On Profit

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The Obama administration does not like profit. That’s according to Andrew Ferguson, who writes in the Weekly Standard that,

You can never be sure when or why one industry or another will draw the attention of the Mr. Fixits of our federal government. Just imagine: There you are, Mr. or Ms. Businessperson, walking along, making money, minding your own business, and then wham: They pop up out of nowhere, wheeling around like a gun turret and fixing their gaze on you and your company, insisting that they’re going to make you fairer and more rational and fix problems you didn’t know you had. It must be terrifying.

And for that reason, if only for that reason, the multibillion-dollar industry of for-profit colleges deserves our sympathy.

This is a common, Ayn Rand-ish, argument of the for-profit colleges’ conservative allies. If the free market is good, so the thinking goes, obviously businesses that make money must be doing something right.

Here’s the thing. Just because it’s profitable doesn’t mean it’s a great company performing a valuable service to the world. The problem with for-profit schools isn’t that someone makes money. It’s that they make virtually all of their profit by exploiting the rules of federal student grants and loans, rules that weren’t designed with for-profits in mind. The trouble is that the entire profit margin of proprietary schools represents an inefficient use of federal education money. Ferguson acknowledges that for-profits can swindle students, he just thinks that regular colleges do that too, writing that,

Both, at their worst, are a swindle, enticing innocents into programs to which they’re poorly suited, for which they’re badly prepared, and from which they depart with slim chances of gainful employment, dangling nearly worthless degrees in such subjects as culinary arts, photographic composition, and English. What is sometimes true of the University of Phoenix is often true of Amherst and Ohio State.

Really? Listen, there’s nothing wrong with impractical education. Indeed, much of the liberal arts are horribly impractical. As long as everyone’s up front about that, no one gets hurt. No one ever got bachelor’s degree in creative writing from Sarah Lawrence thinking that would be a sensible career move. That’s okay.

But there’s something very wrong with promising a practical education and delivering an impractical one at exorbitant cost.

That’s the worry critical people have about many for-profit colleges. Not all of them, but many of them. The worry is that these schools saddle students with huge loans even though their education doesn’t actually provide them with the power to make much money.

The fact that someone is in a program at a “career college” in which he doesn’t learn anything about history or literature and classes occur at convenient times doesn’t mean his program is practical.

It’s a vocational school, designed to help students get jobs. That’s what gainful employment is designed to measure. Do graduates of career colleges obtain careers that allow them to practically pay off the loans that they accumulated going to school? That’s it.

The inquiries congressional Democrats and the Obama administration are making into the for-profit college industry aren’t driven by some pathological discomfort with profit, and the investigations aren’t about making sure all colleges continue to teach air-fairy courses in the liberal arts. The only thing that matters is if for-profit students can pay off their loans, loans backed by U.S. taxpayers.[Image via]

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