get the most education bang for the public buck and private schools delivered a bigger bang, then perhaps they should get the bucks. However, this is not the case. The average graduation rate for the for-profits is around 28% and this is about half that of the nation average. The big state schools often have excellent graduation rates. Also of concern are the facts that those who graduate from the for-profit schools seem to have a much harder time securing employment and graduate with far more debt than students at traditional schools (half of all student loan defaults are from students who attended for-profit schools). As such, the for-profit schools cannot claim that they are providing a better return on public dollars than public schools. In fact, they are doing far worse.

The United States congress recently focused its attention on the severe problems with the for-profit schools. However, intense lobbying on the part of the for-profits succeeded in watering down legislation intended to make such schools more accountable for their effectiveness in order to continue to siphon public money into their coffers. This has apparently been a bi-partisan effort with Republicans and Democrats answering the call of the lobbyists.

One particular egregious practice of the for-profits has been targeting  military veterans. Holly Petraeus, wife of General David Petraeus, has written that veterans are “under siege” by the for-profit colleges. These colleges have even been accused of targeting veterans who have brain injuries, which is particularly reprehensible.

Veterans are a very desirable commodity for the for-profits. As noted above, there is a lot of money available from military benefits and these can spell major profits for schools. More importantly, there is a “90/10” rule for these schools: at least 10% of the revenue for a for-profit must not come from federal financial aid funds. Coincidentally, military benefits do not count as federal financial aid funds, so this money can count as the 10%. This entails that for every military student enrolled by a for-profit, they can have 9 other students who are paying 100% using federal funds. In short, with the right number of military students, a for-profit can get 100% of its revenue from federal funds.

This, as might be imagined, bodes ill for higher education in America. First, federal funds will continue to be diverted from public education to the for-profits. This means that the public schools will continue to suffer. To give a concrete example, enrollment at my university has increased significantly while our budget has dropped significantly. Faculty salaries have stagnated, class sizes have increased dramatically, financial aid has been significantly reduced, and so on. In short, public schools such as my own will see underpaid faculty teaching oversize classes packed with students who often must struggle to pay for their education. Meanwhile, the politically connected for-profits will be making profits on public dollars. Second, while a for-profit education need not be inferior to a traditional public or private college education, it (as a matter of actual fact) has been markedly inferior in terms of graduation rates, job placement and the debt students graduate with. As such, it seems reasonable to conclude that federal funding is being misdirected in ways that are not conducive to providing students with the best education, the best chance of graduating, the best chance of getting a job, and the lowest debt upon graduation.

Unfortunately, the for-profit schools for profit model means that they have plenty of money for lobbying and hence they seem to have been able to get their way in Washington. As such, it seems likely that education will continue to decline in the United States. But, at least some folks (including lobbyists and politicians) will be making some sweet profits. That is what really matters, right?