The nation has changed dramatically since I returned from World War II in 1946. Back then Americans shared a common value that brought us together as a nation. Regardless of political party or economic status, we felt a personal responsibility to help our fellow countrymen, especially returning veterans. Out of that was born the first GI Bill, which helped create the largest middle class this country had ever known.
With the help of the GI Bill, my wife and I raised a family and I had a successful career in finance. Lately, I have grown deeply troubled as I watch that uniquely American ethic of service give way, particularly in the business community, to the overwhelming power of self-interest and obsession with the bottom line.
One deplorable practice that epitomizes the triumph of greed over the greater good is the exploitation of our returning Iraq and Afghanistan veterans by predatory players in the for-profit "education" industry. Many operate with questionable academic credentials or lack proper accreditation, often leaving veterans and their families heavily in debt with little or nothing to show for it. For-profits account for half the nation's student loan defaults although they enroll 13% of the country's students. More than two-thirds of students attending these for-profit companies don't graduate.
These for-profits businesses -- I will not call them colleges -- target veterans, because they are eligible for GI Bill and other federal education benefits. Approximately 85-95 percent of their revenue comes from taxpayer-supported benefits. Former recruiters told U.S. Senate investigators they were trained to tap "the military gravy train" and "probe for weaknesses" to emotionally manipulate vulnerable prospects into enrolling. Even while still in uniform, these young men and women are hounded via phone calls and emails, approached on military bases by cynical recruiters posing as "military advisors," and ultimately duped into signing over their GI Bill benefits and taking out student loans. This is unconscionable.
These for-profit predators must be seen for what they are -- domestic enemies.
Increasingly, federal and state investigators are looking at whether these companies are violating consumer protection laws. State Attorneys General have filed lawsuits against some of the worst offenders, and the Obama Administration and Congress have moved to strengthen oversight and transparency.
The growing spotlight on these companies is affecting their bottom line. Several of the biggest players have reported steady losses in enrollment and revenue over the past few quarters, and their stocks have fallen. DeVry University and ITT Educational have seen their stock prices cut in half. The University of Phoenix reported an 18% drop in enrollment from a year ago; DeVry's enrollment fell by more than 16%.
In 1987, when I left the company I started two decades earlier, I gave a speech to our investors that summed up what, even then, I was starting to see. I said, "...all around us there is a breakdown of these values -- in business and government . . . it is not just the overweening, overpowering greed that pervades our business life. It is the fact that we are not willing to sacrifice for the ethics and values we profess. For an ethic is not an ethic, and a value not a value, without some sacrifice for it. Something given up, something not taken, something not gained. We do it in exchange for a greater good, for something worth more than just money and power and position."
For my colleagues who are still considering the wisdom of remaining in a declining business that is predicated on marketing over morality, I would ask you this question: if you help create a generation of under-educated, unemployable Americans in order to make a quick dollar, who will be able to buy whatever else you have to sell? There will be no middle class left in America. The engine that made our country prosper after World War II will have been sold off for parts.
Jerome Kohlberg, a founding partner of Kohlberg Kravis Roberts and a limited partner of the private equity firm Kohlberg & Co., is chairman of the Initiative to Protect Student Veterans.