This blogpost is based in part on material found in Pacific Standard Magazine, Nov/Dec, 2015. We have an educational problem in the United States—actually, multiple problems. One of them is the issue of for profit colleges and universities as an alternative to public schools. The impetus for attendance in for profit schools appears to be inability to get accepted at a college the student can afford. Ten percent of all U.S. students attend for profit schools, and they account for nearly forty-five percent of the students who default on their loans. The average student—the ones lacking rich parents or a sugar-daddy—are caught in an ever worsening grind: debt loans, extra out-of-pocket costs, the need to work balanced against the need to study, the necessity of putting off marriage and having a family, and the difficulty of getting sufficiently high paying jobs after graduation to be able to pay the ongoing interest of the debt. Many will not outlive their interest debt; many others will just walk away with all of the consequences that entails since student loans are not cleared by bankruptcy—non-dischargeable as of 2005.
The federal government comes into the problem in an additional issue: students in for profit schools are suing their colleges and universities in ever increasing numbers alleging that recruitment policies and delivery of promises are unethical, unprofessional, and sometimes frankly illegal. Recruitment is a sales pitch stacked in favor of the school against the student. The school has attorneys, iron-clad contractual requirements, and loose attention to the school’s responsibility to turn out a good educational product at a cost which the traffic can bear—the product being a reasonable expectation of getting a job and being able to pay the costs incurred. Many recruiters become so disenchanted with the process that they report that they feel as if they were in a white-collar criminal enterprise. Some recruiters are in fact encouraged to lie about actual costs and benefits to entice potential students who are finding entrance into publically vetted schools too onerous. For 150 years, for profit schools have been criticized, prosecuted, or shut-down for unfair practices.
Between 1990 and 2010, enrollment in for profit schools increased from 200,000 students to over 2.5 million. The educational industry is big business, and the profits are large enough to capture the attention of very large business corporations. More than half of the enrollees come from families making less than $40,000 a year, the most vulnerable people in our country. Forty percent are Hispanic or Black. Alumni fare poorly. Of those students who started to payback their student loans (as required by contract) in 2011, twenty percent are already in default as of 2015. The median income for this people is just over $20,000 per year. As of 2013, only about thirty percent of those students who entered for profit schools had graduated, and their debts are still accumulating. Only seventeen percent of University of Phoenix students who started in 2008 had graduated after six years of attendance and the necessity to add an additional year or more to their debt load. One of the real problems is that the families and students are desperate to achieve the American goal of obtaining a university degree and are willing to pay whatever it costs to get one. It is difficult for such families to accept that such a dream is not only beyond their reach, but the financial and personal cost may well turn out to be ruinous. The other problem is that the degree may be in a field where there are few or no well-paying jobs, a fact that seems to escape the attention of the colleges and their recruiters.
The injurious climate of the not for profit educational institutions piles societal failure on the already serious problems of high school drop-outs; the numbers of those unfortunate young people amount to seven percent of all young Americans between sixteen and twenty-four years of age. The drop-outs compete with the people who get a flawed education in a capitalism ruled mill for the lowest rung of jobs. And they compete with the people with high school diplomas who fail to obtain a bachelor’s degree (27%). That figure is even worse for people who fail to get a high school diploma but do get a GED (General Educational Development, known by wags as the Good Enough) degree. Only 5% of them go one to earn a bachelor’s. In fact, although 40% of those who pass GED obtain some post-secondary schooling, less than half spend even a year in such efforts. All of them at some time and in some way require assistance from the government, i.e., the already overburdened taxpayers.
The Obama administration is well aware of these problems and is trying to move against the worst offenders, which is proving to be a very considerable up-hill battle. The problem is a tangle of legal, financial, social, definitional, and human problems. One measure is to require compliance by the school with the gainful employment rule for federal assistance to the school, i.e., the institution must produce students whose loan repayment rates are less than twelve percent of their annual income. There are now income-based repayment programs. Federal, state, and local governments, and students and their families, are now instituting multimillion dollar lawsuits against the large for profit educational companies. The outcomes of these and many other educational finance issues will have lasting consequences for our republic. Will our society prosper? Will our economy grow? Will we be able to compete with other countries? Or will we make a long, slow slide into mediocrity?