Heroes and Villains

Part of the trouble with covering the ongoing fight about for-profit colleges is that it all starts to seem so sordid. Iowa senator Tom Harkin decides to investigate proprietary schools, citing a damning Government Accountability Office report about the companies. And then the for-profit college advocates investigate the GAO, finding that, “ The entire credibility of this report is called into question.”

The for-profit colleges suggest that Harkin’s chief witness might make some money if for-profit colleges are shut down. Now the improprieties and errors here are not exactly equivalent, but things are going wrong everywhere. Tracking and explaining relative guilt and innocence here becomes bewilderingly frustrating.

As Timothy Carney at the Washington Examiner puts it “There are no good guys in fight over for-profit colleges.” He’s right of course (welcome to politics) but there’s still something America can learn from this debacle. Carney explains the problem like this:

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.

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.

The trouble with this summary, which is admittedly very well argued and complete, is that the moral is wrong. It isn’t the injection of government into this industry that’s the problem. The problem is that the government monitoring was so crappy.

For-profit colleges have existed in America for more than a century. Since the Truman administration they’ve been heavily dependent on federal money for survival. But for most of their history for-profits have been more or less fine. They were small vocational schools that trained people to become hairdressers, automotive mechanics, and secretaries.

The great trouble had a lot to do with rules changes in the Bush administration when, in the worlds of the New America Foundation’s Stephen Burd (writing for this magazine):

In his first term, Bush packed the Department of Education with allies of the proprietary colleges. Before becoming the assistant secretary for post-secondary education, for example, Sally Stroup worked as a lobbyist for the University of Phoenix. Under her leadership, the agency took the teeth out of regulations that were designed to rein in abuses of the 1990s, including the incentive-compensation ban for recruiters.

What’s more, in recent years dozens of former students have filed suits alleging they were misled about classes and programs proprietary schools offered, as well as about their prospects for graduating and getting jobs in their fields of study. While the seriousness of the abuses vary, in some cases they amount to outright fraud, with recruiters pressuring students to sign up for classes that don’t actually exist or to enroll in programs where the instructors lack even basic expertise in the field. The push to get students in the door also created more pressure to steer people into private loans.

With this change for-profits made soaring profits, and began some really horrible abuses. But it’s not government money that caused this; it’s lack of government oversight.

So no, the problem here is not the injection of government money, it’s the fact that the government ceased to track what happened to its (your) money.

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