Paul Krugman, President Obama's Head Cheerleader, Finally Wrote Something Useful About Education and the Economy in the NY Times

Paul Krugman finally wrote something useful about education and the economy in the New York Times. In a recent Times essay entitled "Rich Man's Recovery," Krugman began by pointing out what everyone already knows--that the rich live in "a different social and material universe" from the middle class. The enduring American belief that children can grow up to become more prosperous than their parents is dead.

Paul Krugman's Big Idea:
Print More Money

Everywhere, young Americans who grew up in middle class homes are desperately struggling just to stay in the middle class--to avoid falling off the economic ladder and becoming one of the faceless working poor.

And then Mr. Krugman made an interesting point. Rising inequality in the United States has nothing to do with education. As Krugman perceptively observed, "Only a small fraction of college graduates make it into the charmed circle of the 1 percent. Meanwhile, many, even most, highly educated young people are having a very rough time."

Many people--myself once included--pathetically believe they will catapult themselves into a new more glamorous milieu if only they can acquire a prestigious graduate degree from an elite university. And so they borrow money--sometimes a lot of money--to get a degree from Harvard, Yale, Columbia, etc.  Often they learn that even if they get into the prestigious graduate school of their choice that class lines are already drawn.  Even at Harvard Business School, the NY Times reported, the  ultra rich students are separated from other students along lines drawn by status and money.

How can we stop the growing division between the ultra rich and the rest of the United States? How can we restore the prospects of the middle class along with the middle class belief that talent and hard work will lead us to a better life?

Unfortunately, Mr. Krugman has no good answers to these questions.  Like so many NY Times writers, he is very good at identifying problems but not so good at offering real solutions. His essay ends with the lame suggestion that we should tax the rich a bit more.

Thanks a lot, Paul.  Is that the best idea a Nobel Prize winning economist can think of?

No, to restore equality of opportunity in the United States, the wealthy plutocracy that runs this country must be destroyed. Devastating financial regulations are called for--regulations so draconian that the corporate banks will disappear and be replaced by financial institutions on a more human scale.

Taxes on the rich need to be much higher. We will know we are taxing people enough when Tom Cruz and Donald Trump fly commercial and no one has the cash to buy a $250,000 automobile.

And our imperious and arrogant elite universities need to be demythologized.  We need to stop choosing our national leaders from among people who went to Harvard and Yale.  And imperial college presidents need to be sent back to the classroom to teach freshman composition.

But is anyone in the media talking about radical reforms of our economy or our educational system? No. Paul Krugman, the nation's most ardent cheerleader for President Obama's economic policy, wrote an essay in today's NY Times essentially saying Ben Bernanke should continue printing money, a policy designed to do nothing more than delay our nation's economic collapse until President Obama has finished his term of office.

Where is all of this heading--this accelerating disparity in wealth that Mr. Krugman wrote about?

I don't know.  I do know that Germany's economic policy in the 1930s--its reckless printing of money--is very similar to President Obama's economic policy.  And we know what happened to Germany.

One thing is clear. Our nation is now run by an arrogant and selfish plutocracy that manipulates our civic and political life in order to elevate compliant politicians like Barack Obama who will perpetuate the status quo of economic inequality.  And the training grounds for these compliant politicians are our nation's elite universities.

After me--the deluge

The young people of the shrinking middle class won't change this putrid landscape by borrowing money to attend prestigious colleges and elite graduate schools. They have essentially three options: They can fight politically to elect leaders who are truly progressive and not just blatherers who take their marching orders from Goldman Sachs. They can emigrate to a society that offers more opportunities to people of talent. Or they can accept their slow decline into a new kind of servitude--spending their lives paying off student loans they took out to obtain an education that did not improve their economic condition and perhaps made it worse.


References

Jodu Kantor. Class Is Seen Dividing Harvard Business School. New York Times, September 9, 2013.

Paul Krugman. Give Jobs a Chance. New York Times, September 16, 2013, p. A19.

Paul Krugman. Rich Man's Recovery. New York Times, September 13, 2013. P. A19.

Private Liberal Arts Colleges Are Dying and They Won't Be Resurrected

If something can't go on forever, the old bromide goes, it won't. America's small, private liberal arts colleges can't go on forever. Even now, they are in a long slow decline, like elderly widows in small Southern towns, sitting placidly on their verandas and drinking mint juleps while they wait for the disease that will finally kill them.

And this is a great shame.  America's small liberal arts colleges emerged in the late nineteenth and early twentieth century to provide a college education to young people who previously had had no opportunity to attend college.  Started by Catholic religious orders, Protestant denominations, and sometimes just by

liberal-minded philanthropists, they sprang up in industrial cities, small Midwestern towns, and even the plains of West Texas to offer a product most people believed in--a liberal arts education.  Some were started specifically for women and all were started to advance the life prospects of plain ordinary young people.

Looking back on the golden era of the private liberal arts colleges, it is remarkable how physically beautiful many of them were.  The founders seemed to have an innate sense of architectural taste.  Many of the buildings on these small campuses were designed along classical lines and are truly beautiful.

And apparently, these colleges were relatively easy to found.  In the days before onerous federal regulations and bureaucratic accrediting associations, it seems that just about anyone could start a college.  And the nation owes a debt to the many civic minded individuals and organizations that created these lovely little institutions that dot the American landscape.

But their days are numbered and many won't survive another twenty years.  Most have slashed their tuition rates and many have experimented with online offerings, or other innovations to stop their enrollment declines.  But in the end, most private liberal arts colleges are doomed to close.

Why are the private liberal arts colleges in decline?

They have gotten too expensivee.  First of all, liberal arts colleges have gotten too expensive.  Many undistinguished little colleges charge as much to attend as the elite private institutions.  Families have done the math and have come to the conclusion that it doesn't make sense to pay $50,000 a year in tuition, room and board for their children to attend colleges that have nothing special to offer in today's modern economy.

It is true that the real cost of attending one of these colleges is often far less than the sticker price.  As a recent Inside Higher Education story explained, most students pay far less than the advertised price to attend a private college.  But even if the $30,000 tuition is reduced to $15,000, the total cost to attend these schools is around $30,000 per year, when room, board, and books are figured in.  That's a lot of money for a middle class or working class family.

The idea of a liberal arts education is dead. Second, the notion that a liberal arts education is a good in itself is dead. There was a time when most people agreed that the study of history, literature,

Seinfeld reruns
Postmodern education for free

philosophy and the social sciences produced good citizens prepared to make their way in life.  But now the emphasis is on the bottom line.  Far more students major in business today than history or English.

Furthermore, even if students want a classical liberal arts education, they are increasingly unlikely to find an institution that provides it.  Many of today's liberal arts professors are postmodernists, neo-Marxist cranks, moral cynics, or outright nihilists. For many liberal arts professors, stamping out the ideals of the young is their life's mission.

And many young people have figured out that they can become disillusioned about life for a lot less than $30,000 a year.  After all, if they want a lesson in postmodern nihilism, they can watch reruns of Seinfeld.

 Residential education is dead.  Finally, American young people no longer see the value in residential education. In another time, students willingly lived in dormitories where they shared a room with at least one other student and showered in a communal bathroom.  Students ate in university-run cafeterias and participated in a host of campus activities--student clubs, drama society, student government, etc.  Dorm mothers and hall monitors kept order and made sure students made it back to their dorms every evening before the doors were locked for the night.

Today, many young people simply won't put up with living in a dormitory. They would rather live in off-campus apartments where they can cohabit with their significant (or insignificant) others, eat at fast food restaurants, and only come on campus for their classes.  In fact, a lot of students prefer online classes so they need not come on campus at all.

Where are we headed? In short, liberal arts colleges are in a downward spiral for variety of reasons. And I don't see a revival.  The future of higher education is still not clear, but I think it is headed into three main segments.

First, the elite colleges will always survive, selling prestige, political connections, and smooth access into elite graduate schools.  The future of Harvard, Yale, Emory, Georgetown, Stanford, and 30 or 40 other elite universities is assured.

Second, most middle class students will attend public institutions, both flagship institutions like the University of Michigan and Louisiana State University, but also a host of regional and satellite institutions like University of Texas at San Antonio and the University of Western Michigan. Increasingly, these public universities will turn into mega institutions with thousands of students, soulless leadership, and robotic bureaucracies.

Third, working class students with college aspirations will go to community colleges with commuter cultures or will get sucked into the predatory for-profit institutions that will offer them lackluster educational experiences and leave them with high levels of student-loan debt.

But the lovely little liberal arts colleges with their elm-lined pathways and neo-Grecian halls are fading into the past.  I think we will miss them.

References

Ry Rivard. Paper (Tuition) Cuts. Inside Higher Education, September 16, 2013. Accessible at: http://www.insidehighered.com/news/2013/09/16/small-private-colleges-steeply-cut-their-sticker-price-will-it-drive-down-college

In Massachusetts, Land of Kookie Ideas, the Humanists Want to Abolish the Pledge of Allegiance in Schools

Years ago, I walked into Good's Barbecue Restaurant in Houston and noticed a message scrolled  in large letters above the door. "Texas, our Texas! All Hail the Mighty State," the sign proclaimed.

The official flag of Postmodern Nihilism

I remember thinking I would never see a sign like that in Massachusetts.  Indeed, no two states could be more different in terms of cultural and regional pride than Massachusetts and Texas.  Texas even has a pledge to its state flag, which willing Texas children are required by law to recite on each and every school day. The people of Massachusetts would never think of doing such a thing. 

Or maybe they're just ashamed of the Massachusetts flag. After all, the flag portrays an American Indian, a reminder that the good people of Massachusetts killed all  the Native Americans in their state (except Elizabeth Warren, whom they elected to the Senate.)

And now the American Humanist Association has filed suit in Massachusetts, seeking to invalidate the recitation of the Pledge of Allegiance to the Flag on the grounds that it violates the equal rights provision of the Massachusetts Constitution.

An AHA spokesperson argued that recitation of the flag is indoctrinating and alienating to atheists. “It validates believers as good patriots and it invalidates atheists as non-believers at best and unpatriotic at worst,” he said.

The Massachusetts Supreme  Judicial Court (too snooty just to call itself the supreme court) is taking the matter seriously and has asked for amicus briefs from interested parties.  Who knows? This goofy body might  root around in the state constitution and find a way to invalidate the Pledge of Allegiance in the state's public schools.  After all, they wouldn't want to offend the sensibilities of Bay State atheists

In fact, Massahusetts' highest court might strike down the pledge in state schools just for fun. I'm sure the judges would get a kick out of the fulminations of Bill O'Reilly on Fox News if the court ruled  the Pledge could not be said in Massachusetts schools. 

This petty lawsuit, brought by New England elitists, is an exercise in postmodern nihilism, which is the philosophy of the day among Massachusetts jurists, academics and politicians.  In their self-centered world, there are no ultimate values, no truths which can claim our allegiance, no  transcendent ideas.  And so they descend into whining trivialities.

And that would be fine if those folks would confine their nihilism to their own neighborhood. Unfortunately, our nation's leaders are mostly trained up there; and these people are running the country.

And we can see where it has gotten us.  Even now, we see the President of Russia smoothly outmaneuvering and humiliating our president.  And what should we expect? While Barack Obama was polishing footnotes on the Harvard Law Review, Vladimir Putin was running the KGB.

 References

Atheist Acton couple takes Pledge of Allegiance challenge to Supreme Judicial Court. Boston.com. Acccesible at: http://www.boston.com/yourtown/news/acton/2013/09/acton_family_takes_pledge_of_allegiance_challenge_to_supreme.html

Doe v. Acton-Boxborough Regional School District. Trial court decision accessible at: http://www.americanhumanist.org/system/storage/63/ee/7/3171/SJ_Decision_Partial.pdf

Memo to LSU: Fire Your Lawyers, Fire Your Executive Search Firm, and Apologize to Judge Clark

When I practiced law years ago, my senior partner gave me three good pieces of advice.

1. Always comply with a court order.
2. Never hide relevant documents that are the subject of a legitimate request in civil litigation.
3. Admit your mistakes and do everything you can to repair the damage.

LSU has acted contrary to all this good advice, and it will pay the price.

Bill Funk
LSU should fire him

This morning, Judge Clark ordered the Sheriff of East Baton Rouge Parish to go to LSU and retrieve documents pertaining to LSU's search for a new president.  Judge Clark ordered LSU to make the documents available to the Baton Rouge Advocate last April. According to Judge Clark, those documents are subject to Louisiana's open records law and LSU cannot lawfully conceal them.  LSU refused to comply and has been in contempt of Judge Clark's order for about four months.

This afternoon, two sheriff's deputies went on campus to get the documents and came away empty handed. LSU claims it has no documents to turn over and that all relevant documents pertaining to its presidential search are in the hands of William Funk and Associates, an executive search firm located in Dallas.

In short, LSU has contemptuously defied Judge Clark's order, acting no doubt on the advice of its

Say you''re sorry, Bobby

attorney, Jimmy Faircloth.  And who is LSU protecting by hiding its presidential search documents?  Bill Funk and his executive search firm, whose business runs more smoothly if candidates for executive jobs can keep their identities confidential.  And you can bet your last dollar that Mr. Funk was paid handsomely to produce LSU's new president, King Alexander.

This is going to end badly for LSU. It made a huge mistake toying with Judge Clark.  What can it do to begin repairing the damage?

First, it should fire Jimmy Faircloth, who gave LSU such bad advice.

Second, it should fire Bill Funk and never again use an executive search firm that insists on secrecy in an LSU executive search.

Third, Bobby Yarborough, the chairman of the LSU Board of Supervisors, should go to Judge Clark's court without an attorney and turn over the documents Judge Clark demanded.  Then Mr. Yarborough

Oh yeah. Fire this guy too.

should personally apologize to Judge Clark, to the students of LSU and to the people of Louisiana.

Imperious, Arrogant and Defiant: LSU Plays the Scofflaw and Refuses to Compy with a Court Order

I sat in Judge Janice Clark's courtroom this morning, curious to see how she would deal with Louisiana State University's continued defiance of her court order. 

The Baton Rouge Advocate and the Times-Picayune sued LSU several months ago under Louisiana's open records law, seeking to obtain the records of LSU's search for a new president. The search ended last March when the LSU Board of Supervisors selected F. King Alexander as LSU's new chief executive.  At least 35 other people applied for the job, but LSU refuses to release these applicants' names.

Last April, Judge Janice Clark issued an order directing LSU to turn over the records of its search, including the names of the other applicants, but LSU refused to comply.




Judge Janice Clark

Instead it tried to get the Louisiana Supreme Court to issue a stay of Judge Clark's order while LSU pursues a leisurely appeal.  The Supreme Court declined to issue a stay, but LSU still won't turn over the records.  LSU accrues a fine of $500 per day for each day it refuses to comply with Judge Clark's order and currently owes about $60,000.

This morning, Judge Clark increased the pressure on LSU to turn over the records. In an order issued from the bench, she directed the Sheriff  of East Baton Rouge Parish to seize the presidential search records and indicated she would issue the appropriate writs and warrants necessary for the sheriff to carry out her order. 

LSU would like Judge Clark to issue a final judgement in the case so it can start the long process of appealing it, a process that could take years.  It wants to continue withholding the records while the appeal is pending.  By the time the appeal process is over, President King Alexander will probably be gone--having left LSU for an even more lucrative job.  LSU could then argue that the whole dispute over its presidential search is moot.

But Judge Clark said today that there will be no further proceedings in the case until the disputed records are turned over.  Meanwhile, LSU continues in contempt of Judge Clark's April order and risks even heavier sanctions being imposed on it--including jail time for recalcitrant members of the LSU Board of Supervisors.

So what's LSU's next move? With the sheriff poised to search LSU's administrative offices (and perhaps even the offices of LSU's attorneys), I think LSU has run out of options. Surely it will turn over the records sometime this week.

LSU Prez King Alexander
Hey, I'm just a bystander

Or maybe not.  But if LSU continues to defy Judge Clark's order, it will only enhance its image as an imperious, arrogant scofflaw.  What a message to send to LSU's students and the people of Louisiana.

As for LSU President King Alexander, he is sitting on the sidelines. He did not appear in court this morning with LSU's attorney. President Alexander could show real leadership if he would tell the LSU Board of Supervisors to obey the law like everyone else in Louisiana is required to do and comply with Judge Clark's order.



References

 Joe Gyan, Jr. Judge: LSU board could face jail time in records case. The (Baton Rouge) Advocate, September 10, 2013, p. 1.

The Rats Are Deserting A Sinking Ship: Banks Are Getting Out of the Private Student Loan Business

JP Morgan Chase Bank recently announced that it is getting out of the student loan business.  The bank said it was responding to a trend by students toward taking out federally back student loans, but in fact it has been scaling back its student loan program for several years.  This year the JP Morgan Chase only loaned about $200 million, down dramatically from 2008, when the bank loaned an astonishing

I'm getting out of the student loan biz

$6.9 billion to student borrowers (according to USA Today).

There was a time when the banks considered student loans to be very profitable. In 2008, they loaned a total of $20 billion. The student-loan market must have looked very lucrative at the time.  After all, a majority of these loans have a co-signer--usually a student's parent; so mom and pop are on the hook for them.  And the banks got legislation through Congress in 2005 that made private student loans almost impossible to discharge in bankruptcy.

In fact, for several years prior to 2008, private loan volume increased every year such that one commentator predicted that private student loans would exceed the federal student loan program by 2030.

But the banks are backing out of the private student loan business. After 2008, loan volume began dropping precipitously and only amounted to $6 billion in 2011.

Private student loans generally have higher interest rates and less favorable terms than loans offered through the federal student loan program. So who took out these loans?  The usual suspects. According to a report to the Senate Banking Committee, 46 percent of undergraduate students in four-year programs at for-profit colleges took out private loans in 2008 compared to only 14 percent of comparable undergraduates at public colleges.

The Project on Student Debt also found that students attending for-profit colleges were most likely to take out private loans and that African American students were more likely to take out a private bank loan than other students.

Why are the private banks reducing their student loan portfolios?  My guess is that the banks are bailing out of the student loan business because it has become unprofitable. In spite of the fact that these loans are almost impossible to discharge in bankruptcy and a majority of them are co-signed, the banks are still seeing a high default rate in their private loans.

In short, the rats are leaving a sinking ship. They are retreating from a sector that is no longer profitable.


References

JP Morgan Chase to stop making student loans. USA Today, September 5, 2013. Accessible at:
http://www.usatoday.com/story/money/personalfinance/2013/09/05/jpmorgan-chase-student-loans/2772509/

Private Student Loans. Finaid web site. Accessible at:  http://www.finaid.org/loans/privatestudentloans.phtml

Private Student Loans. Report to Report to the Senate Committee on Banking, Housing, and Urban Affairs, the Senate Committee on Health, Education, Labor, and Pensions, the House of Representatives Committee on Financial Services, and the House of Representatives Committee on
Education and the Workforce. August 29, 2012. Accessible at: http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf

Private Loans: Facts and Trends. Report updated in July 2011. Project on Student Debt. Accesible at: http://projectonstudentdebt.org/files/pub/private_loan_facts_trends.pdf

Playing For Time: Who Benefits When A University Keeps Its Executive Searches Secret?

As of today, Louisiana State University has been in contempt of a court order for 115 days, incurring a fine of $500 a day for each day it is in contempt.

As I wrote in an earlier blog, The (Baton Rouge)Advocate sued LSU, seeking to get the university to comply with the Louisiana open records law and turn over the names of people who applied for the LSU president's job. Judge Janice Clark directed LSU to turn over the records almost four months ago.  LSU refused and appealed Judge Clark's order to the Louisiana Supreme Court.  The state's highest court refused to review the order.

But the litigation is not yet over. Apparently, the university is going to pursue a lengthy appeal process, hoping that a Louisiana appellate court will eventually reverse Judge Clark's order. I think this is a forlorn hope.  Ultimately, LSU will have to turn over the records

Why does LSU insist on keeping its presidential search secret?  And more importantly, who benefits from this secrecy?

Executive search firms. First, executive search firms charge tens of thousands of dollars to administer university searches for executive leaders. These firms keep a stable of potential job applicants who are happy to throw their names in the hat for a university executive job so long as their current employers don't find out.  Keeping names secret helps the search firm keep a tidy pool of job candidates on hand for the many searches they coordinate.

University executives. Second, many university presidents and senior executives--provosts, deans, etc.---are constantly on the prowl for new jobs, and they don't want their current employers to know that they are ready to jump ship if a better opportunity appears.  Undoubtedly, some of the 35 semifinalists in the LSU presidential search will be embarrassed when their names are eventually released.

Lawyers. Finally, attorneys make their fees by helping universities skirt the letter of state open records laws.  In LSU's current dispute with The Advocate, the accumulated legal fees will certainly be much larger than the fine that LSU ultimately pays.

LSU plays musical chairs with its chancellors and provosts. LSU maintains that secret executive searches are essential in order to attract the best talent. But how has that worked out for it? LSU has been plagued by a constant turnover of top leadership for the last 15 years.  The university has changed chancellors and provosts so many times that it appears like the Board of Supervisors is playing musical chairs with its executive leadership.

And of course it is the secrecy of the executive searches that enables a little gang of mobile administrators to hop, skip and jump around the United Staes, getting ever higher salaries with every move.

Yes, LSU's secrecy benefits an executive search firm; it benefits a small group of suitcase administrators; and it benefits the attorneys.  But who are the losers?  The people of Louisiana, who are paying for this charade through their taxes.

References

Editorial. 109 days in contempt. The (Baton Rouge) Advocate, September 1, 2013, p. 6B.

The For-Profits "Are Making Out Like a Bandit": Will Sheriff Obama Round Up those Bad Boys?

In a question-and-answer session with college students at SUNY at Binghamton, President Obama made clear that he understands what's wrong with the for-profit colleges.

 [T]here have been some schools that are notorious for getting students in, getting a bunch of grant money, having those students take out a lot of loans, making big profits, but having really low graduation rates. Students aren’t getting what they need to be prepared for a particular field. They get out of these for-profit schools loaded down with enormous debt. They can’t find a job. They default. The taxpayer ends up holding the bag. Their credit is ruined, and the for-profit institution is making out like a bandit. That’s a problem.

President Obama also said he understands that some for-profits are exploiting our military veterans:

[T]hey’ve been preyed upon very badly by some of these for-profit institutions.... Because what happened was these for-profit schools saw this Post-9/11 GI Bill, that there was a whole bunch of money that the federal government was committed to making sure that our veterans got a good education, and they started advertising to these young people, signing them up, getting them to take a bunch of loans, but they weren’t delivering a good product.

 Indeed, Senator Tom Harkin's Senate Committee report on the for-profits found that the for-profits soaked up a huge share of the money made available to military veterans under the Post-9/11 GI Bill, a law designed to extend educational benefits to veterans of the Afghanistan and Iraq wars.

Some for-profits are "making out like a bandit"

According to the report, the for-profits trained 25 percent of the participating veterans but received 37 percent of the Post-9/11 GI Bill money during the first two years the program was in place.  Eight of the top 10 education providers during that two-year period were for-profits, including the owners of the University of Phoenix, DeVry University, and Kaplan University (pages 27-28 of Harkin report).

Among the top ten participating institutions in this veterans program, the eight for-profits had the highest student withdrawal rates.  Apollo's student withdrawal rates for bachelor's degree programs was more than 50 percent. Kaplan Higher Education Corporation (owner of Kaplan University) had a 68 percent withdrawal rate for its four-year programs (page 29 of the Harkin report).

Will the Obama administration and Arne Duncan's Department of Education rein in these bad boys? I'm not sure. President Obama made it abundantly clear that he is willing for the federal government to continue funding for-profit colleges--the largest of which are publicly traded corporations or institutions owned by private equity groups.

 "For-profit institutions in a lot of sectors of our lives obviously [are] the cornerstone of our economy," President Obama said at the Binghamton gathering. "And we want to encourage entrepreneurship and new ideas and new approaches and new ways of doing things. So I’m not against for-profit institutions, generally."

President Obama's approach to for-profit colleges is basically in harmony with the Harkin Committee's viewpoint.  Like President Obama, the Harkin Committee acknowledged a place for the for-profit sector in higher education.  The Committee expressed the view that the public sector and nonprofit private colleges do not have the capacity to educate all the postsecondary students who want to be educated.

Personally, I disagree.  Why should the federal government pump $30 billion a year into the for-profit colleges in the form of federal student aid, when it is absolutely clear that the for-profit colleges have an overall poor record of performance and catastrophically high student-loan default rates? Shouldn't that money be going to the public institutions--particularly our community colleges?

So far, President Obama has been unwilling to take aggressive action to clean up or close the for-profit college industry.   For the time being at least, the for-profits will continue to "make out like a bandit," and President Obama will continue to critize them but do little or nothing to bring them under control.

References

Paul Fain & Scott Jaschik. Obama on Non-Profits. Inside Higher Education, August 26, 2013. Accessible at: http://www.insidehighered.com/news/2013/08/26/obama-speaks-directly-profit-higher-education-noting-concerns-sector

United States Health, Education, Labor and Pension Committee. For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success. July 2012. Accessible at: http://www.help.senate.gov/imo/media/for_profit_report/PartI.pdf

Note: All quotes come from the Inside Higher Education article cited above.

An Exercise in Cynicism: The Obama Administration Mucks Around in Louisiana's School Voucher Program

Let's try to put ourselves inside the mind of Attorney General Eric Holder as he tried to decide whether the federal government should intervene in Louisiana's school voucher program.



With friends like Eric Holder, Louisiana school children don't need enemies.

"Let's see," Mr. Holder might have said to himself, "if I impede Louisiana's voucher program, I will please the teacher unions, because they hate all school vouchers."  Since the teacher unions are a core constituency of the Democratic Party, interfering with Louisiana's voucher program would be a big plus for President Obama.

"Second," Mr. Holder might have mused, "if I harass the Louisiana voucher plan, the federal government will make it more difficult for poor children to attend religious schools." So, that would be another big plus.

"Finally," Holder may have thought to himself, "sidetracking a Republican governor's school reform initiative is never a bad thing to do."  So that would be another plus in favor of federal intervention in Louisiana's voucher program.

Hey, what's not to like? 

And so the Obama administration has intervened in an old school-desegregation lawsuit, seeking to persuade a federal judge that a federal court must decide whether children residing in districts covered by desegregation orders may participate in Louisiana's school voucher program for poor children.

I have to agree with Governor Bobby Jindal on this one.  What Eric Holder and the Obama administration has done is shameful.  As Governor Jindal put it, Obama and Holder "are trying to keep kids trapped in failing public schools against the wishes of their parents."

Let me be clear. I am not an uncritical cheerleader for all of Governor Jindal's school reform initiatives. I think the tenure reforms he rammed through the Louisiana legislature are deeply flawed. And Governor Jindal's school voucher program is not perfect either.

But at least Louisiana is trying to improve its failing school systems, and I think it is making some progress.  I remember visiting New Orleans schools during the mid-1990s, before Hurricane Katrina came and basically wiped the New Orleans school system off the map.  The New Orleans schools were terrible during the pre-Katrina years; and no one--liberal or conservative, Democrat or Republican, white person or black--would want Louisiana's then largest school system to return to those days.

Today, more New Orleans students attend charter schools than public schools, and most New Orleans schools are slowly getting better.  Are they perfect? No they are not.  But Eric Holder's attempt to impede Louisiana's school voucher program won't help a single impoverished school child get a better education. 

If the Obama administration truly wants to do something to improve education in this country, it should take on the for-profit colleges that have exploited millions of Americans who just wanted to get a good education--including a lot of low-income and minority young people. 

But that would be too hard.  It is much easier to launch senseless and expensive litigation against a Southern state's efforts to improve its education system.  Louisiana's Education Superintendent John White called the litigation "deeply cynical:" and off course, he's right.

References

Michelle Millhollon. Jindal rebukes Fed voucher stance. The (Baton Rouge) Advocate, August 25, 2013, p. IB.

Why President Obama's Proposal for Controlling College Costs is a Nonstarter

In politics as in life, there are problem solvers and there are problem managers.

President Obama is a problem manager.  Before he was elected president, he saw Guantanamo as a problem to be solved, and he promised to close it. Five years into his term of office, Guantanamo is still open; it is being managed.

Ma'am, I don't solve problems; I manage them.

Likewise with the student loan crisis. Fifty Million Americans now hold $1.2 trillion in student loan debt.  About 6.5 million people have formally defaulted, and another 9 million are not making payments because they have been granted deferments or forbearances. 

For-profit colleges account for almost half of all student loan defaults.  The Department of Education reports that about 20 percent of student loans originating in the for-profit sector default within three years of entering repayment, but DOE estimates that almost half of all students who borrow money to attend a for-profit institution will eventually default.

Now that's a problem. Is the Obama administration trying to solve it? No it is not.

Last week, President Obama proposed the creation of a college rating system whereby the federal government will rank colleges and universities based on their costs, their graduation rates, the number of low-income students they enroll, and some other factors.  The President hopes to link this rating system to the federal student loan program, perhaps allowing students who attend high-ranking colleges to borrow money at a lower interest rate.

By introducing such a system, the President hopes to encourage colleges to keep their tuition prices down and stop the ever-increasing cost of attending college. In short, President Obama wants to manage the student loan crisis, not solve it.

Why is President Obama's college ranking system doomed to fail? Several reasons:

Colleges will just game the system. First as the New York Times pointed out in a recent editorial, colleges are very good at gaming the system when it comes to measuring college quality. We've seen how they've manipulated data to make themselves look better in the U.S. News & World Report rankings.  They will use the same tactics if the feds implement a college rating system. So why go through this charade?

DOE doesn't even give us useful information about student-loan default rates. Second, DOE has shown itself unable to provide the public with accurate information about one simple measurement--the student-loan default rate.  DOE only measures the number of people who default during the first three year of the repayment period--currently about 13 percent.  But the number of people who default over the lifetime of the repayment period is much higher--probably double DOE's posted rate.  And that''s the number the public really needs to know.

If DOE can't report an accurate and useful student loan default rate--a simple thing to do, what makes anyone think it can manage a much more complicated college ranking system?

Students and families won't choose a college based on the federal ranking system. Third, students and their families won't make college choices based on the federal government's rankings, so why set up a bureaucratic ranking system?  Texas high school graduate are not going choose between enrolling at the University of Texas or Texas A & M based on rankings reported by Secretary of Education Arne Duncan.  They choose their college based on a host of very personal factors, not the least of which involves the varsity football team's win-loss record.

The Clery Act, which Congress passed in 1990, demonstrates my point.  Congress passed the Clery Act in the wake of the rape and murder of Jeanne Clery, a freshman at Lehigh University, based on the belief that parents need more information about crime rates in and around the nation's colleges and universities.  The law requires all higher education institutions that receive federal funds to report crime activity in their campus communities on an annual basis.

Although the Clery Act has some useful features--colleges are required to notify the campus community of ongoing criminal activities--I have never met anyone who made a decision about where to go to college based on the Clery Act's crime reports.

If students and their parents aren't going to make college choices based on the Clery Act's crime statistics, they are not going to make them based on Secretary Duncan's rating system.  Does anyone disagree?

Why impose more federal regulations on a host of colleges that are doing a pretty good job? Finally, President Obama wants to impose another layer of bureaucratic measurements on colleges and universities that are already overly regulated.  And a lot of these institutions are doing a pretty good job.  College tuition has gone through the roof at the Ivy League colleges and other elite universities, but a college education is still fairly reasonable at the nation's community colleges and regional universities, like the one where I teach.

The growing level of student-loan debt is a big problem that gets bigger every day, and there is no simple solution. Nevertheless, it is clear that the rapacious for-profit college industry is the source of a lot of student indebtedness and about half of the student-loan defaults. 

We won't solve the student-loan crisis until we bring the for-profit colleges under control. Unfortunately, President Obama doesn't have the political courage to tackle that problem.  He would rather rank all colleges than put the bad apples out of business.

In short, President Obama doesn't want to solve the student-loan crisis, he wants to manage it--at last until his term of office expires.

References

Editorial. A Federal Prod to Lower College Costs. New York Times, August 22, 2013. Accessible at: http://www.nytimes.com/2013/08/23/opinion/a-federal-prod-to-lower-college-costs.html?_r=0

Michael Shear and Tamar Lewin. On Bus Tour, Obama Seeks to Shame Colleges Into Easing Costs. New York Times, August 22, 2013. Accessible at: http://www.nytimes.com/2013/08/23/us/politics/obama-vows-to-shame-colleges-into-keeping-costs-down.html?ref=opinion

President Obama's Proposal to Lower College Costs--Is He Just Appointing a Committee on Snakes?

If you see a snake, just kill it-don't appoint a committee on snakes.

                                                                                                      Ross Perot

To his credit, President Obama recognizes that higher education in the United States is broken and needs fixing. The cost of higher education is increasing faster than the rate of inflation, graduation rates are low at many colleges, and the student-loan default rate is catastrophic. 

But what does President Obama plan to do about the problem?  He wants to create a rating system for colleges whereby comparable colleges are ranked based on tuition rates, graduation rates, graduates' earnings, and the percentage of low-income students who enroll.  Ultimately, the President wants to tie this rating system to federal student aid in some way--perhaps providing more aid to students who attend institutions with higher ratings.

As Neal McCluskey of the Cato Institute described the plan, President Obama wants to impose "soft" price controls, creating a regulatory system that will encourage colleges to keep their prices down.

Well, pardon me for invoking  a quote from Ross Perot,  but isn't President Obama just appointing a snake committee instead of killing the snake?

"If you see a snake, just kill it."

Who really believes that President Obama's proposed rating system will help bring college costs down, reduce the amount of money people borrow to attend college, or lower the student-loan default rates?  All President Obama has done is to introduce a new topic to quarrel with Congress about. And no matter what rating system is devised, the colleges will figure ways to game the system--making themselves look better by manipulating the numbers.

No--rather than form a committee on snakes, let's kill the snake and treat the snake-bite victims.  These are things the Obama administration and Congress can do right now that will improve higher education and alleviate the suffering the present system has caused:

• Report the true student-loan default rate.  The Department of Education's official default rate understates the number of people who are defaulting on their loans.  DOE needs to publish a more accurate figure on student-loan defaults.  At least then we would know the true size of the mess we are in.
• Kick the for-profit colleges out of the federal student loan program. 
• Amend the Bankruptcy Code to allow overburdened student-loan debtors to discharge their student loans in bankruptcy under less onerous conditions.
• Repeal the 2005 law that makes it almost impossible for people to discharge their private student loans in bankruptcy.
• Stop garnishing defaulters' Social Security checks.
• Reward community colleges that opt out of the federal student loan program by refusing to allow students to borrow money to enroll.
• Encourage dual-credit programs whereby high school students obtain college credit for taking college-level courses while still in high school.

And I will go further and make a more radical proposal.  Why not kick all non-public institutions out of the federal student loan program?

Why should the federal government be subsidizing Harvard University, the University of Phoenix, or any other non-public college by loaning money to students who otherwise couldn't afford to attend those institutions? If a student cannot afford to go to a nonpublic college without taking out a student loan, that student should probably be going to a community college or public university.

What would happen if my proposals were adopted?

First of all, most of the for-profit colleges and trade schools would close if they were shut out of the federal student loan program because most of them receive the vast majority of all their revenues from federal student aid.  Personally, I am OK with that.  I think the United States can get along quite well without the University of Phoenix, Walden University, Kaplan University and all the other for-profit institutions.

Second, a lot of non-profit colleges would be forced to close if they were pushed out of the federal student loan program. I'm OK with that too.

A lot of non-profit colleges and universities are affiliated with religious denominations and they served a purpose when they were founded in the late 19th or early 20th century by providing low-cost college options for low-income students. But today most of these little denominational colleges charge $30,000 a year or more  in tuition and fees.  In my opinion, if St. Stigmata College in Jerkwater, Indiana can't survive without federal student loan money, then St. Stigmata needs to close.

Of course none of my proposals will ever be implemented.  Instead, total student loan indebtedness--now at $1.2 trillion--will continue growing. The number of student-loan defaulters will keep rising and the number of people whose lives were ruined by their student loans will keep going up.

And slowly---month by month and year by year--our economy will continue to falter because as a nation we can't figure out how to educate young people effectively and efficiently.

References

Tamar Lewin. Obama's Plan Aims to Lower Cost of College. New York Times, August 22, 2013, p. A2.

Neal McCluskey. Obama to Control the Price of Ivy? Cato Institute. Accessible at http://www.cato.org/blog/obama-control-price-ivy

Ignoring the Elephant in the Room: The Center for American Progress Proposal for Easing Bankruptcy Restrictions for Some Student Loan Debtors Does Not Go Far Enough

A lot of fair-minded people have made proposals to reform the federal student loan program.  Unfortunately, most of these proposals don't go far enough.  Specifically, they don't acknowledge the elephant in the room--the fact that for-profit colleges have extraordinarily high default rates and are not being effectively regulated.

Student loan default rates at for-profit colleges is the elephant in the room.

A few days ago, the Center for American Progress (CAP) issued a report that recommends the creation of a so-called "Qualified Student Loan"  product.  Essentially, a Qualified Student Loan would be a loan that meets specified quality standards--reasonable interest rates, provisions permitting loan deferments for qualified borrowers, and certain other features. To be eligible for a Qualified Student Loan, a student would be required to attend a higher education institution that has a relatively low student-loan default rate.

Under the CAP proposal, students who obtained Qualified Student Loans would be subject to the current restrictions on discharging their student loans in bankruptcy.  In other words, it would be virtually impossible for students who obtain high quality loans to discharge them in a bankruptcy court. 

But for students who obtain lower-quality student loans, CAP proposes easier access to bankruptcy.  People who obtained low-quality loans would be eligible to discharge their student-loan debt in a Chapter 7 bankruptcy proceeding after some reasonable waiting period.

Frankly, I don't get it. I appreciate any proposal to ease bankruptcy restrictions for overburdened student-loan debtors, but why offer better bankruptcy options to people who obtained low-quality loans than to people who obtained higher quality loans?   An overburdened student-loan debtor is suffering without regard to the quality of the loan that was taken out. Am I missing something?

Let's face it--the student-loan program is out of control.  As the authors of the CAP report pointed out, there is more than a trillion dollars in outstanding student-loan indebtedness and 45 percent of all American households owe on at least one student loan.

But the student-loan debtors who are suffering the most are the people who borrowed money to attend for-profit colleges.  Ninety-six percent of people who enroll in for-profit colleges take out student loans, and  the Department of Education estimates that 46 percent of these people will ultimately default.

Frankly, it is crazy for the federal government to allow the federal student-loan program to prop up the for-profit colleges and trade schools, which has such a dismal loan default rate. And for CAP to propose reforms in the student-loan program without endorsing tougher regulation of the for-profit college industry shows that it either doesn't understand the nature of the student-loan crisis or is too timid to propose meaningful reforms.

References

Joe Valenti and David Bergeron. How Qualified Student Loans could Protect Borrowers and Taxpayers. August 20, 2013. Center for American Progress.  Accessible at: http://www.americanprogress.org/wp-content/uploads/2013/08/QualifiedStudentLoans2.pdf

A Closer (and Closer) Look at the Trillion: Consumer Financial Protection Bureau Releases Useful Report on Magnitude of the Student Loan Crisis

Earlier this month, Rohit Chopra, the Student Loan Ombudsman for the Consumer Financial Protection Bureau (CFPA), issued a very useful report that moves us closer to figuring out what the real student-loan default rate is.

As I have tirelessly (some would say tiresomely) pointed out, the Department of Education's three-year default rate--13.4 percent--only measures the number of people who default on their federal student loans within three years after their repayment obligations begin.   Many people default after the three-window that DOE measures, and these people are not counted in the default rate.

 Moreover, millions of people aren't making payments on their student loans because they received deferments or forbearances that temporarily relieve them of their obligation to make loan payments. These people aren't counted in the official default rate either.  Without question, many of these people won't pay back their loans, due in part to the fact that their loan balances are getting bigger because interest on these loans continues to accrue while the loans are in deferred or forbearance status.

The recent CFPB report tells us how many million people have loans in forbearance or deferred status, and this information gives us a clearer picture of the student loan crisis.

First of all, CFPB reported that 50 million people have federal student loans with outstanding balances.  That's right--50 million! 

CFPB also reported that 6.5 million people have loans in default--about 13 percent of those 50 million debtors.  That figure roughly correlates with DOE's official three-year default rate of 13.4 percent.

But CFPB also reports that 3.4 million people have obtained forbearances on their loans and about 5.3 million people have obtained deferments.   In other words, 8.9 million people have been temporarily excused from making payments on their student loans.

When we add the number of people in default to the number of people who aren't making payments due to deferments or forbearances, we have a total of 15.4 million people who are not making loan payments--30 percent of the people who have outstanding student loans.

Of course some of the people who obtained deferments or forbearances will eventually start making their payments and will ultimately pay off their loans.  But I believe--and who can disagree--that most of those 8.9 million people who have temporary exemptions from making their loan payments will never pay off their loans.

Why do I believe that? First, as I just stated, most people with deferments or forbearances are seeing their loan balances grow because interest is accruing during the time they are not making loan payments.  The longer these people wait to begin making loan payments, the harder it will be for them to ever pay off their loans.

Second, as Senator Tom Harkin's report on for-profit colleges documented, a lot of for-profit institutions are actively urging many of their former students to apply for economic hardship deferments in order to keep their institutional default rates down. If it were not for these college's "default management" activities, many more students who borrowed money to attend for-profit colleges would be formally categorized as defaulters. 

CFPB has performed a useful service by reporting the number of people who are not making payments on their loans due to deferments or forbearances.  It should now be clear to everyone that the percentage of people who will ultimately default on their student loans is at least double DOE's official default rate.  The true default rate must be at least 25 percent--and for students who attended for-profit institutions, the default rate is probably closer to 50 percent. 

This state of affairs cannot go on forever.  Our economy simply cannot afford to operate a huge federal program that ruins the lives of a quarter of the people who participate. 

References

Rohit Chopra. A closer look at the trillion. Consumer Financial Protection Bureau, August 5, 2013.  Accessible at: http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/

The New Arrogance of Our Public Universities: LSU Refuses to Comply with a Court Order

Mark Emmert: LSU Prez 1999-2004
Goodbye, Mark. We hardly knew ye!

Never disobey a court order--this was the advice my senior partner gave me when I practiced law as a young man.  You can protest a judge's order, appeal the order, seek to have the order rescinded, but never disobey. 

And of course this was good advice. The rule of law in the United States breaks down completely if some parties feel free to disregard the rulings of the courts. 

But maybe the old rules no longer apply.  The Baton Rouge Advocate reported yesterday that Louisiana State University refused to comply with Judge Janice Clark's order to turn over the records of LSU's recent search for a new Chancellor, a search that ended last spring with the selection of F. King Alexander. 

Judge Clark ruled that LSU is in contempt of court for refusing to turn over the records, and she fined the university $500 a day until it complies. As of August 14th, the total fine amounts to about $46,000.

Judge Clark's ruling came as the result of a lawsuit filed The Advocate and The New Orleans Times-Picayune.  The newspapers had sued LSU under Louisiana's open records law, seeking to get the records of LSU's Chancellor search process.  The newspapers want to know the names of the other applicants for the Chancellor's job.  According to the Advocate, there were 34 semi-finalists whose names were never revealed.

LSU maintains that these 34 individuals never formally applied for the Chancellor's position.  According to LSU, Alexander was the sole formal applicant, and thus LSU is only obliged to reveal Alexander's name in connection with the Chancellor search process.

This is sheer sophistry. It is ludicrous for LSU to argue that King Alexander, the man who was named Chancellor of LSU, is the only guy who applied for the job.  Without question other people also sought the position.

LSU argues that Alexander was the only applicant in a technical sense under its interpretation of the open records law. But Judge Clark and a Louisiana appellate court rejected LSU's argument, and Judge Clark ordered LSU to turn over the records. Now LSU is obliged to comply with Judge Clark's order.

Why--you are probably asking--does LSU want to hide the names of people who applied for the LSU Chancellor's job? LSU argues that revealing the names discourages good candidates from applying for the position.  If a sitting college president applies for the LSU Chancellor's job and the president's present employer finds out, then the president might find his or her current job in jeopardy.

That is reasonable argument, and many universities across the United States basically take the same position. We must keep our executive searches secret, they say, so we can attract the best candidates.

But look who benefits from this philosophy--college presidents and other senior executives who are constantly trolling for their next job and don't want people to know about it.

On the other hand, don't our universities and other public institutions deserve to know if their leaders are in the job market?  Of course they do.

And here is an example of why it is important for a university to know that its chief executive is looking for a new job. LSU hired Mark Emmert as its chancellor in 1999, hiring him away from the University of Connecticut where Emmert was president.  As a recent USA Today story documented, Emmert left UConn just ahead of a scandal having to do with construction projects.  Emmert stayed at LSU five years and left for the University of Washington, leaving behind a scandal in LSU's athletic program. 

As USA Today pointed out, Emmert seems to have a record of moving from place to place, leaving scandals behind at his former jobs.  "Rightly or wrongly," the USA Today reporter observed, Emmert "has a history of dodging blame in scandals that have festered on his campuses, sometimes moving on to a more lucrative job before the full extent becomes known."

Today, our colleges and universities are experiencing a crisis in moral leadership.  College presidents have basically become fund raisers who are paid exorbitant salaries.  Many are constantly looking for their next gig and an an even bigger pay check.

It seems to me that university governing boards and taxpayers are entitled to know if their executive leaders are shopping around for new jobs.  For one thing, that fact may be an indication the executive wants to leave before a scandal breaks.

There was a time when universities followed the law, but no longer.  Increasingly, they have become arrogant institutions, raising tuition nearly every year, paying their senior leaders fat salaries and benefits, and resisting all efforts to hold them accountable.

I agree with the Baton Rouge Advocate's editorial on this controversy. By refusing to turn over records of its Chancellor search process, LSU has shown contempt not only for a court but for the people LSU is supposed to serve--the people of Louisiana.

Refereces

Editorial. Our Views: LSU Board shows its contempt. Baton Rouge Advocate, August 16, 2013. Accessible at: http://theadvocate.com/news/opinion/6783345-123/our-views-lsu-board-shows

Joe Gyan Jr. Judge fines LSU Board. The (Baton Rouge) Advocate. August 15, 2013, p. 1.

Brent Schrotetenboer. Digging into the past of NCAA President Mark Emmert. USA Today, April 2, 2013. Accessible at: http://www.usatoday.com/story/sports/ncaab/2013/04/02/ncaa-president-emmert-previous-cases-uconn-lsu/2047607/

Rodger Sherman. Mark Emmert failed to oversee at UConn and LSU too, according to LSU Today. SBNation.com.  Accessible at: http://www.sbnation.com/college-football/2013/4/3/4176742/mark-emmert-ncaa-president-usa-today

 

Obama Signs a Bill to Reduce Interest Rates on Student Loans: This is Just a Side Show

Earlier this month, Congress passed a bipartisan bill to reduce interest rates on student loans, and President Obama signed the bill into law this week.  Under the new law, the interest rate on this year's undergraduate loans is set at 3.9 percent. For graduate loans, the rate is 5.4 percent. For loans taken out by parents, the new rate is locked in for this year at 6.4 percent.

Interest rates will rise if the interest rate on 10-year treasury notes goes up, which it is expected to do, but the maximum interest rate under the new law is capped at 8.25 percent for undergraduate loans. The cap for graduate student loans is set at 9.5 percent and parents' loans are capped at 10.5 percent.

The new law is good news, I suppose, and nullifies the 6.8 percent interest rate that undergraduates were paying before it was enacted. But make no mistake--the recent Congressional squabble about interest rates on student loans is just a side show. 

Why? Because almost everyone participating in the congressional debate on student-loan interest rates assumed that the borrowers will pay back the money. As I noted in a previous blog, the New York Times and Senator Elizabeth Warren talked as if the government would make an unseemly profit if the interest rate on student loans wasn't lowered.

 

Out of Control

All this is nonsense.  The student loan default rate is so high that the government is going to lose money no matter what interest rate it charges on student loans.  How high is the default rate? No one knows for sure because the Department of Education hasn't released the data.  But DOE itself estimates that 46 percent of students who borrow money to attend for-profit institutions will default on their loans at some point during the repayment period.

And, as everyone knows, DOE has been underestimating student-loan default rates.  So if DOE says 46 percent of students who borrow to attend for-profit colleges are going to default, it is a safe bet that the real default rate for this group is well over 50 percent. 

Furthermore, a lot of former students have gotten economic hardship deferments that temporarily excuse them from making loan payments; and these people aren't counted as defaulters. Nevertheless, a lot of these folks will never pay off their loans. 

As Senator Harkin's Senate Committee report pointed out, people whose loans are in deferments are excused from making loan payments, but the interest on the loans continues to accrue for most borrowers, causing students' overall debt to grow larger with each passing month.  Thus, economic hardship deferments are making it harder for debtors who obtain them to ultimately pay off their loans.

How many people have loans in deferment status? DOE hasn't released the number, but it could be millions.  As the Harkin Report explained, for-profit colleges are aggressively encouraging their former students to apply for economic hardship deferments in order to keep their institutional default rates down.  And these deferments are ridiculously easy to get.  According to the Harkin Committee,  sometimes it is just a matter of a phone call.

No--the federal student loan program is like an out-of-control express train that is headed straight for a cliff.  Congress doesn't care--those guys and gals plan on getting off at the next station. No, it is students--especially students attending for-profit colleges--who are going over the cliff with the train.

References

Josh Lederman and Philip Elliott. Obama Signs Student Loan Deal. MSN Money, August 9, 2013. Accesible at: http://money.msn.com/business-news/article.aspx?feed=AP&date=20130809&id=16792937

The Bomb That Failed to Explode: Why Didn't the Senate Report on For-Profit Colleges Provoke Public Outrage?

Senator Tom Harkin
 

In July 2012, an important U.S. Senate Committee, chaired by Senator Tom Harkin from Iowa, issued a lengthy report on for-profit colleges and universities.  This report examined records of 30 for-profit institutions that enrolled a total of 1.1 million students and found enormous problems in the for-profit sector of higher education.

Among the report's startling revelations, were the following:

• High costs. The average cost of associate degrees from the 30 for-profit colleges it examined was four times higher than the cost of receiving a comparable degree from a community college. (p. 41)
• Poor student outcomes. According to the report, most students who enrolled in these institutions "do not graduate."  Of 1.1 million students enrolled in 2008 and 2009, almost 600,000 had withdrawn from their studies by 2010. (p. 17)
• Inordinate appropriation of taxpayer resources. Although for-profit institutions only enroll about 10-13 percent of higher education students, they receive about a quarter of federal student aid money. (p. 19)
• High default rates. Although the Department of Education reported recently  that almost 20 percent of students who attended for-profit institutions defaulted within three years after beginning the repayment phase, it estimates that 46 percent of students who borrowed money to attend for-profit institutions will eventually default on their loans. (p. 23)
• Low spending on instruction.  The for-profit institutions examined by Senator Harkin's committee spent more on marketing and recruiting students than they spend on instruction.
• Excessive executive compensation.  Average CEO compensation for the thirty for-profit institutions that the Senate Committee examined was over $7 million! (p. 3)

Given the Senate report's shocking findings, why wasn't there a public outcry to clean up higher education's for-profit sector? Why wasn't federal legislation passed to better regulate the for-profit colleges or even eliminate them from the federal student aid program?  Why--more than a year after this report was issued--has nothing been done about the rapacious for-profit colleges and universities?

I think there are several reasons why Senator Harkin's report had such a small impact.

The report was too long. First, the report was too long, and its length discouraged people from reviewing it thoroughly.  Although it is accessible on the web, the entire report--including appendices--was more than 2500 pages long.

Senator Harkin's committee pulled its punches. Second, I think the report was overly restrained in reporting its findings given the explosive content of its report. For example, on page 2 of this 2500 page tome, the Committee said that "[f]or profit colleges have an important role to play in higher education," and that the non-profit and public colleges can't handle the growing demand for higher education on their own. 

This conciliatory stance implies that the nation needs for-profit higher education institutions; indeed we can't get along without them.  Personally, I don't think that's true. Surely our public and non-profit colleges and universities can meet the nation's demands for post-secondary education.  And if they can't, the federal government would do well to give the public and non-profit sectors more resources than to send $32 billion a year to for-profit colleges with their overall record of poor performance.

The committee made puffball recommendations. Finally, Senator Harkin's committee made puffball recommendations for reform--far too mild given the serious problems that the committee documented.  Let's face it--if 46 percent of students who borrow money to attend for-profit institutions will eventually default on their loans, then the for-profit sector is not doing a good job in preparing students for the workforce.  That fact alone requires drastic action.

Nevertheless, Senator Harkin's committee only made timid and uninspired recommendations for reform like enhanced transparency, an online student complaint clearinghouse, and improved default tracking. (pp. 13-14)

The bomb that failed to explode

Senator Harkin and his Senate Committee had an opportunity to raise the alarm about the for-profit higher education industry that has hurt millions of students who paid far too much for educational experiences that didn't prepare them for good jobs. Anyone who reads the report carefully and grasps its implications can see that the report is a bombshell.

Unfortunately, this opportunity was squandered.  Senator Harkin's report was a bomb that failed to explode.

References

U.S. Senate Committee on Health, Education, Labor and Pensions. For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success. 112 Congress, 2d Session, July 30, 2012.