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Obama’s Crusade Against Profits

Coming soon to a college near you.

Jul 5, 2010, Vol. 15, No. 40 • By ANDREW FERGUSON
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You can never be sure when or why one industry or another will draw the attention of the Mr. Fixits of our federal government. Just imagine: There you are, Mr. or Ms. Businessperson, walking along, making money, minding your own business, and then wham: They pop up out of nowhere, wheeling around like a gun turret and fixing their gaze on you and your company, insisting that they’re going to make you fairer and more rational and fix problems you didn’t know you had. It must be terrifying. 

Obama’s Crusade Against Profits

And for that reason, if only for that reason, the multibillion-dollar industry of for-profit colleges deserves our sympathy. Proprietary colleges, as they’re also called, educate about 7 percent of America’s college students, according to a study by the Chronicle of Higher Education. Most of these are “nontraditional”—single parents, high school drop-outs, part-time workers, adults past the usual college age. They learn a trade or prepare for careers in medicine, business, education, or information technology. Being needier than the average college student, they bring to their schools large sums in federally subsidized loans, which the for-profit schools are delighted to accept. Students at proprietaries consume nearly 20 percent of the federal government’s education loans and grants. 

To oversee the for-profits from a perch at the all-seeing Education Department, President Obama last year appointed Robert Shireman, an activist who had spent much of his career chastising for-profit schools. Like most activists, he himself was not-for-profit. This spring Shireman gave a speech to school administrators that signaled Washington’s intense interest in the schools. He singled out for-profit companies by name, ticking them off one by one—from Kaplan to DeVry, Strayer to the University of Phoenix. With heavy sarcasm he “congratulated” them for the large number of students they had recently enrolled, despite “these difficult economic times,” and expressed mock admiration for the size of their revenue streams.  

Then he dropped the sarcasm and compared the schools to the financial companies that had run amok before the collapse of 2008, and reminded them, pointedly, of the severe regulations that might be imposed as a consequence.

“Nice business you got there,” Shireman seemed to be saying, sniffing the carnation in his lapel. “I’d hate to see anything happen to it.” 

Meanwhile, PBS’s investigative program Frontline made for-profit colleges the subject of a breathless report that was intended as an exposé. The Education Department announced an investigation into the private accrediting agencies that decide whether proprietaries are eligible to accept federal loans. A raft of new regulations was handed down, with another one—which proprietaries say will force the closing of several school programs—set to be issued this fall. 

Democrats on Capitol Hill responded on cue. The House Committee on Education and Labor held a hearing at which the chairman, George Miller, disparaged the very notion of “education for profit.” Proprietary schools, he’d discovered, have obligations to “shareholders, profit margins, the stock markets,” and other things that are tainted by commerce and money-grubbing. A few days later, Miller joined with a pair of Senate pashas, Richard Durbin and Tom Harkin, in asking the General Accountability Office to commence a “review” of the entire industry. Harkin followed up last week with a committee hearing of his own, featuring a parade of witnesses who likened proprietary colleges to a criminal enterprise.

What brought all this on? Like an idiot, the proprietaries have been making too much money—and making it, moreover, at a moment that promises to be a hinge point in the history of American higher education. Last year President Obama set the goal of making the United States the world leader in the percentage of population with college degrees. He has put the muscle of the American taxpayer behind his vow. The amount provided in federally subsidized college loans and grants nearly doubled last year; similar increases in operational funding have flowed to community colleges. At the same time, the federal government did away with the private bank programs that traditionally handled college loans and transferred control to the Department of Education. 

The government is inducing more adults than ever before to go to college, and to the horror of the Mr. Fixits, the students are grabbing their loans and enrolling in the wrong kind of schools. One fourth of all adult undergraduates are going to a proprietary institution. At present trends, that figure will rise to 42 percent by the end of the decade. Unless something is done.

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