July 14, 2012 8:31AM

Remember: The Feds Fund Students

It's so fun and easy to bash for-profit schools: on the whole their outcomes aren't good; they don't look like the ivy-covered institutions we envision when we think of "college"; and it's easy to assume that anyone who openly seeks profit must have zero compunction about duping the innocent. But guess what? Openly for-profit schools are no more rapacious than putatively not-for-profit institutions, and it's not the schools that federal money is funding, anyway. It’s students, and if you want to place blame for wasted time and dough, it should be placed on Washington giving college money to anyone with a high school diploma or GED---and that’s a newly heightened level of restriction.

Look at the whole profit thing. It's true that for-profit schools want to take in more money than their operations cost. But guess what? So do other colleges. As Oklahoma State University professor Vance Fried has estimated, not-for-profit institutions typically bring in between $2,000 and $13,000 more per undergraduate student---depending on school type and inclusion of various subsidies---than it costs to educate him or her.

Of course those schools don't call this "profit," primarily because they don't send it to investors. Instead they spend it on themselves---bolstering administrative ranks, raising salaries, paying more for journals---then call those things "costs" the next year. But the self-interest underlying it is the same: people are making themselves better off through the bills they send to students.

But aren't for-profits worse performers than not-for-profits? Seemingly yes, but it is very hard to make apples-to-apples comparisons. Indeed, it makes little sense to make policy based on sectors of higher education at all. What should be important is whether an individual school is working, be it a state flagship, its local branch, or the strip-mall Strayer. But if you want to play the sector vs. sector game, look at community colleges. They appear to be atrocious performers---worse than for-profits---with only one out of every five students completing a program within 150 percent of normal time.

The word "appear," however, is crucial. Schools might be doing the best they can but are working with many people who simply have too little ability, desire, or a combination of the two to handle college work. But as long as those students can get money to pay for college, it’s crazy to think that there won’t be schools to admit them. Indeed, were all schools to refuse to admit large swaths of students the feds deem college-qualified, major federal investigations would almost certainly ensue.

No, the root problem is not the schools (though all sectors seem happy to make big bucks), it’s that the federal government, first and foremost, will give college aid to almost anyone. Indeed, the one time Washington created student aid programs that required some demonstration of aptitude and success---Academic Competitiveness and SMART grants---Sen. Ted Kennedy (D-MA) objected that they abandoned “the federal commitment to prioritize the neediest students.” That the grants were tied to Pell eligibility was apparently irrelevant; they were allowed to die last year.

If you want to really tackle the problems of noncompletion, debt, and overall waste in higher education, the first thing you must do is cease making cheap aid available to students regardless of their demonstrated aptitude or desire. Do that and you would almost certainly see diminution in the size of both the for-profit and not-for-profit sectors. Much more important, you would cease to have so many people squandering both their resources and those of taxpayers.

Unfortunately, making aid contingent on recipients demonstrating real aptitude is not in the best interest of politicians, who maximize their benefit---getting people to vote for them---by maximizing the number of people to whom they give money. Indeed, as we've seen, even if we could get politicians to pass even relatively small programs that require recipients do a little more than breathe, it won't last. That, in addition to the Constitution giving the federal government no authority to be involved in student aid, is why we must phase out federal aid programs. Unless we have the clarity of an absolute prohibition against federal politicians providing aid, it is almost certain that they will give it out, and will do so without regard for what makes even minimal educational sense.

And when things go badly? They'll just find easily demonized groups---like honestly profit-seeking schools---to scapegoat.

C/P from the National Journal‘s “Education Experts” blog.