Your Stimulus at Work

The federal stimulus has apparently been very beneficial to for-profit colleges. According to an article by Jeremy Redmon and John Perry in the Atlanta Journal-Constitution:

Massage and beauty schools, online universities and other for-profit colleges in Georgia and across the nation are cashing in on federal stimulus spending, collecting $2.2 billion in tuition grants for low-income students, public records show.

That represents nearly a quarter of the stimulus money spent on these grants to date.

As Redmon and Perry rightly point out, that’s a violation of no laws. For-profit schools exist to train people for jobs. Any accredited school can receive stimulus money. The situation does, however, seem a little peculiar. Through for-profit schools the stimulus money eventually finds its way into the pockets of shareholders.

The Career College Association objects to the article, explaining that:

The almost 3000 private sector funded professional and career colleges and universities in Georgia and across the nation are educating a cohort of Americans who otherwise would have limited or no access to higher education, lower income and working adult students. Their education creates jobs because they learn specific skills in high demand, which is a fundamental purpose of the Federal stimulus funding. These students, many of them eligible for Pell grants because they are not affluent, are increasingly choosing schools in our sector. The students get the Pell funding: schools do not. Students vote with their feet.

Good point, though from a public policy perspective it would seem far more economical to spend the stimulus money on education itself, and nothing on helping already solvent companies make more money. Four days ago White House adviser David Axelrod said that the stimulus was necessary because,

People are suffering out there. We want to keep this economy growing faster. We want to see an acceleration of job creation. And we have to take some steps to continue in that direction.

Presumably he did not mean creating jobs at for-profit schools. Ideally these schools facilitate job creation only by training people for jobs. For-profit schools currently have yields up to 34 percent. That’s fine, but how much of that profit margin should be fueled by American taxpayers?

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer