Against For Profit…And Against State Education

By Professor Doom
3-3-15

I’ve mostly focused on the immense corrupting of public/State higher education, and not simply because this is what I’m most familiar with. I’ve often thought “everyone knows” for-profit schools are frauds, and so I’ve put little time into “exposing” a fraud everyone already knows about, in favor of exposing the fraud that is much of public higher education. With millions of students trapped in the for-profit system, it’s clear I’ve been remiss.

A recent article lists criticisms against for-profit education (or, more accurately, against certain for-profit schools), but doesn’t really address the fraudulent component. At times, the article incidentally mentions how its criticisms also apply to public institutions…but it just doesn’t press hard enough on the similarities.

So, allow me to summarize, and expand upon, some real issues going on in for-profit, and “non profit” education, particularly state schools:

for-profit schools care more about making money than educating students.

Well, no kidding; I guess I’m expecting too much from an article that starts like this. Realize, however, public institutions also care more about making money than education. The simple proof of this is the huge focus on “growth”—administrators make more money, via their salary, the more they grow the institution, and so the pressure on faculty to do all they can to help with the growth is enormous.

Harkin is particularly critical of the University of Phoenix. He thinks when the school was founded in 1976 it had a "pretty good model." Back then, Phoenix students had to have two years of college credit already, they had to have work experience, and they had to be at least 23 years old.

Look at that. There was a time when University of Phoenix was legitimate: they didn’t simply scour the gutters looking for anything with an opposable thumb to check a box for student loans. Instead, they focused their market to those who had an academic and personal record that indicated a potential for success.

Today, schools are perpetually lowering standards and opening admissions wider and wider, in the name of growth, of profits. The reason for this is the student loan scam, which wasn’t nearly so pervasive in 1976. Back then, to get that loan, you actually had to demonstrate to the lender that you were a legitimate student. Today, to get a loan, you just have to check the box saying you’re a student, and be at a school that has accreditation, which I’ve shown many times has nothing to do with education.

So what happened to University of Pheonix once the student loan scam went fully on-line:

But then the school "kept expanding and expanding and expanding, and so it kind of morphed into this behemoth that it is now," he says.

Well, gee, that’s the same thing that’s happened to many public schools, that have grown, and grown, and grown, not through superior education, but by easing admissions and lowering standards so that anyone can be a college student, enrolling in a wide array of courses with no reading, writing, or any other requirements. All while providing that sweet, sweet, student loan money to administration.

Admin: “We’re going to have to sacrifice quality for quantity, for a time.”

--“For a time”? It was ever thus. Every institution I’ve been at has had a focus on quantity, and not once in 25 years have I seen “quantity” sacrificed for “quality”.

So yeah, University Phoenix’s insane growth is a big factor in allowing it to have no standards. Every school with a population over 10,000 or so should be very suspect. Phoenix has close to half a million students, to give an idea of how far over the line they are now.

Harkin believes the University of Phoenix went wrong in 1994 when it became a publicly traded company.

I disagree; what went wrong is the student loan scam, which made it way too easy for bogus schools to rake in ridiculous sums of loot. Get rid of that, and going public is only viable if the school is legitimate.

Going public just makes sense today, with the huge stock bubble that the ill-advised “plunge protection team” pretty much guarantees (until the day comes when it doesn’t---please, gentle readers, be very conservative with your stock investing, if you must involve yourself in that immense bubble filled with systemic risks the mainstream media never mentions). I’m not saying going public helped Phoenix…but it’s just not the issue.

One of the oldest for-profits is Strayer University, founded in 1892 in Baltimore as a business college. For decades Strayer operated as a small, regional school offering training in skills such as shorthand, typing and accounting. Some of the first students were farm workers looking for new ways to make a living.

As you can see, for-profit schools can totally be legitimate. I’m not sure why the article ignores this data, failing to realize that every time it says something good about for-profits, it comes from a time BEFORE the student loan scam.

Strayer went from having fewer than 10,000 students in 1996 to more than 60,000 students by 2010

This is the same Strayer from 1892, but the student loan scam allowed it to expand greatly, while simultaneously destroying its standards, going from a job-training school to, well, a school that teaches nothing useful to people that don’t really care to learn anything anyway.

For-profit companies are ultimately accountable to shareholders and investors. To stay in business, they must produce returns.

This is not accurate at all. Business enterprises are ultimately accountable to CUSTOMERS. To stay in business, there must be customers. A bogus business just can’t stay in business once the customers know what’s going on. Lots of folks know for-profits are bogus, but the student loan scam provides a steady stream of “customers” able to get into the scam, and willing to do so since they get a check for it. The real customer in this case is the Federal government that provides the checks.

What do for-profits spend on education per student?

Apollo -- the University of Phoenix parent company -- spent $892 per student according to the committee's analysis.

Wow. A student at this school easily can blow $10,000 a year on tuition. Note that “less than 10% of revenue goes to education” is also the kind of ratio we find in public institutions, too. It really doesn’t take much to see that many of the criticisms of for-profits apply to public institutions of higher education as well.

The committee found that the traditional schools it compared to the University of Phoenix spent between $3,344 and $11,128 per student on instruction.

That’s a monstrously wide estimate, so wide that a much lower, lower end, is quite possible, and sure doesn’t jive with the many calculations I’ve made. I mean, most college courses are taught by adjuncts, for about $2000 a class. Most classes have 40 or more students (with 1,000 students not out of the question). So, that’s $50 a student, times 5 classes a semester (an above average load)…that’s $250, and even throwing in incidentals won’t put it at $3,000. I suspect administrators have cooked the books a bit in our state schools.

Even accepting the low end reveals that a college education can easily cost less than $15,000; charge $20,000, and that allows for a very nice profit. Of course, we know it doesn’t cost nearly so much for a fully accredited degree. Hmm, why should we believe state school’s claims that it costs a bare minimum of $3,000 a student when a new university can start up and charge 10% of that?

Harkin wants the University of Phoenix and other for-profits to put more of the money they take in toward student instruction, and less toward marketing, recruiting and executive pay.

While certainly true, keep in mind the stockholders could complain about executive pay, too. Of course, executive pay at our public institutions are also wildly over the top. Yet again, a criticism that applies to higher education in general.

Now, because for-profits are basically bogus (now), they have to search long and hard to get suckers to sign up for their classes (and those sweet student loan checks!). They have lots of recruiters to do the searching:

The company will not say how many recruiters it employs, but Harkin's committee found that the 30 for-profit companies it investigated employed, on average, one recruiter for every 48 students... they work in big rooms that look and sound like call centers.

A “recruiter” is basically a telemarketer, spending full time calling prospective students and talking them into taking on loans for the glory of the for-profit school. I grant that public institutions only have a few such recruiters, but they nevertheless have public relations departments, marketing departments, and a huge advantage in recruiting, since they have inroads to the public schools—they get first shot at every high school student, while the for-profits have to go for the dregs.

I’m hard pressed to blame the for-profits, they have to look harder for suckers…but both types of schools are preying on kids as they emerge from high school.

More next time.

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