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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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Enrollment has surged despite the high tuitions that proprietaries charge. Average tuition at a for-profit is roughly twice that of public schools (state universities or community colleges), and roughly half that of private, nonprofit schools. The Mr. Fixits, being government guys, suspect a trick. Miller, Shireman, and the others see the surging enrollments (and surging profits) as the result of market manipulation, misleading advertising, and deceptive recruitment practices—one more instance of the confidence game that is free enterprise, the ongoing cycle of exploitation of the weak at the hands of the powerful. 

An industry as vast as proprietary education will have its share of predators and sleazeballs, but you can find simpler explanations for the popularity of for-profits. They offer a flexibility and convenience that’s unavailable at most nonprofits, whether state-run or private. They offer multiple locations with uniform fees and credit hours. Rolling admissions allow students to begin study whenever they’re ready. For-profits offer a higher percentage of night and weekend classes and make greater use of online teaching. Schools like these are designed to appeal to a single-parent or an adult working full time. 

The flexibility does not extend to the curriculum, however, which may, paradoxically, be another advantage proprietaries enjoy over their nonprofit peers. There’s something refreshingly no-nonsense about the for-profits, especially to anyone familiar with the airy, free-floating curriculum found in nonprofit schools. The liberal arts are rarely indulged. Course work, with some exceptions, is directed toward the practical goal of learning how to do a job, as a medical technician, a nurse’s aide, a paralegal, so as to fix oneself on the first or second rung of the ladder to a decent living. There aren’t many “History of Ideas” majors at DeVry.

The nontraditional population also explains why for-profit students are more likely to default on their student loans. Receiving 20 percent of all federal loans, for-profits account for more than 40 percent of the defaults. Their students usually have many more of the risk factors—lower incomes, unconventional family and work arrangements, past involvement in drugs and drink—that lead to high default rates. The same students with the same profiles would default at roughly the same rates whether they were enrolled in nonprofits or for-profits. 

Yet the Mr. Fixits cite the default rate as an excuse to tighten regulatory control and thereby, they say, save the taxpayer money. It is an irony of the Obama era that an industry could be faulted for educating the disadvantaged citizens who are supposed to be the primary object of the president’s concern. But government subsidy follows a peculiar and pitiless logic, under which the hobbling of a private business can be cast as an act of fiscal responsibility, and private citizens, receiving a subsidy in hopes of bettering themselves, will be allowed to better themselves only under approved conditions. 

We should quickly stipulate that for-profit colleges are hardly delicate flowers of free enterprise. They are creatures of government subsidies without which they would become unrecognizable. And they are happy to meet the government on its own terms. 

Recently the industry’s trade group, the Career College Association, hired the Podesta Group to defend their cause against the coming Democratic onslaught. The firm is run by Anthony Podesta, a longtime professional Democrat and the brother of John, who was President Clinton’s chief of staff. This year CCA made sure to invite President Clinton to speak at its annual convention, for his customarily mind-boggling fee. The subject of his speech was “Embracing Our Common Humanity.” He assured the attendees that they were okay by him. 

According to Bloomberg News, the CCA also hired the lobbyist Paul Braithwaite, the former director of the Congressional Black Caucus. The University of Phoenix hurried to donate $1.25 million in college scholarships to the Congressional Black Caucus Foundation. After careful study, the caucus, through several of its members, expressed disapproval of the administration’s campaign against for-profit education. 

However the campaign turns out, we are unlikely to hear an answer to the most interesting question it has raised: Why single out the proprietaries for special attention? 

Both kinds of colleges, for-profit and nonprofit alike, rely for their existence on government subsidies, and both use the easy money to insulate themselves from market pressure. Both enjoy the inflated administrative salaries and bloated management that such insulation makes possible. Both are certified by the same inbred and lackadaisical bodies of accreditation. Both resist submitting themselves to objective measures of performance and quality. 

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