Thursday, September 29, 2016

Stamato's For-Profit College Hatchet Job

The Left is at war against private colleges, especially for-profit colleges. This includes the Obama Administration, through its so-called “gainful employment” regulations, and its henchman in the press. A good example of Obama’s henchman is Linda Stamato, a faculty fellow at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, a public college. In a New Jersey Star-Ledger guest column titled The predatory for-profit college industry and its enablers in Congress, Stamato opens with:

For-profit college conglomerates take in millions of U.S. students—12 percent of the nation's college students—and pocket their publicly-financed student grants and loans—$30 billion annually—while their students account for nearly 50 percent of loan defaults.  These outfits generate substantial profits, attract Wall Street speculators and hedge funds to finance their expansion all the while making a joke (on us) of the notion that "private industry does it better."

The rest is a hit one-sided hit piece full of accusations that could apply to every college in America, where graduation rates nationally are abysmally low. I left these comments:

Why do these millions of students flock to for-profit schools? Because they see value in what the colleges offer. For-profit colleges, also called career colleges, cater largely to mature working poor and middle class students who are trying to improve their skills through education while juggling jobs, families, and other adult responsibilities. These schools succeed despite unfair competition from public colleges—especially community colleges—which have the benefit of direct taxpayer subsidies that enable them to keep tuitions artificially low. This leads to artificially better loan-to-income ratios for the community colleges, thanks to the tax subsidies that for-profits don’t enjoy.

The Obama Administration’s attack on for-profit schools is motivated by an ideological bias against for-profits. The gainful employment rules are rigged mainly to target the for-profit colleges. There is a double standard here. If the gainful employment debt-to-earnings guidelines were fairly enforced against all colleges, the public colleges and non-profit colleges would fare as bad or worse than the for-profits.

The problem of the disconnect between the cost of higher education and the ability to repay the loans cuts across all of higher education, not just private for-profits. And it is mainly the government’s fault, relating to the wide-open spigot of government-backed student loans and grants. Profit-seeking is not predation. But the real predator is the government, and the victims the taxpayers that are involuntarily forced to fund the government’s college financing schemes. All colleges, not just the for-profits, receive the loot. Yet Obama gives all but the for-profits a pass.

True, there are some unscrupulous private for-profit colleges. Where outright fraud is involved, enforcement of anti-fraud laws is in order. But the fraud of the few doesn’t justify broad-based regulation across the entire industry sector. It never does. Regulation punishes the innocent for the wrongdoing of the few: It is the institutionalization of guilty until proven innocent, akin to treating all Italians like paroled criminals because a few become mafia. And don’t forget the irresponsible students who fail to rationally judge whether the employment prospects justify the costs of the education. College administrators need to avoid overhyped promises but students need to exercise personal responsibility as well.

What the enemies of for-profits evade is that the same accusations leveled against the for-profits can just as rightly be aimed at public colleges and their students. All of higher education has ridden the government’s college financing gravy train to the tune of tuition increases four times the rate of inflation over the last several decades. We’re said to have a “student loan crisis.” That crisis, to the extent it is a crisis, is traceable fundamentally to the perverse incentives inherent in the government’s involvement in higher education funding. The Obama Administration and the Left generally are allowing their irrational hatred of profit-seeking to drive a scheme to target, crucify, and eventually eliminate the for-profits and gain increasing government control over higher education.

Under Obama’s gainful employment rules, students attending or considering for-profit colleges that don’t meet the gainful employment standards will lose access to federally-backed loans and grants, regardless of the judgement of the student or whether fraud was actually involved. Given the dominance of the government in student financing, this will effectively put many of these schools out of business. And that is the real goal of Obama and their media and political allies.

The government should not be involved in lending money to students at all. But so long as it is, and so long as it regulates these loans, it is morally obligated—and should be legally obligated—to treat all students and all educational institutions equally under the law. Toward that end, Congress should amend the Higher Education Act to forbid the executive branch from acting prejudicially against private-sector, for-profit colleges and universities.

At least the for-profits are still able to “petition the government for a redress of grievances.” But it’s a shame that this college sector has to seek “friends in high places” to fight their own government for the fundamental human right to do business with willing education-seeking consumers.

We need not excuse the objectively provable fraud perpetrated by some bad for-profits to recognize the gross injustice the government is waging against for-profit schools. It’s part of an ideological campaign against private education and the profit motive. Obama’s use of government regulatory power to discriminatorily attack the for-profits is regulatory tyranny that would make any gangster drool with envy. I’m sorry that the gainful employment rules have, unlike 2011, survived court challenge this time. Hopefully, the ruling will be overturned on appeal. The discriminatory attack on for-profit colleges, which offer educational flexibility not always available from public colleges, would crush one of the last vestiges of freedom and individual rights in education and cut off an important career path for millions of people trying to improve their career prospects.

Related Reading:

NJ Assemblyman Joseph Cryan's Bill to Control College Costs is the Wrong Solution

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