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Dr. Lawrence M. Schall Headshot

Our Tax Dollars at Work: The Shame of Proprietary Colleges

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Floyd Norris writes today on The New York Time's business page about what ought to be a national scandal. It actually is a scandal but it would appear that the dollars being contributed to our politicians by the for-profit higher education industry has prevented the scandal from being "discovered" by our lawmakers. At a time when government support for our public universities has been slashed and slashed again, state support of private, for-profit colleges continues to grow. As we make public education less accessible to the neediest in our country, these students are being heavily recruited to attend proprietary schools with the government covering near all their expenses. What's not wrong with that picture?

President Obama has been trying to write rules that would stop loans from going to the worst of the worst, but the earliest any school would be impacted is 2014. Norris has been investigating one particular school -- ITT Educational. We've all seen their TV ads and billboards. I'm not sure we have noticed the type that appears in very small letters at the end of the commercial or at the bottom of the ad: Credits earned are unlikely to transfer. They might as well say that attending ITT is a complete waste of time and money. Norris has been trying to get an answer to what he thinks ought to be a simple question -- how many students who enroll in ITT get a degree? The answer is not so easy to discover, but with a little digging, he came up with this. Sixteen percent of the students who began school in 2004 completed a two-year degree within three years or a four-year degree in six. He also discovered that two-year degree costs about $50,000 and the four-year, presumably, about twice that. That's a lot of money, significantly more than the average student pays at my university, considered one of the best liberal arts colleges in the nation. In 2010, the Indianapolis campus of ITT had more than 7,600 students. They awarded less than 900 degrees that year. Last year, ITT had revenue of $1.5 billion dollars, 89 percent of which came from the government. Students and parents put up about 4 percent. Are you sick yet?

If not, this ought to do the trick. In 2009 and 2010, pretax profits at ITT exceeded what they spent on educating students. OK, I'm officially sick. It's not clear if Obama's limited efforts will have any impact. A trade group of proprietary schools has filed suit to halt the new rule, claiming unjustified "regulatory excess." Please.