Tag: for-profit colleges

Score One for For-Profit Colleges This Veterans Day

There is nothing easier or seemingly more popular in higher education than bashing openly for-profit colleges. (I use “openly,” by the way, for a reason.) If you burrow into the demographic and funding weeds, however, you’ll see that proprietary schools are likely no worse, as a whole, than any other sector of uber-subsidized higher ed. And now Gallup has produced a little more good news for these beleaguered schools, to the extent that any news from our bloated Ivory Tower is good: For-profits seem to do a better job of serving veterans – at least from the vets’ perspective – than public colleges and, depending on how you slice the data, nonprofit private colleges as well.

As the table below shows, when veterans rank how well they feel their schools understood their needs, the percentage giving a 4 or 5 – the top scores – to for-profit schools beats any other sector, and at just the 5 level only nonprofit private institutions surpass them. Comparing for-profit and public schools, for-profits get more 4s and 5s by a 15 percentage point margin.

It’s probably not a mystery why this is. For-profits are more nimble than public colleges, and their desire for profits may actually – get ready – make them more responsive to the needs of the students who buy their services. Yes, there are bad for-profit actors – though the extent to which that is the case is unclear – but maybe on the whole they work better for students than lumbering, impersonal public institutions that get big taxpayer subsidies upfront. At the very least, that’s what this evidence suggests. Not that evidence has mattered much in this debate so far.

You’re Destroying the Whole Tower, Stop Blaming It on the Basement

Yesterday Sen. Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions Committee, released his magnum opus on for-profit colleges, the culmination of two years of excoriating, browbeating, shaming, and generally demagoguing that fast-growing but relatively small sector of American higher education. His report is everything you’d expect from a crusade characterized by an almost complete unwillingness to address the central role of the federal government in creating pervasive rot not just in for-profit higher education, but the entire Ivory Tower.

The for-profit college sector is certainly raking in lots of cash and producing very little for it, with big revenues but very low completion rates. It’s probably not as bad as Harkin would have us believe—I’ve chronicled much of the exaggeration and misrepresentation that has punctuated his attack—but there’s little question that lots of students drag heaps of taxpayer dough into for-profit schools and get little of value for it.

The thing is, that happens across higher education, including the profit-taking.

As I’ve cited ad nauseum, completion rates throughout higher education are abominable. Looking at first-time, full-time students—an imperfect sample, yes, but the best we’ve got—the top completion rate is for bachelor’s students at private not-for-profit schools. But that’s only 65.4 percent completing within six years. The worst is at public two-year institutions—community colleges—which see only 20.4 percent finish their programs within 150 percent of normal time. That’s just one-in-five!

Surprisingly, Harkin’s report mentions the atrocious completion rates at community colleges. But only very briefly, and mainly to assert that “the cost of for-profit programs makes those programs more risky for students and Federal taxpayers.” That proviso is technically correct, but as misleading as much of the behavior for which Harkin condemns for-profit schools. Community colleges are cheaper to students in large part because they get direct taxpayer subsidies, and while those don’t come mainly from Washington they do come from taxpayers, just at the state and local level. In the 2009-10 school year, state and local appropriations to community colleges totaled $5,412 per pupil. Meanwhile, public four-year schools—with six-year graduation rates of just 56 percent—received almost $8,000 per student in federal, state, and local appropriations. And, of course, all “not-for-profit” schools get favored tax status, paying no taxes on most of their revenue and benefiting from tax deductible largess of donors.

But don’t think those schools aren’t profiting. Harkin’s report blows off the possibility that putatively not-for-profit schools make profits simply by stating that “by definition” such schools “do not retain any revenue as profit.” But as Vance Fried illustrated in his 2011 policy analysis, most public and not-for-profit private colleges make thousands of dollars per-undergraduate beyond the cost of educating them. They just use the money to reward the people in the school, or to pay for things that often make the school more bloated, instead of distributing the profits to investors.

Putting the for-profit sector in the context of all of higher education, it’s clear the witch hunt has been on. But there’s also been major scapegoating: by enabling students to pay for school with other people’s money, and with almost no regard for their ability to do college work, it is federal student aid that largely causes the rot in higher ed, quashing both school and student incentives to economize, and student incentives to think critically about consuming higher ed. By demonizing institutions that dare admittedly make profits, politicians like Sen. Harkin shift the blame from where it belongs—themselves—to those who do what the politicians want: ”educate” people regardless of their ability. It’s exactly like housing: the politicians demand that everyone be able to buy a home, condemn anyone who might fail to furnish the uncreditworthy with mortgages, then blame the lenders when things go horribly wrong. They seem to want the votes—their profits—but no blame when things go south.

Sen. Harkin, the fault for what ails not just for-profit higher education, but the entire Ivory Tower, sits largely with you and your colleagues. Please quit shifting blame and do what must be done: phase out student aid and make all schools earn their money.

A Quick College Policy Primer

As the story of Julia—America’s favorite two-dimensional, life-long ward of the state—makes clear, higher education is likely to figure prominently in the upcoming presidential campaign. In addition, as the student loan interest uproar has progressed, I’ve realized that a lot of well-meaning people have little or no clue about higher ed reality. As a result, I’ve put together a few links to some foundational information for reporters, policymakers, and the public to get some much-needed perspective on higher ed. The list isn’t exhaustive, but it gets at the really big issues:

Let Taxpayers Eat Ramen: We hear a lot about supposedly starving students, but almost nothing about the living, breathing people who are supplying all the public funds for higher ed. The Cato report How Much Ivory Does This Tower Need? What We Spend on, and Get from, Higher Education calculates the total burden for those forgotten folks, and how it has changed over the past few decades. And the result is, well, ”Let the taxpayers eat Ramen!”

For-Profit Colleges Are Bad, All Others Are Saints:  If politicos ever decide to go after colleges and universities, it’s usually only those that are openly and officially for-profit. You know, because seeking profit is inherently evil and exploitative. But here’s the thing: As revealed in Federal Higher Education Policy and the Profitable Nonprofits, most of the ivy-clad institutions that wouldn’t stoop to something as squalid as profit-making are actually making big bucks off of undergrads. They just use the booty to reward the people already in the schools rather than investors. Turns out you don’t trade in your self-interest when you take on a career of the mind.

Heartless State Legislatures Are the Problem: Maybe taxpayers are providing more student aid, but they wouldn’t have to if state legislators would stop cutting subsidies to public postsecondary institutions. Or maybe not:  As itemized in my two posts here—one of which includes some back-of-the-online-spreadsheet estimates for every state—it’s not true that state and local governments have been slashing overall aid to public colleges. It’s a teensy bit closer to true on a per-pupil basis, but public institutions have generally raised tuition revenue well in excess of subsidy losses.

Student Aid: The Reverse Chinese Finger Trap: With a Chinese finger trap, the harder you pull, the tougher it is to escape. For college affordability, the harder we pump in student aid, the tougher it is to escape ridiculous college prices. Basically—though many in higher ed will swear it doesn’t happen—colleges raise their prices to capture aid, rendering the aid largely self-defeating. The “how” and “why” of this is explained in the Cato analysis Making College More Expensive: The Unintended Consequences of Federal Tuition Aid, and I pinpoint some of the empirical research—as well as furnish a brief explanation of the limits of such research—here.

Hopefully, these links will be of value as some try to establish Eden for Julia. Because, for the rest of us, doing so will likely require a move decidedly to the east.

Debate: Colleges Getting Rich Off Students and Taxpayers?

On Tuesday, Cato held a forum on the big profits made by putatively “nonprofit” colleges, the subject of a new Cato Policy Analysis. Not surprisingly, Peter McPherson, president of the Association of Public and Land-grant Universities, objected to the use of the term “profits” to categorize the excess money colleges take in through undergraduate students, but all the panelists seemed to agree that there is both significant waste in higher ed, and that the Capitol Hill obsession with unabashedly for-profit institutions misses big cracks all over the Ivory Tower.

Unfortunately, of course, many of you couldn’t join us on Tuesday. Thankfully, you can now take in the entire bit of illuminating infotainment right here:

On a related note, give George Leef’s latest commentary a read. He does a nice job of pointing out all the major flaws in perhaps the most politically powerful argument for ever-greater government spending on higher education: because degree-holders tend to earn more, we need oodles more people with degrees. I’ve taken a whack at that dubious argument recently, but George gives it a far more comprehensive treatment.

Truth Is, All of Higher Ed Is Broken

Over at the New America Foundation’s “Higher Ed Watch” blog, Stephen Burd purports to know “the truth behind Senate Republican’s boycott of the Harkin hearing.” And what is that truth? Republicans are trying to “discredit an investigation that has revealed just how much damage their efforts to deregulate the industry over the past decade have caused both students and taxpayers.”


Okay, it is possible that Republicans are trying to save themselves some sort of blame or embarrasment – I can’t read their minds – but if so they’ve done a terrible job. Every time Harkin holds one of his hearings the bulk of the media coverage treats it like it has revealed shocking abuse by the entire for-profit sector. And don’t forget the damage done by the now-discredited – at least for those wonks who have followed it – GAO “secret shopper” report that was baised against for-profits enough on its own, but Sen. Harkin abused even beyond what the GAO wrote was reasonable.  So Harkin has defintiely gotten his message across, and he certainly hasn’t hidden past Republican efforts to reduce regulatory burdens on for-profit schools.

The fact remains, however, that the whole Ivory Tower – every floor and staircase – is loaded down with luxurious but crushing waste, and the crumbling foundations are being propped up with huge amounts of taxpayer dough and student debt. Not addessing that, as the boycotting Senators have stated, is what has been blaringly wrong with Harkin’s crusade. (Not that I think either party is likely to do what needs to be done: phasing out federal student aid.)

So absolutely, let’s stop forcing taxpayers to prop up the for-profit part of the tower. But let’s also stop pretending that that part isn’t just one rotten level in a much bigger, buckling edifice.

Are Even Dems Getting Tired of Anti-Profit Crusade?

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Yesterday, Sen. Tom Harkin (D-IA) held his fifth – and perhaps final – Health, Education, Labor, and Pensions committee show-hearing lambasting for-profit colleges. As usual, it was a decidedly one-sided affair, with no profit-defenders apparently invited to testify, and Republican committee members boycotting. Perhaps the only interesting thing that occurred was Sen. Al Franken (D-MN), who has never given any indication he doesn’t support Harkin’s obsessive whale hunt, saying the proceedings could have benefitted from more than one point of view. According to MarketWatch, Franken lamented that “it would have been nice to have someone here to represent the for-profit schools.” Now, he might have only wanted a for-profit rep there to receive the beating, but even that would have been preferable to no rep at all.

Could this indicate that even Senate Democrats are getting tired of Harkin’s tedious grandstanding against for-profit colleges, especially now that the Education Department has issued its “gainful employment” rules? Maybe, and there are lots of Dems in the House who have opposed the attack on for-profit schools for some time. But don’t expect this to be over quite yet: Harkin still gets a lot of negative media coverage for proprietary schools with each hearing, while the scandals surrounding people he’s had testify; the decrepit GAO “secret shopper” report that turned out to be hugely inaccurate; and potentially dirty dealings behind the gainful employment rules seem only to get real ink from Fox News and The Daily Caller. And Harkin keeps indicating that he will introduce legislation – doomed to failure though it may be – to curb for-profits even further.

Of course, what should be the biggest source of outrage in all of this is that while Harkin fixates on for-profit schools, Washington just keeps on enabling all of higher education to luxuriate in ever-pricier, taxpayer-funded opulence. Indeed, as a new Cato report due out next week will show, putatively nonprofit universities are likely making bigger profits on undergraduate students than are for-profit institutions. Of course, they don’t call them “profits” – nonprofits always spend excess funds, thus increasing their “costs” – but that’s probably just plain smart. Be honest about trying to make a buck, and Sen. Harkin has shown just what’s likely to befall you.

‘Gainful Employment’ Regs Softened, Still a Diversionary Sideshow

The hotly anticipated – and dreaded – “gainful employment” regulations aimed at for-profit colleges were released this morning, and based on media reports the big news is that they are a little more lenient than originally expected. Most importantly, schools that fail to meet debt-to-income and debt-repayment requirements will not be cut off from federal student aid – the financial crack on which almost every college and university depends – until 2015.

That’s the big news, at least as reported. But it isn’t the important story.

The real story remains that the Obama administration, and at least the education leadership in the Senate, continues to divert the public’s eye towards for-profit schools when the entire higher education system is a waste-engorged, parasitic mess.

Yes, for-profit schools have low program completion rates, but the overall six-year completion rate for four-year programs is just around 57 percent. And yes, for-profit schools leave many students with big debt, but the average debt for all four-year undergraduate students who have taken loans is around $24,000. And yes, students at for-profit institutions draw heavily on the public treasury to pay for the studies they don’t complete, but higher education overall is a gigantic leech feeding off  taxpayers, taking in hundreds of billions of dollars every year from all levels of government. And it is ever-growing aid to students from vote-hungry federal politicians that is likely the most potent force enabling rampant price inflation and massive college overconsumption. After all, the price becomes a lot less important – and extravagances more enticing – when someone else is footing much of the bill.

Now that these rules have been published, let’s move on to what really needs to happen: Phasing out government subsidies for the entire draining Ivory Tower.