Tuesday, August 17, 2010

For-profit colleges: This is Private Enterprise

According to a Wall Street Journal article (Aug. 17, 2010, Page B6), for-profit colleges are upset by proposed new rules from the DOE re government aid.

According to the article, "the DOE in late July proposed rules intended to measure how well for-profit schools train students for "gainful employment" in a recognized occupation."

It turns out that many (most?) of these wonderful examples of private enterprise "derive more than 80% of their revenue from federal student aid. Students attending for-profit schools, in general, are twice as likely to take on debt for an associate's degree and, when they do, they take on nearly twice as much debt compared with students who attend nonprofit and public institutions. While both groups would be entering the same job market, students with higher debt may find it more difficult to repay their loans."

"According to the Institute for College Access & Success, an advocacy group promoting affordable higher education, 98% of for-profit school associate's degree recipients in 2007-2008 had loans in 2008, with average debt of $19,700. At public and nonprofit colleges, 40% of associate's degree recipients had loans, with average debt of $10,900."

The proposed DOE guidelines hardly seem onerous. "Schools would face no penalties if they posted student-loan repayment rates above 45% or if students maintained debt-to-income ratios below 8% of total income."

So, in essence, the Federal Government, i.e., you and me, are giving money - via student loans - to private companies, listed on stock exchanges with, no doubt, highly-paid CEOs and stockholders, to saddle young people who want an education with, probably, unacceptable levels of debt.

Why, exactly, is this kind of government-funded education OK with Conservatives but the more normal direct support given, say, to public universities is criticized as being wasteful?

One could, and should, of course make similar arguments about defense spending. How many so-called private companies that make products or provide services for the Defense and related Departments depend largely or wholly on government money for their profits? Is there any justification, other than Conservative economic philosophy, for assuming that such so-called private companies are any more competitive or efficient or innovative than, say, a non-profit run directly by the government - with no billion-dollar executives or profits that had to be distributed - would be?

Just asking.

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