Today featured the first of the Senate Help Education, Labor and Pensions Committee hearings on for-profit schools. Chaired by Sen. Tom Harkin (D-IA) the committee is now investigating the practices of America’s for-profit schools with an eye toward creating new regulations to monitor and police these schools.
Today’s hearing featured testimony from Steven Eisman, a portfolio manager at the FrontPoint Financial Services Fund, Yasmine Issa, a former student at the for-profit Sanford Brown Institute, Sharon Thomas Parrott of DeVry, Inc., Margaret Reiter, a lawyer with experience prosecuting several for-profit schools.
The Career College Association, for one, objected to the presence of Eisman, at this hearing. According to an article by Jennifer Gonzalez in the Chronicle of Higher Education:
Harris N. Miller, president of the trade association that represents such institutions, spoke out in defense of the booming sector and sharply criticized the expected testimony of a Wall Street investor who has compared it to the subprime-mortgage industry.
Mr. Miller, speaking on Wednesday at the National Press Club, noted that Mr. Eisman, as a hedge-fund manager, profits through “short sales,” which essentially are bets that the share price of a company’s stock will drop. Short sellers, Mr. Miller said, are “modern-day Cassandras, constantly warning of economic doom and gloom.” They can perform a useful watchdog service when they draw attention to fraud, abuse, or other miscarriages of investor trust, he said, but he added a caveat: “Particular care should be given to the line between vigilance and vitriol. For whatever reason, Mr. Eisman not only crossed it, he ignored it altogether.”
Miller had good reason to be concerned. In Eisman’s testimony he questioned not just the actions of a few for-profit schools but the entire structure of the industry as it’s currently set up. They have, at this point, a financial incentive but it’s an incentive only to grow, to enroll more people, not to actually educate people. “It’s not that this a fundamentally sound industry with a few bad apples, said Eisman. “It’s a fundamentally unsound industry with a few good ones.”