The invaluable Tim Carney of the Washington Examiner is an expert at exposing the corruption of big government, and his article about for-profit colleges and government-subsidized tuition shows that everybody involved in this fight is sleazy. Unfortunately, no matter who wins, the taxpayers lose. It’s also worth pointing out that the main effect of government-financed tuition payments and loans is to drive up the cost of college – another example of the third-party payer phenomenon.
Here are key passages from Tim’s column.
For a case study in the tawdry and twisted world of Washington policymaking and lobbying, you can’t do much better than the current fight over the subsidies and regulations for for-profit colleges. Behind every argument is an ulterior motive, around every corner is a conflict of interest, and in every pocket there is cash procured through government policy supposed to serve the public good. …don’t confuse “for-profit” with “capitalist.” Without federal subsidies in the form of Pell grants and federal loan guarantees, the for-profits might not exist. At the very least, they would be much smaller. About 87 percent of the revenue at the biggest for-profits comes from federal taxpayers, according to the Chronicle of Higher Education. They belong to a class of company that I call Subsidy Sucklers. Sen. Tom Harkin, D-Iowa, earlier this year declared war on the for-profits, ordering the Government Accountability Office to investigate these schools’ marketing techniques. The GAO produced a scathing condemnation. …But a closer look revealed a murkier picture. The GAO last month corrected the paper, modifying 16 of the report’s 28 findings. At Education Week, Rick Hess wrote, “all 16 of the errors run in the same direction — casting for-profits in the worst possible light.” The credibility of Harkin’s star witness in his August hearing, Steven Eisman, was also called into question. Eisman is a short-seller who reportedly stands to make big money if the stocks of for-profit colleges collapse. He also is a vocal lobbyist for new regulations that would cripple these colleges. The term for Eisman is Regulatory Robber Baron. … Bill Clinton’s former special counsel Lanny Davis first flagged Eisman’s role in a Politico op-ed, and liberal ethics “watchdog” Melanie Sloan followed up, criticizing Harkin for allowing Eisman to testify, sparking the liberal American Prospect to ask in a headline, “Why Are Progressives Fighting Student Loan Reform?” The answer: money. On September 17 — about three months after Davis’s op-ed — Davis registered as a lobbyist for the Coalition for Educational Success, a trade group of for-profit colleges. Then in November, Sloan announced she was joining Davis’s lobbying firm. Also lobbying for the for-profit colleges are six former Democratic congressmen and three former Republican lawmakers. This tale has no good guys, but it does have a moral: When you inject government into an industry, you get some pretty unsavory results.
WELL…. the lying sister of the turd in the white House has come up with a PLAN!!!… SHE WANTS HER HANDS IN OUR POCKETS TAKING OUR MONEY SO ILLEGALS AS WELL AS CRIMINALS CAN GO TO COLLEGE WHILE WE PAY THE BILLS!!! YOU DON’T BELONG IN GOVERNMENT…. YOU BELONG IN THE WACKY BIN!!! YOU STOLE SO MUCH MONEY FROM THE GOVERNMENT….. YOU PUT YOUR MONEY IN A FUND FOR ILLEGALS AND CRIMINALS!! AS FOR ME…… SEND THEM BACK WHERE THEY CAME FROM….. IF THEY ARE IN JAIL.. LEAVE THEM IN JAIL, THEN SEND THEM BACK!!! WE WANT OUR BORDERS SEALED.. PREFERABLY WITH YOU AND BILLY WILLY ON THE OTHER SIDE OF THE BORDER!!!
[…] Third-party payer in higher education also shows how government money can corrupt private institutions. Though any effort to stamp out such corruption should apply equally to government schools as […]
[…] the case of higher education, there is substantial third-party payer because of money funneled to students in the form of grants and loans, as well as funds channeled directly to colleges and […]
Kelly, you are so right. My position was eliminated because of those damn numbers, and now I, too am planning on going back to my public University and finishing a couple more degrees so I can shift my focus back to the public sector rather than these for-profit colleges. I also attended one for some graduate work and had a horrible experience.
[…] DAN MITCHELL: Fight over For-Profit Colleges Shows the Corrupting Influence of Federal Subsidies. […]
[…] DAN MITCHELL: Fight over For-Profit Colleges Shows the Corrupting Influence of Federal Subsidies. […]
I worked as an instructor for a short while at one the largest for profit colleges traded on the NASDQ, and that should have been a clue in and of itself– a university indexed in the financial markets spells trouble. The business model this industry shares is so loaded with drivers for corruption that each institution should need a federal agent on the premises at each campus always, as the industry’s culture is to cheat at every opportunity.
Life as an instructor at this for profit college was intensely focused on numbers and not education. According to management, maintaining high attrition rates was the number one priority of instructors–one’s pay raise and job depended on it. For example, Instructors were required to call each student who was absent on daily basis and report to management why the student was absent and when they would return to school, and this was solely profit driven. What college does this? I attended a nonprofit, top tier (very small student body) university, and nobody called me when I missed a day of class. Moreover, instructors were pressured to pass every student because failing students equated to loss revenues. Just to give you idea of how corrupt the operation was, I could have attended graduate school were I was teaching and pay only 10% of costs, but chose to go to a private nonprofit university and pay the additional costs because my time is worth something. How could I trust that an instructor/ or professor was grading my work honestly, or if they had simply succumbed to management’s pressure to pass every student?
[…] Fight over For-Profit Colleges Shows the Corrupting Influence of Federal Subsidies The invaluable Tim Carney of the Washington Examiner is an expert at exposing the corruption of big government, and his […] […]
Have to disagree with Annie – at least, to the extent she’s “black hatting” only the ‘for profits.’
Annie misses the “Why?” behind “everyone has a right / ability” mindset.
What do colleges “sell”? Credentials.
Why is there a market for their “product”? Because our society deems “credentials” of one sort or another a prerequisite for most jobs.
Who benefits from “credentialism”? The people who sell the credentials.
So, thinking it through – – – what should we expect to see from the “credentials” business?
* They’re going to encourage the spread of ‘credentialism’ across ever wider swaths of the economy because it increases demand for their product.
* They’re going to encourage political types to put “free” money in the system (via grants or below market rate loans) so people will buy more “credentials” than they would if they were spending “their own” money.
* Which brings us back to the other motivation for “encouraging credentialism” – the more convinced customers are that the product is vitally important, the less likely they are to focus on what a good racket colleges have going.
If we follow the money, it’s pretty easy to figure out why “for profits” are being targeted:
1) There’s only so much “credentials” money out there for “not for profits” and “for profits” to fight over.
2) Convince the political class to play favorites and the “favored” segment of the market gains a significant advantage.
3) The “not for profit” segment is far larger, so that’s “where the money is” for the political class.
4) Which puts “for profits” in the crosshairs – especially for “government guys” like Tom Harkin.
It’s simpler and sadder than that. (Although it is true that politicians always corrupt what they touch.) The for-profit college is just in the business of – not education of students – but the reassurance of students.
We have a culture that demands that we pretend ‘everyone has a right to an education ‘ and ‘everyone has the ability to go to college. (The first flawed in theory – the second false upon observation of reality.) Then we demand that the gov. provide the cash to make the above impossibilities happen *anyway*.
The older and conventional universities do not want the hassle of dealing with anything below the easily educated ( or at least coralled) top of the student potential.
Given that there is demand? Why would you not expect someone to show up with the supply? Not, as I said, of real education ( which is pretty much unabsorbable by the greater percentage of for-profit ‘students’) but at least of pretty printed paper degrees.