Tuesday, July 31, 2012

For Profit Colleges And Other Costly Taxpayer Ripoffs

Senate Committee Report on For-Profit Colleges Condemns Costs and Practices has this to say:

"Wrapping up a two-year investigation of for-profit colleges, Senator Tom Harkin will issue a final report on Monday — a voluminous, hard-hitting indictment of almost every aspect of the industry, filled with troubling statistics and anecdotes drawn from internal documents of the 30 companies investigated.

According to the report, which was posted online in advance, taxpayers spent $32 billion in the most recent year on companies that operate for-profit colleges, but the majority of students they enroll leave without a degree, half of those within four months.

“In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation,” Mr. Harkin, an Iowa Democrat who is chairman of the Senate Health, Education, Labor and Pensions Committee, said in a statement on Sunday. “These practices are not the exception — they are the norm. They are systemic throughout the industry, with very few individual exceptions.”

In a statement on Sunday, the Association of Private Sector Colleges and Universities, the leading trade group of for-profit colleges, called the report “the result of a flawed process that has unfairly targeted private-sector schools and their students.”

For-profit higher education has long been a politically divisive issue, with Democrats generally arguing that greater regulation is needed to prevent huge publicly traded colleges from plundering the Treasury for student financial aid while leaving students with crippling debt and credentials that are worthless in the job market. Many Republicans see such colleges as a healthy free-market alternative to overcrowded community colleges, offering useful vocational training and education to working adults who will not attend more traditional institutions. . . .

Over the last 15 years, enrollment and profits have skyrocketed in the industry. Until the 1990s, the sector was made up of small independent schools offering training in fields like air-conditioning repair and cosmetology. But from 1998 to 2008, enrollment more than tripled, to about 2.4 million students. . . .

Enrolling students, and getting their federal financial aid, is the heart of the business, and in 2010, the report found, the colleges studied had a total of 32,496 recruiters, compared with 3,512 career-services staff members.

Among the 30 companies, an average of 22.4 percent of revenue went to marketing and recruiting, 19.4 percent to profits and 17.7 percent to instruction. . . .

The bulk of the for-profit colleges’ revenue, more than 80 percent in most cases, comes from taxpayers. The report found that many for-profit colleges are working desperately to find new strategies to comply with the federal regulation that at least 10 percent of revenue must come from sources other than the Department of Education. Because veterans’ benefits count toward that 10 percent even though they come from the federal government, aggressive recruiting of students from the military has become the norm.

The amount of available federal student aid is large and growing. The Apollo Group, which operates the University of Phoenix, the largest for-profit college, got $1.2 billion in Pell grants in 2010-11, up from $24 million a decade earlier. Apollo got $210 million more in benefits under the Post-9/11 G.I. Bill. And yet two-thirds of Apollo’s associate-degree students leave before earning their degree....

On average, the Harkin report found, associate-degree and certificate programs at for-profit colleges cost about four times as much as those at community colleges and public universities. . . .

Many of the for-profit colleges, the report found, set tuition at almost exactly what a student could expect in maximum federal aid, including Pell grants and Stafford loans. . . .

Furthermore, the report found, recruiters are often encouraged to avoid directly answering questions about costs and instead emphasize that with federal aid, student will pay little out of pocket. And costs are not easy for students to determine. A former Westwood College recruiter explained that prospective students were told that the cost was $4,800 per term, but not that there were five or six terms a year rather than the usual two or three.

At many schools, students learned only after the fact that their credits would not transfer to another college or university or qualify them for the professional licensing they sought.

Students at for-profit colleges make up 13 percent of the nation’s college enrollment, but account for about 47 percent of the defaults on loans. About 96 percent of students at for-profit schools take out loans, compared with about 13 percent at community colleges and 48 percent at four-year public universities.

Colleges with very high loan default rates in the two years after graduation (now changing to three years) lose their eligibility for federal student aid. As a result, the report found, many of the for-profit colleges try to move students having trouble with repayment into deferral or forbearance until they are past the years the government monitors."

My Take

For-profit colleges are an obvious taxpayer ripoff. That's not a surprise. Collusive capitalism in action.

However, not-for-profit public colleges and universities are generally a taxpayer ripoff as well. Pell Grants and government sponsored student loans in action.

So are technical schools and other "skill" oriented facilities. Same story.

The common ingredient is an abundance of unaccounted for and broadly available "free or cheap" government money. Sometimes it's in the form of student grants or loans, sometimes in the form of research grants and sometimes in other variations of the same theme.

A common ingredient of all this is lack of accountability and transparency. A lack of metrics as well.

In other words, it looks a lot like K-12 spending on public schools and other government spending programs, too.

Government takes from the people and then doesn't serve the people by acting as stewards or ficudiaries. It doesn't even try.

As a result, the new Senate report doesn't surprise me even a little bit. Nor should it surprise you. But it should have covered all the other areas mentioned hereinabove as well. Not just for-profit institutions.

The problem is government and not the genuine non-government sponsored private sector profit generators. Government shouldn't use taxpayer money to help its collusive or crony capitalist friends make a profit or otherwise make money or enrich themselves at taxpayer expense.

The solution is obvious. Let the market decide and keep government knows best rules and regulations off the campus. Subsidize individuals and not institutions.

Finally, what would surprise me would be to see some genuine "public servants" taking care of the money entrusted to them by We the People.

But a MOM mentality and approach has been MIA in our elitist government for a long time now.

Instead it's OPM all the way. How sick!

Thanks. Bob.

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