The For-Profit College Problem is a Trainwreck

Re-printed from the Huffington Post

by Ben Mangan

So, how are you feeling these days? Kind of like you are in the midst of a trainwreck? Well, you are. My last poll on a double-dip recession revealed deep cynicism among readers. Nearly 90% of respondents said we would experience a double dip. Granted, this was not a scientific poll – but it still represents a picture of the American mood on economic prospects.

As it happens, a double dip recession looks unlikely. This feels like a technicality to most people, though. The kind of economic pain Americans are feeling hurts – whether it meets the criteria to be called a recession, or in twisted irony, we call it a recovery.

 

Subsidizing for-profit colleges which fraudulently laden students with debt is a Trainwreck.

As I reflect back on the years of challenge we’ve faced as a nation, one particular paradigm of catastrophe has become clear – something I’m going to coin as the Trainwreck. Gladwell gave us the Tipping Point and Taleb gave us the Black Swan event. And I am now giving us the Trainwreck, really wishing I didn’t have to. Trainwrecks are painful, complex and challenging to stop. There are a few Trainwrecks unfolding before our very eyes as I write this. I want to call your attention to one in particular – taxpayer dollars enriching the owners of for-profit colleges who are ripping off students.

You may have seen the recent flurry of news on this issue. The US government is figuring out what to do about for-profit colleges that operate fraudulently – by pressuring students to enroll with false statistics about what their degree can earn them. These students are doing their best to strive toward a better future – to get better jobs to support their families and improve their prospects in life. In a nation that has built the dream of prosperity so firmly on the foundation of education, this kind of fraud is particularly egregious.

Putting my own ethical assessment aside, here’s why everyone should care about this problem: For-profit, private colleges are eligible to receive grant money and subsidized loans that their students use to pay for school. Much of this government money then gets distributed to their share holders when they profit. Share holders really like profits. They pressure these schools to enroll as many students as possible to make sure they profit. Fraud ensues – as government inspectors found when they posed as students. My colleagues on EARN’s policy team blogged about this problem recently, writing a hard hitting piece that includes some gory details that may make your blood boil.

You can also read the damning NYT op-ed piece by an instructor from one of these schools. This teacher notes that for-profit colleges have drop out rates that are double their nonprofit counterparts, while they happen to receive a hugely disproportionate share of federal largess.

Trainwrecks could be described wonkily in terms of moral hazards and perverse incentives. But there is a more visceral description that also works. Trainwrecks happen when taxpayer dollars flow through lobbyist-created loopholes to fatten profits for companies that happen to be screwing over customers who are working hard to better themselves. In this case, it is our fellow citizens striving to get a piece of the American Dream and getting snake oil instead. This is a toxic recipe that is poisoning the American Dream.

To read this article on the Huffington Post, click here.