The Education Trust's recent report "Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities" documents the way that private for-profit colleges are cashing in on the current financial crisis by offering disadvantaged students an opportunity to earn degrees during a time when public universities and colleges are reducing their enrollments. The catch is that the vast majority of these students never graduate, and the only thing they accomplish is racking up huge student loans. According to this report, "only 22 percent of students who enroll in four-year-degree programs at for-profit colleges graduate within six years, compared with 55 percent and 65 percent at public and private nonprofit colleges, respectively."
One reason why the students at these schools often fail to complete their programs is that these institutions pour much of their money into marketing and compensation for senior administrators, while they short-change classroom instruction and student services. Furthermore, these schools now receive most of their income through federal student aid, and the result is that taxpayers are supporting a system where lower- and middle-class students go into debt in order to bring profits to wealthy corporations.
Even the students who do graduate often end up defaulting on their loans because they cannot find a job that will cover their high loan payments. In fact, the median debt for students graduating from for-profit colleges with a bachelor's degree is $31,190, while the average for students graduating from public colleges is $7,960. Not only are banks making huge profits off of these students, but many of these colleges are controlled by privately traded companies on the stock exchange. In short, wealthy investors are profiting from the exploitation of impoverished students who are being punished for looking to better their lot in life.
One of the clearest examples of the link between the decreased access at public universities and the increased profits at non-profit colleges can be seen in the case of Richard Blum, who is not only a Regent of the University of California, but he is also one of the biggest investors in for-profit education. Thus, while the cost-cutting UC system turns away students, Blum profits from the increased value of his stocks in ITT Educational Services (ESI) and the Career Education Corporation (CECO), and luckily for Blum, he is married to U.S. Senator Diane Feinstein who can help push for less regulation and more funding of for-profit colleges. In fact, according to the Education Trust's report, Blum is investing in two companies, ESI and CECO, which are not only providing for-profit education but are also acting like banks by offering students private loans for their own for-profit schools.
It just seems that our economy is addicted to using middle-class taxpayer dollars to fund programs that end up transferring wealth from the neediest to the wealthiest. Just as middle-class taxpayers were asked to bail out the wealthy banks who seduced poor people into accepting subprime mortgages, taxpayers are funding subprime student loans going mostly to poor people of color. In other words, as disadvantaged minority students are being excluded from private and public universities, they are being directed into highly exploitative schools that provide an inferior educational experience at a much higher cost. And you, my reader, are paying for this great redistribution of wealth.
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