Proprietary colleges keep growing, supported by federal loans to students. Constrained by their budget deficits, states have been cutting funds to community colleges and four year institutions, causing them have fewer places for new students. Private colleges are stepping into the breech, expanding and capturing some of these students in addition to their usual enrollees. While this may not sound bad on the surface, it’s a problem for both the students and the federal government. These for-profit colleges that were supposed to provide a way for more people to acquire a college education, instead have been ripping off their students and the government.
Many of the enrolled students have not had adequate preparation for college and require extensive remedial classes before starting basic courses. And most of the enrollees, while taking various classes, will never graduate. All the while, tuition payments are adding up for these colleges, who are willing to enroll just about anyone. As long as the money is rolling in, they don’t care.
Unfortunately, the money comes from student loans guaranteed by the federal government, putting these individuals on the hook to pay the money back. The students, most of whom are financially unsophisticated, don’t seem to understand the burden they’ll be assuming, hoping their degrees will lead to good jobs and the ability to pay back the loans. However, the majority of these students, for one reason or another, will never graduate, but will still be responsible for the loans, usually in the tens of thousands of dollars. And the good jobs they’ll be able to find are mostly a mirage.
Whether graduating or not, many students have difficulty paying back the money owed, which means losses by the government. In addition, when individuals are burdened by debts from student loans, they have less money to spend on other things, hurting the general economy.
A recent article by Floyd Norris in the New York Times (http://goo.gl/AvBSr) highlights the problems with the proprietary colleges, by focusing on ITT Educational Services, one of the largest in the group. This corporation has 148 locations with 71,000 students in forty-eight states, with four new campuses this year and another four to be opened. However, none of the college credits obtained at ITT can be transferred to other institutions, perhaps a sign of the poor quality of these credits, or a desire to keep the students chained to ITT. The article by Norris noted that at one location in Indianapolis, only 16% of students had earned associates degrees within three years of enrolling, and 16% of bachelor’s degrees within six years. In the meantime, students had paid an average of $48,000 in tuition and fees. In 2011, ITT had revenue of $1.5 billion with 89% resulting from government loans and grants, most of it federal in origin. Its pre-tax profits in 2009 and 2010 were greater than the amount it spent on student education, with pre-tax profit margins for the first quarter of this year just under 30% of revenue.
The profits of these proprietary colleges are dependent on the federally guaranteed loans. In the 2010-2011 academic year this amounted to $24 billion in student loans and another $9 billion in grants. With many of these students not graduating in a reasonable period, or not at all, and many of them unable to obtain decent jobs to pay back the loans, the default rate will undoubtedly be high. The federal government is not getting enough bang for its educational buck and should start cutting back or eliminating these loans. However, attempts to do so are being stymied by suits by the for-profits schools and by members of Congress who are supporters of this industry. It’s a sad commentary on the way our nation functions when subsidies to higher quality state schools are being cut and loans that support ineffective for-profit institutions are being continued or expanded.
Resurrecting Democracy
A VietNam vet and a Columbia history major who became a medical doctor, Bob Levine has watched the evolution of American politics over the past 40 years with increasing alarm. He knows he’s not alone. Partisan grid-lock, massive cash contributions and even more massive expenditures on lobbyists have undermined real democracy, and there is more than just a whiff of corruption emanating from Washington. If the nation is to overcome lockstep partisanship, restore growth to the economy and bring its debt under control, Levine argues that it will require a strong centrist third party to bring about the necessary reforms. Levine’s previous book, Shock Therapy For the American Health Care System took a realist approach to health care from a physician’s informed point of view; Resurrecting Democracy takes a similar pragmatic approach, putting aside ideology and taking a hard look at facts on the ground. In his latest book, Levine shines a light that cuts through the miasma of party propaganda and reactionary thinking, and reveals a new path for American politics. This post is cross posted from his blog.
Political junkie, Vietnam vet, neurologist- three books on aging and dementia. Book on health care reform in 2009- Shock Therapy for the American Health Care System. Book on the need for a centrist third party- Resurrecting Democracy- A Citizen’s Call for a Centrist Third Party published in 2011. Aging Wisely, published in August 2014 by Rowman and Littlefield. Latest book- The Uninformed Voter published May 2020