Sunday, August 1, 2010

Should Uncle Sam Attend For-Profit Schools?

Problems with student loans revolving around for-profit universities draw moves to reform the federal footprint.
By Emily Badger in MILLER-MCCUNE

Some Interesting Excerpts:
The University of Phoenix, for example, reported last year that 86 percent of its revenue came from federal Title IV student aid. It’s an investment from which the government gets little in return when students neither graduate nor repay their debt. And it subsidizes an educational industry beholden not to students, but to Wall Street.

“This is now a sector in which the vast majority of participants are actually engaged in what I view as counterfeiting of degrees and consumer fraud,” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. “Consumer fraud defined as over-advertised, over-promised, overcharged and under-delivered.

“For a group that reports to be market-based,” he went on to a room of education insiders at the New America Foundation, “what is a better measure of market failure than apparently nobody but the idiot federal government puts their money into these institutions? That is the single best indication that the product has no intrinsic value. People who spend their own money don’t spend it there.”

Nassirian calls the benchmarks “anemic” relative to the scope of the problem. But the administration’s stated goals also raise another question: If it’s a waste of the government’s money to subsidize loans for education that doesn’t actually lead to gainful employment, why stop at for-profit higher ed? Couldn’t the same be said of a liberal arts degree in philosophy?

James Kvaal, a deputy undersecretary at the education department, says the agency has long been responsible for setting minimum standards of eligibility for for-profit schools seeking access to federal student aid. The phrase “gainful employment” has been on the books since 1965; DOE has simply never defined it before.

“When you’re talking about regulating subprime loans, you’re setting minimum standards. You are potentially reducing peoples’ ability to get loans,” Kvaal said. “Here we’re talking about programs’ eligibility. Students aren’t going to lose their eligibility.”

It’s also hard to argue for access to an education that may leave students worse off than when they enrolled.

“If we have an access problem in this country,” Nassirian said, “we should forthrightly address it and not simply satisfy ourselves by stuffing the pockets of low-income citizens with vouchers to enable somebody to rip them off. That is not education.”
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