What's Good For The For-Profit Colleges Is Good For America

As Barbara Ehrenreich noted in Nickel and Dimed: On (Not) Getting By in America , it can cost a hell of a lot to be poor. From residential motels that charge by the week (but don’t require a deposit) to rent-to-own furniture stores and predatory used-car loans, there is a thriving segment of the market dedicated to charging poor people a premium for stuff that would otherwise not be available at all.

In a terrific Village Voice article, Chris Parker takes us on a tour of the double-markup inner-city bodegas of education, the for-profit college industry. Both business models are adept at converting their customers' government aid -- food stamps for the bodega, subsidized student loans and GI Bill benefits for the colleges -- into tidy private profits. But where the bodega is typically owned by recent immigrants living in the neighborhood, for-profit schools are hugely profitable enterprises owned by investment firms with a well-organized lobbying arm. (Korean grocers beware: Goldman Sachs probably has you in their sights next.)

Parker presents a survey course -- Intro to Scams -- of the interconnected tactics and loopholes that allow operators of for-profit college to make a killing. In a grimly evolutionary sense, it's kind of inspiring: Who would have thought someone could get rich selling higher education to people who have neither money nor a sound educational background, with schools where the failure rate is 80% -- twice as high as in traditional colleges and universities? Cue Jeff Goldblum: Capitalism finds a way.

Those seeming disadvantages become opportunities for profit when a college’s primary goal is not the inculcation of knowledge, but rather the extraction of money, and recruiters don’t mind tossing aside pesky concerns like "ethics." There’s actually pretty good money to be found in low-income students: paradoxically, their lack of resources qualifies them for some sweet loans and grants from federal education programs, as much as $100,000 for a student pursuing a bachelor’s degree. The money goes to the college, the debt goes to the student, and if students default on repayment -- which they do at about double the rate of students in traditional schools -- then ultimately goes to the taxpayer. We were moved very deeply by the absolute simplicity of this arrangement, and let out a respectful whistle. That's some catch, that Catch-EDU. 

And what a merry bag of tricks some of the more creative schools have at their disposal! A Michigan 14-year-old who clicks on an online ad offering to help find money for college is called by a sales rep for Ashford University, who enrolls him and then forges the kid's application for student loans, telling the boy that it would be best if he didn't tell his parents so they can be surprised when he finishes high school and medical school at the same time. And after a year, when the kid refused to go along with the deception on the financial aid forms, "administrators miraculously discovered that he was under 18. Since this left him ineligible for federal aid, Ashford was forced to return his loan money to the feds." The school sent the kid a bill for the $13,000 it had tried to borrow on his behalf.

Or how about Chris Pantzke, a head-injured Iraq-war veteran who was convinced by a recruiter for the Art Institute of Pittsburgh that a rewarding career in photography awaited him, and since he suffered from PTSD that made a traditional classroom setting impossible, why not take the entire program online? Talk about tailoring instruction to meet students' individual needs! Except, oops, looking at a computer screen gave Pantzke migraines, one of his classes was "taught" by an instructor who was not actually able to get online for much of the course, and the promised assistance for disabled students simply didn't exist -- guess the buyer needs to beware, maybe. After PBS's Frontline featured Pantzke in a segment on veterans and for-profit schools, Pantzke suddenly started getting A's and B's for all his work, regardless of quality, but after a car accident left him unable to type, Panzke dropped out altogether. By that point, Parker notes, "he'd run up $26,000 in debt and burned through an additional $65,000 of his GI Bill benefit -- with almost nothing to show for it."

But isn't this really just a case of some emptors who needed to caveat a lot more carefully than they did? It makes for a good story for free-marketeers, just as it did during the subprime mortgage crisis: If only those Poors hadn't misled their well-financed, deceptively marketed, and aggressively-lobbied benefactors in the private sector, they'd be so well-off now! (And we wouldn't face a Trillion-dollar debt bubble, either.) Darn those poors! Where would they ever get the idea that spending a bundle of borrowed money on a cut-rate education would give them a leg up in life? Other than from all those late-night ads that show high-achieving folks bettering themselves by going back to school, getting job training and a degree, a rags-to-riches dream played out on every third episode of Oprah. Only an idiot would believe that stuff -- but an astonishingly cynical industry has proven that it can profit quite handsomely by selling it.

 Full Disclosure: Doktor Zoom taught first year composition and business writing at a for-profit school for a couple years (no names; let's just say it rhymes with "High-Fee-Fee Dreck"). The school actually did have content and academic standards that seemed comparable to a community college (at several times the cost), but there was also never any forgetting the boiler room full of sales staff next to the front office. Always Be Closing! 

[ Village Voice ]