A Philosopher's Blog

Gainful Employment & Education

Posted in Universities & Colleges by Michael LaBossiere on April 25, 2014
For-Profit Education

For-Profit Education (Photo credit: Truthout.org)

Since education is rather expensive, it seems reasonable for a student to expect a return on her investment. Given that the taxpayers often contribute to the education of students, it also makes sense that they also receive a return on their investment.

As it now stands, the return on the student’s investment is supposed to be a job that is proportional to the cost of education. Roughly put, a student should be able to reasonably work out of her school debt with the job that education is supposed to get her. In terms of the return on the taxpayer’s investment, the return is similar: the students funded by the taxpayers are supposed to get jobs and repay the investment through the taxes they pay. The student becomes the taxpayer, thus enabling the next generation of students to also become taxpayers.

Because the cost of education is so high these days, it is natural for some folks to place their hopes in the free market. The ideal is that for-profit schools will provide a high quality product (education that leads to a job) at a lower cost than the (supposedly) bloated state and traditional private schools. As might be suspected, the ideal is rather different from the real.

While state schools obviously receive state funds, the for-profit schools receive massive federal support—about $26 billion per year in grants and loans. Unfortunately, this money seems to be ill-spent: 20% of the for-profit school students default on student loans within three years of entering the repayment period. About half of all student loan defaulters went to such for-profit schools, although these schools make up 13% of the student population. The estimate is that about half of the loans funneled through students to the for-profit schools will be lost to default, which is hardly a good investment.

One of the main reasons a student defaults on loans (though not the only one) is financial hardship. As might be imagined, not earning an adequate paycheck is a clear way to end up in such hardship. While there are over 2,000 programs where the students had load debt but who paychecks were not adequate to keep them above the poverty line, 90% of these programs are at for-profit schools. As such, these schools seem to be a bad investment for both taxpayers and students. While public and traditional private schools do account for the other 10% that need to be addressed, they are quite clearly a better investment for taxpayers and students. This is not to say that such schools do not need improvement—but it is to say that the current for-profit model in not the solution.

There have been some attempts, such as those in 2011, to impose regulations aimed at addressing the predatory exploitation of students (and taxpayers) by institutions. Not surprisingly, these were countered by the well paid lobbyists working at the behest of the for-profits.

Interestingly, some states are pushing hard for performance based funding for public institutions. For example, my adopted state of Florida has seen the Republican dominated state legislature engage in what some might regard as micro-managing of education. In any case, we are been transitioned to a performance based model in which funding is linked to achieving goals set by the state. Naturally, for-profit schools are not impacted by this since they are private institutions. As such, the current trajectory seems to be for state schools to be state regulated in accordance with performance measures while the for-profit schools enjoy unfettered access to the federal largesse.

Some might suspect that the performance based funding approach being taken towards public universities and colleges is cover for reducing funding even more. This seems reasonable since one of the main effects has been to cut funding for some state schools (such as my own). It is also the case that the approach is designed to shift funding to schools that have more political influence—which is supported by looking at where the money goes.

It might also be suspected that the performance based funding is also designed to harm public schools and push students towards the for-profit schools. These schools typically enjoy excellent political connections and certainly would benefit from reduced public education opportunities. Of course, the profits of such schools come largely at the expense of students and taxpayers—they are thus well-subsidized by the state in a new twist on the old corporate welfare system.  Shockingly enough, there is little conservative rage at this wasteful socialism and these welfare queens.

 

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7 Responses

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  1. WTP said, on April 25, 2014 at 9:48 am

    While state schools obviously receive state funds, the for-profit schools receive massive federal support—about $26 billion per year in grants and loans.

    As far as I got before running into the first (intentional?) misleading statement. One of sophistry’s laziest tools is mixing apples and oranges. And as usual, Mike only looks far enough to confirm his own bias, which fortunately for him is right under his nose, other sources of information be damned. As I pointed out here before, many state schools offer a worse ROI than so-called “for profits”. As reflected in student load default rates, I previously pointed out:

    https://aphilosopher.wordpress.com/2013/10/21/for-profit-college-again/#comment-31118

    http://www.nslds.ed.gov/nslds_SA/defaultmanagement/search_cohort_3yr.cfm

    Some sample data, e.g. default rates for various institutions:

    Harvard 1
    Yale 1.4
    University of Miami 2.7
    University of Florida 3
    Florida State 5.2
    Ohio State 5.6
    University of Maine 7
    Webster University 8.2
    Full Sail University 11.8
    Webber College 18
    FAMU 18.3
    University of Phoenix 26.4

    As for his point here specifically, as stated you would be led to believe that state schools only receive state funds and for-profits get all the federal funds. State schools and other private institutions (which of course are not “for profit”, Harvard’s endowment be damned) receive billions in federal funding as well. I’m sure Mike has heard of Pell Grants, not to mention billions and billions more.

  2. apollonian said, on April 25, 2014 at 1:18 pm

    Public Edjumacation: On Way Out

    Mike this essay wasn’t so good expo–not sure what ur thesis was or conclusion. Look comrade, u gotta remove all this public edjumacation crap and gov. involvement and -funding–if u don’t it’s just going to get worse and worse, esp. for the propaganda corruption of the “education”–what else would u expect?

    And u’re right about public funds, there being so much of it, getting everywhere–why should the private institutes not go for it? And this funding finding its way to private institutions was part of the plan all along, anyway, truth be told.

    Freedom means free market, period–that’s only way u get education that’s worth anything. That’s surely ur biggest hang-up–imagining “public” edjumacation doesn’t turn into just propaganda, watered-down crap, and crass thought-control.

    But regardless, the whole (economic) system is getting ready to collapse, so little adjustments and tinkering aren’t going to mean much of anything. US Dollar as reserve currency is coming to an end, Mike, and soon–and this means a tremendous sea-change for entire culture, not just “education.”

    There’s not going to continue to be this “money” just printed-up by the Fed available then to fund “public edjumacation.” People will have to go back to serious working, w. bare-bones gov.–if we can manage to survive the wars ZOG is ginning-up for us presently.

  3. T. J. Babson said, on April 25, 2014 at 2:15 pm

    According to Lanny Davis, Mike has his facts wrong. Mike, care to rebut?

    To put it bluntly and to paraphrase a well-known pundit, those who criticize for-profit schools are “entitled to their own opinions, but not their own facts.”

    In this spirit, I challenge three important “assertions of fact” by proponents of these regulations, including leaders at the DOE as well as some Democrats in the U.S. Senate, that are false or misleading, or both.

    First:

    Repayment Rates — Asserted fact: that the regulations are needed because the “profit” in the for-profit colleges yields lower repayment rates than at non-profit and public colleges.

    Actual fact: Repayment rates are a result of the demographic and socio-economic status of the students who take out the loans, not the tax status of the colleges they attend. See, e.g., independent study by Mark Kantrowitz, an independent financial aid professional (found here) and Professor Jonathan Guryan, Ph.D, a professor in economics at Northwestern University, whose comments to this effect regarding the proposed gainful employment regulations were submitted to the DOE (found here).

    Mr. Kantrowitz’s data leads to especially troubling conclusions for those who are concerned about low-income and minority students: that the more minority students are in a college, the more they are likely to fail one or both of the two tests in the GE regulations — debt-to earnings and repayment rates.

    No wonder so many members of the Democratic Congressional Black Caucus have written letters of concern to DOE Secretary Arne Duncan, as well as many other leaders of minority communities who have expressed the same concerns, such as Rev. Jesse Jackson, and Rev. Al Sharpton, regarding these regulations as currently drafted and support serious changes before final issuance.

    Isn’t it troubling (at least to fellow liberal Democrats, such as myself) that a progressive Democratic administration seems indifferent or determined to go full steam ahead and ignore a disparate racial and economic effect of these regulations on a core Democratic Party base — minorities and lower income people who comprise most of the for-profit colleges students adversely affected by these proposed regulations? And just before an election day when the president and Democratic Party leaders are seeking a large turnout from that base?

    Second:

    Cost to Taxpayers — Asserted facts: Critics assert that regulations are needed because for-profits cost federal tax payers too much money each year. DOE uses the number26.5 billion as the latest total annual “federal aid.” Senator Harkin repeatedly uses the number24 billion. Both are false and misleading.

    Actual fact: The data proves that public colleges and private not-for-profit colleges cost taxpayers substantially more money per student at four-year colleges than for-profit colleges. (See recent analysis by noted economists Dr. Robert Shapiro and Dr. Nam Pham, available here.) A recent analysis by Charles River Associates concluded that career colleges cost the taxpayers25,000 less per graduate than community colleges or other public two-year institutions.

    With $20 billion in annual student loans to students attending for-profit colleges, the DOE’s own data calculates that the projected cost of student loan defaults at these for-profit colleges — net of recoveries after defaults – is about one percent to be written off as entirely non-collectible, or less than $200 million – not the $26.5 billion or $24 billion misleadingly cited by the DOE and Senator Harkin, respectively.

    http://www.huffingtonpost.com/lanny-davis/lets-stick-to-the-facts-o_b_773305.html?view=print&comm_ref=false

    • Michael LaBossiere said, on April 25, 2014 at 3:08 pm

      Well, I could just respond that he has his facts wrong.

      But, I actually would prefer that I had it totally wrong and that people were not being led to mountains of debt and that the taxpayers were not being ripped off. It would be great if there were lean and effective schools providing high quality education for low cost.

      So, I hope he is right and that I am wrong.

  4. ajmacdonaldjr said, on April 25, 2014 at 3:15 pm

    • WTP said, on April 26, 2014 at 7:19 pm

      An excellent link. There’s a good amount of truth in this, though some BS as well. Would make an interesting thread of discussion. As a video, it’s a bit hard to dissect, though if I have time I’d like to get back to it tomorrow.


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