Earlier this month, the Government Accountability Office (GAO) issued a scathing report about the for-profit college industry. After conducting undercover tests at 15 for-profit colleges, the GAO found that representatives of four colleges had encouraged applicants to engage in fraud to secure government college loans and that representatives at all 15 had attempted to deceive applicants in some way.
No two ways about it, this is terrible. People looking to increase their marketability in a tough economic climate are being deceived about what an education at these schools will cost, what doors these degrees might open, and the salaries students can expect upon graduation. Perhaps worse, at least some schools are encouraging applicants to engage in out-and-out fraud to obtain government loans and are telling students not to worry about repaying them. Many of these students, unable to repay their loans, are defaulting on them and costing taxpayers millions of dollars.
In addition to the issues highlighted by the most recent GAO report, there have been other problems as well. Some for-profit colleges spend a large portion of revenue on non-teaching related expenses, have high dropout rates, and engage in abusive recruiting and debt-management practices.
Given all of the abuses documented, and the ever-increasing amount of federal student aid dollars flowing to these schools, the industry clearly merits greater scrutiny and regulation by both Congress and the Obama administration. But it is also worth noting that for-profit colleges are not the only ones engaged in deceptive tactics here. Some urging additional regulation of the industry are not exactly on the up-and-up themselves. It seems hedge fund managers have developed a remarkable interest in for-profit educational institutions, and not out of heartfelt concern for the American educational system.
Steven Eisman, for example, a hedge fund manager who previously manipulated market reaction in the for-profit education industry and has raked in cash through short sales based on dire public forecasts for companies in that industry, testified (PDF) before a Senate committee in June that the industry is fundamentally unsound and we should expect to lose millions from students who attend such schools and default on their loans. Last May, after a speech before the Ira Sohn Research Conference in which he described specific for-profit education institutions as on financially shaky ground, share values of those companies plummeted and Mr. Eisman reaped huge profits.
Shortly after Mr. Eisman testified about the evils of for-profit colleges, ProPublica reported on other efforts by those with financial interests to encourage federal regulation of the industry. An unidentified hedge fund manager (though according to Mr. Eisman, not him) hired Johnette McConnell Early to encourage federal regulation of for-profit education by sending Education Secretary Arne Duncan a letter signed by 19 executives of homeless shelters and service agencies expressing the concern that "for-profit trade schools and career colleges are systematically preying upon our clients," and pledging support for tighter regulation. While some of those who signed the letter had personal knowledge of aggressive recruiting tactics, others had only heard about them third-hand. Ms. Early claimed not to know whether the hedge fund she worked for was betting against the for-profit higher education industry, but she did admit, "Clearly an investment firm is not going to look into something unless they're thinking about whether it's a good or bad investment."
Further, a non-profit group associated with another high-profile investor, Manuel P. Asensio, has written five letters to members of Congress and regulators since April criticizing the for-profit college industry and calling for stricter regulation. On top of this, one analyst of short-selling stated, "Short sellers have shown a steadily increasing interest in for-profit schools."
These examples suggest there may be a concerted effort by those who stand to benefit financially to drive down the stock price of certain for-profit schools. Knowing this, how can we be sure that the new regulations the Department of Education is proposing are really in the best interest of the Americans most likely to attend these schools? Even more disturbing, the revelations of the hedge fund managers' efforts here raise the specter of whether federal oversight and regulatory processes are being secretly manipulated for financial benefit in other instances.
While for-profit colleges have been rightfully criticized for offering little transparency as to how well taxpayers have been served by our substantial investment in that industry, some of the efforts to fuel anger against and encourage regulation of these schools are similarly lacking in transparency. Congress and the Department of Education should remain vigilant against the efforts of a few opportunistic multi-millionaires to abuse the regulatory process for their own pecuniary interests.
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A prime example would be our Medical Assisting program, which has been AAMA accredited since the early 80s. The state nursing board approved our nursing program where we built the nursing wing to the state’s specs. Do not tell me that the education I received or that we give does not change lives.
I have graduates who have started their own businesses. RNs working in the same hospitals side-by side nurses who received their education at public institutions.
Graduates from this program whether completed at our institution or a public institution will receive the same starting salary, there is not an employer anywhere who cares where the graduate completed their education, but whether can do the job they were hired to do.
The education I received provided me the chance I needed to propel my future, it still does. However,I can't do anything about the unemployment rate nor the amount of doctors who have suddenly closed their practice and left this area because of the currently economy.
Gainful Employment and it is important to get rid of the unscrupulous practices committed by any institution are solid ideas but all when applied to all!
http://www.huffingtonpost.com/bob-samuels/higher-education-everythi_b_681266.html
I went to my local community college for some classes and I can safely say that anyone going to that school is wasting taxpayer money. This school even offers certificates (1 to 2 year program) for similar things that I went to the bad for-profit for. Only issue with that is they don't provide anything resembling an education for the cert. Like say a Network certificate and the only class they give that has anything to do with networking is "networking with windows". As in networking with your home computer to a home computer.
I cannot say that all for-profits are good, my guess are some are even really bad. UofP and Devry I find questionable. But to act like all for-profits are bad and all non-profits are good is dishonest. The education system in this country sucks, anyway we can actually improve it is good, but that means also looking at non-profit.
I still believe the future of higher education is going to be in the private sector as the states continue to look for ways to cut costs.
One thing is certain - there is no room for short-sellers like Eisman in the gainful employment debate. Students are the ones who will be affected by the implementation of this rule and they are the voices we should be listening to.
As former president of Colorado State University, I discuss higher education access and success as well as other higher education issues on my blog at http://larrypenley.com. You can also follow me on twitter at @LarryPenley.
But alas, even though there is 0 correlation between more government funding for schools and educational progress, our government will still throw and waste billions at the problem without never realizing the root problem. Time to privatize education and the marketplace will offer students what they want and at a lower price.
Why should any publicly generated funds fall into the pockets of private owners and investors? (I might ask the same question about the health insurance industry.)
But many, many, many not-for-profit "real" schools are just as opportunistic as the heads of the for-profit institutions.