Own a Piece of the American Dream: Buy Stock in the For-Profit College Industry

 Fifty years ago, most Americans understood that education was a public responsibility. It was the community's job to operate good public elementary and high schools. It was the state's job to support high-quality public colleges and universities.

All in all, this notion of publicly supported education worked well. Some public schools were better than others, but most were pretty good.

Some public universities were also better than others. The University of Michigan, University of Wisconsin, the University of Virginia, and the University of Texas were universally regarded as some of the finest universities in the world. Still, even the states of Idaho, Oklahoma, and other flyover states operated pretty good public colleges.

Of course, there was always a place in American education for non-profit schools and colleges. Harvard, Dartmouth, and dozens of lesser-known private colleges were well respected as public-spirited organizations, and the Catholic Church operated flourishing parochial schools.

Until recently, it hardly occurred to anyone that schooling should be turned over to investors who could make a fast buck in the education racket.

How times have changed. We now have for-profit K-12 charter schools and almost a thousand for-profit colleges.

And anyone can get in on the action. Equity funds own some for-profit colleges, and others trade on the stock market.

Adtalam Global Education (ATGE), which owns Walden University and two medical schools in the Caribbean, traded for $39 a share last week--down a few bucks from its 52-week high. 

Grand Canyon Education (LOPE) operates Grand Canyon University, a Christian school that makes money for investors. You can buy into that outfit for $84 bucks a share.

You can't buy shares in the University of Phoenix (UP) anymore. In 2017, a private equity fund out of Chicago took over the company that operates UP.

We all know that complaints have barraged the for-profit industry for many years. Critics have argued that for-profit college tuition is too high at most schools and that many for-profits deliver a shoddy product. Some commentators have pointed out that the for-profit industry preys on minority and low-income students.  

But, hey--this is America, and we're all entitled to make a buck off the rubes. So, if you want a piece of the American Dream, you can purchase some for-profit stock or buy a piece of an equity fund that owns a college.

As for me, if I am going to invest in a dodgy industry, I would prefer to buy stock in the casinos. 

Chicago, home to Adtalem's corporate headquarters

Betsy DeVos, the for-profit college industry's best pal, rolls back regulatory protections for students who were defrauded by for-profit colleges

This week, Betsy DeVos, President Trump's lamentable Secretary of Education, proposed new rules for implementing the Department of Education's Borrower Defense to Repayment Program.

The new rules--433 pages long--outline the DeVos regime's procedures for processing fraud claims filed by students who took out federal loans to attend for-profit colleges and were swindled.  The New York Times and Steve Rhode of Get Out of Debt Guy reported on this development, but Rhode's analysis is more comprehensive and insightful than the Times story. Rhode's essay is the one to read.

Millions of Americans have been defrauded by for-profit colleges--literally millions. Corinthian Colleges and ITT Tech filed for bankruptcy, brought down by regulatory pressures and fraud allegations. Those two institutions alone had a half million former students.

Globe University and Minnesota School of Business both lost their authority to operate in Minnesota after a Minnesota trial court ruled they had misrepresented their criminal justice programs.  Last month, the Minnesota Court of Appeals partially upheld the trial court's judgment, finding sufficient evidence to support a fraud verdict on behalf of 15 former students who testified at trial.

In California, DeVry University agreed to pay $100 million to settle claims brought by the Federal Trade Commission that it had advertised its programs deceptively. In the wake of that scandal, the company owning DeVry changed its name from DeVry Education Group to Adtalem Global Education.

The Art Institute, which charged students as much as $90,000 for a two-year associates' degree,
agreed to pay $95 million to settle fraud claims brought against it by the Justice Department, but the settlement is paltry compared to the amount of money borrowed by 80,000 former students.  And there have been numerous small for-profits that have been found liable for fraud, misrepresentation, or operating shoddy programs.

The for-profit scandal is a huge mess. If every student who was defrauded or victimized in some way by a for-profit college were to receive monetary restitution, it would probably cost taxpayers a half trillion dollars.

So how do we fix this problem? The Obama Administration approved rules that would have streamlined the process for resolving student-fraud claims, but Betsy DeVos pulled back those rules just before they were to have been implemented.

The new DeVos rules, summarized by Steve Rhode, put most of the blame on students for enrolling in these fraudulent and deceptive for-profit colleges. According to DeVos' DOE, "students have a responsibility when enrolling at an institution or taking student loans to be sure they have explored their options carefully and weighed the available information to make an informed choice."

DeVos' janky new rules forces fraud victims to continue paying on their student loans while they process their damned-near hopeless fraud claims, while DOE processes those claims--if at all--at a snail's pace.

DeVos nixed the Obama administration's ban against mandatory arbitration clauses that the for-profits have forced students to sign as a condition of enrollment. Sometimes these clauses also bar class action suits. So under Betsy DeVos' administration, many defrauded students will be barred from suing the institutions that cheated them.

Betsy and her for-profit cronies want struggling student debtors to enroll in long-term income-based repayment plans (IBRPs) that last from 20 to 25 years. Payments under those plans are generally so low that student debtors' loan balances are negatively amortizing. Borrowers in IBRPs will see their loan balances go up month by month even if they make regular monthly payments. In other words, most IBRP participants will never pay off their loans.

Some people are predicting the student-loan scandal will eventually lead to a national economic crisis similar to the one triggered by the home-mortgages meltdown. I am beginning to think these doomsday predictors are right. Already we see that student loans have impacted home ownership and may even be a factor in the nation's declining birth rates--now so low that the American population is not replacing itself.

Two things must be done to destroy the for-profit college cancer that is destroying the hopes of millions for a decent, middle-class life:

1) First, the for-profit college industry must be shut down. No more University of Phoenixes, no more DeVrys, no more Florida Coastal Universities.

2) Second, everyone who was swindled by a for-profit school should have easy access to the bankruptcy courts, so they can shed the debt they acquired due to fraud or misrepresentations and get a fresh start in life.

And there is a third thing we need to do. Congress should impeach Betsy DeVos for reckless dereliction of duty and blatant misconduct against the public interest.  Let's send her back to Michigan, where she can enjoy her family fortune as a private citizen and not as a so-called public servant.

References

Mark Brunswick. Globe U and Minn. School of Business must close, state says after fraud ruling. Star Tribune, September 9, 2016. 

Christopher Magan. Globe U. and Minnesota School of Business to start closing campuses. Twin Cities Pioneer Press, December 21, 2016.

State of Minnesota v. Minnesota School of Business, A17-1740, 2018 Minn. App. LEXIS 277 (Minn. Ct. App. June 4, 2018).

Sarah Cascone, Debt-Ridden Students Claim For-Profit Art Institutes Defrauded Them With Predatory Lending Practices.  Artnet.com, July 23, 2018.

Erica L. Green. DeVos Proposes to Curtail Debt Relief for Defrauded Students. New York Times, July 5, 2018.

Claire Cain Miller. Americans Are Having Fewer Babies. They Told Us Why. New York Times, July 5, 2018.

Steve Rhode. A Deep Dive Into the Debtor Blaming 2018 Borrower Defense to Repayment Program. Get Out of Debt Guy (blog), July 25, 2018.

Reuters. DeVry University agrees to $100 million settlement with U.S. FTC. Reuters,  December 15, 2016.