Listen, the pattern is well-established. It starts like this: there’s a huge and growing problem. Somebody blows a whistle and screams, “we’ve gotta stop this before it becomes a huge disaster!” Then everybody acts like the problem is endlessly complex when it isn’t. Special interests (i.e., narrow, well-organized, well-heeled interests within society) outmaneuver the clueless and disorganized public and their often less-than-dedicated or paid off lawmakers.Then things essentially go forward, unchanged, and, eventually, the shit hits the fan, as per prediction, with taxpayers all brown and wet and desperate. "How could this have been allowed to happen!?" they shriek. Meanwhile, some rich guys are vacationing somewhere, fat and sassy. (Later in the day, Dick Armey will stop by for a drink. Lotsa laughs. "America. It's about freedom, goddammit!", he says. Yes, yes. Everybody gets staunch.)
I’m so tired of this.
The Chronicle of Higher Education reports on the latest chapter in the saga of the for-profits in higher education—a saga that will receive more and more attention until something (that is actually nothing) will be done about it, and everybody will smile and declare a job well done.
Senators Vow to Crack Down on 'Bad Actors' in the For-Profit Sector
Senate Democrats took aim at for-profit colleges at a hearing on Thursday, promising to crack down on "bad actors" in the rapidly growing sector to protect federal student aid dollars from being wasted through fraud and abuse.
"This is taxpayer money," said Sen. Tom Harkin, the Iowa Democrat who is chairman of the Senate's education committee. "We have to seriously question the profit margins and how much is going into actual instruction."
He added that "those that know how to game the system are pulling a lot of good schools into the vortex" of bad practices. "That compels us to do something about it and stop it before it goes too far," he said.
Mr. Harkin didn't say what he had in mind but promised additional hearings on for-profits, with the next to come in July.
"We're going to be delving into this," he said.
Thursday's witness list was stacked with critics of the for-profit sector, including a former California deputy attorney general who prosecuted cases against for-profit colleges and a student who said she was defrauded by a for-profit college.
The most critical—and most controversial—witness was Steven Eisman, a hedge-fund manager who, as a short-seller, would profit from a drop in the value of stocks of for-profit colleges. Mr. Eisman made his reputation (and a fortune) betting against subprime mortgages, and in his prepared testimony, he likened for-profit education to the real-estate market before the collapse, with easy credit driving prices ever higher and large defaults looming.
"Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive as the subprime mortgage industry," he said. "I was wrong. The for-profit education industry has proven equal to the task."
He accused for-profit colleges of peddling false hopes to "the most vulnerable of society," much as mortgage issuers did with low-income home buyers.
"We just loaded up one generation of Americans with mortgage debt they can't afford to pay back," he said. "Are we going to load up a new generation with student-loan debt they can never afford to pay back?"
Mr. Eisman predicted that students of for-profit colleges would default on $275-billion in student loans over the next decade, and suggested that for-profit colleges be required to bear some of the loss when their students default.
She got some Republican support. Of course. Despite the dire warnings and our recent experiences with disastrous failures of regulation/deregulation, some of them seemed unwilling to pursue any further regulation here.
(The marketplace takes care of itself, you know.)
One must be aware of the facts, and the fact is that for-profits are growing rapidly:
Thursday's hearing comes amid increased federal scrutiny of the for-profit sector, which educates a growing share of students and is highly dependent on federal student aid. Enrollment at for-profit colleges has grown by 225 percent over the past 10 years, with most students borrowing to pay for their education. While for-profits enroll fewer than 10 percent of American college students, they accounted for 23 percent of Pell Grants and federal student loans in 2008, and for 44 percent of defaults among borrowers who entered repayment in 2007, according to a report issued by Sen. Harkin's office.
Congress, which recently provided billions of dollars in additional Pell Grant aid, wants to be sure that taxpayer dollars are being spent wisely. Last week, the education committee of the House of Representatives held a hearing to examine whether accrediting agencies are doing enough to ensure that students studying online are getting adequate instruction for the degrees they earn.
Part of the difficulty of this issue—namely, the issue of taxpayers underwriting vast numbers of loans issued to clueless students and spent at ruthless for-profits—is a lack of crucial information:
"There is much that we don't know," said Mr. Harkin. "We don't know how many students graduate, how many get jobs, how schools that are not publicly traded spend their Title IV dollars, and how many for-profit students default over the long term. More broadly, we don't know exactly what risk we are taking by investing an increasing share of our federal financial-aid dollars in this sector."
And the for-profits tend to be trouble:
During the first half of the Senate hearing, lawmakers heard from Kathleen S. Tighe, inspector general of the Education Department, who said that 70 percent of her agency's postsecondary investigations center on for-profit colleges. She described cases in which colleges have falsified students' eligibility for aid, exploited loopholes in a ban on compensating recruiters based on enrollments, and failed to return federal aid money when students withdrew.
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