Well, sorta. As Halperin explained, Betsy DeVos' Department of Education "has blessed a series of troubling deals that allow a [not-]for profit college to be 'serviced by connected for-profit companies."
To what purpose?As Halperin reported:
The non-profit school benefits from the elimination of the for-profit stigma, reduced regulations, elimination of taxation, and eligibility for more state and charitable grants. Meanwhile, the for-profit, and its owners and executives, get to siphon off a lot of the revenue, much of it from taxpayer-funded grants and loans.Thus in the fairyland world that Betsy DeVos has created, Brian Mueller wears two hats. He is president of Grand Canyon, a non-profit entity. He is also CEO of the university's parent for-profit corporation, Grand Canyon Education. GCE trades on NASDAQ at $115 a share and reported a profit margin of 27 percent at the end of 2018.
Mueller conducted an earnings call to his investors recently in which he complained about non-profit colleges warning potential students not to enroll at a for-profit college. Through DeVos' mumbo jumbo, Grand Canyon can now call itself a nonprofit college, which has boosted its enrollment.
As Mueller boasted: "They see our ad & call Grand Canyon and within 72 hours everything is done. Applications filled out. Transcripts evaluated. Financial aid is done. They go to our website, they see who Grand Canyon is and say, 'this sounds good,' and they start."
As Halperin accurately observed, "the Donald Trump-Betsy DeVos Department of Education . . . has done everything possible to eliminate rules that protect students and taxpayers from predatory college abuses."
In fact, according to a Century Foundation report, which analyzed colleges with large online enrollments, Grand Canyon only spends 17 percent of its tuition money on educating students (as summarized by Halperin). Some non-profit!
I once thought that DeVos was simply incompetent and making decisions that benefited for-profit colleges out of ignorance. But DeVos knows exactly what she is doing, and she must know that the for-profit college industry as a whole is committing economic rape on unsophisticated young people, including first-generation college goers.
In a November speech, DeVos admitted that the student-loan program is in crisis. This is what she said:
- The federal government holds $1.5 trillion in outstanding student loans, one third of all federal assets.
- Only one in four federal student-loan borrowers are paying down the principal and interest on their debt.
- Twenty percent of all federal student loans are delinquent or in default. That's seven times the delinquency rate on credit card debt.
Of course, the for-profits aren't responsible for all the carnage in the student-loan program, but they are responsible for a lot of it. Adam Looney and Constantine Yannelis, writing for the Brookings Institute, reported awhile back that the 5-year default rate for one cohort of students who attended for-profit colleges was 47 percent! Several for-profits have been shut down in a shower of fraud allegations.
But even for DeVos, this latest scheme, which allows a college to call itself non-profit while its for-profit parent reports a profit margin of 27 percent, is outrageous.
But even for DeVos, this latest scheme, which allows a college to call itself non-profit while its for-profit parent reports a profit margin of 27 percent, is outrageous.
Thanks for the post. Halperin is always valuable.
ReplyDeleteStudent loans are not a very valuable asset, for at least two reasons:
1. With 40% delinquency rates, the asset must be devalued right away (see Preston Cooper in Forbes.
2. Loans are a toxic asset, in that many borrowers must be ruined in order for the asset to pay off. Kind of like an Oklahoma bank owning a lot of farm mortgages in 1932.
Julie Margetta Morgan hammers home the concept that the federal government must stop trying to make money or break even on loans. We have to accept the idea that a lot of loan monies are not coming back. America is rich enough to handle this.
Thanks, Bob, for your perceptive comments. Betsy DeVos herself basically admitted in a speech she gave last November that a lot of student loans labeled as performing are not going to be paid back. I agree that the government should admit that a high percentage of student-loan debt is uncollectible and should be written off.
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