Dear Commons Community,
The New York Times has an editorial today complimenting Arne Duncan”s recent decision to forgive the federal loans of tens of thousands of students who attended Corinthian Colleges. The decision provides relief for those who were seduced into taking on debt in exchange for useless degrees and certificates. As stated in the editorial:
“Corinthian, a for-profit company, filed for bankruptcy last month after finding itself in the cross hairs of federal and state lawsuits and multiple investigations. The Education Department’s decision, announced Monday, is a rebuke to members of Congress who have steadfastly defended these companies, which have feasted on federal student aid, despite clear evidence that many earn their profits by preying on low-income students and veterans.
The flaws in this system have long been clear. For-profit colleges account for only about 12 percent of student enrollment but for nearly half of student loan defaults. In addition, an analysis of federal data by the Institute for College Access and Success, a nonpartisan policy organization, shows that graduates of for-profit schools are much more likely than graduates of other institutions to have debt of $40,000 or more. In other words, the problem of excessive debt goes well beyond schools that may be guilty of fraud.
The schools compound the problem by misleading students about the value of their degrees. This spring, for example, the Department of Education fined Corinthian $30 million for misrepresenting job placement rates in one of the chains it owns, saying that the company had “violated students’ and taxpayers’ trust.” This came on top of a 2014 lawsuit by the federal Consumer Financial Protection Bureau, which charged that the school had “lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services.”
The Department of Education has broad authority to forgive debt in cases where schools have committed wrongdoing. The pressure on it to do more in this area has been building in the states where attorneys general have taken the initiative in shielding people from predatory schools. In April, nine attorneys general petitioned the department to forgive the debts of students harmed by schools that have broken the law and to pursue large companies that “seem to exist largely to capture federal loan dollars and aggressively market their programs to veterans and low-income Americans.”
Speaking bluntly, Mr. Duncan said that some for-profit schools had brought “the ethics of payday lending into higher education.” The department’s proposal promises forgiveness to students who were enrolled in Corinthian schools that closed after June 20, 2014, or who withdrew after that date without completing their program. Students at other institutions who believe they were defrauded by their schools may seek debt relief, whether their schools closed or not. The department will appoint a special master to design and manage a system for processing those claims.
Critics are already casting this as a windfall for former students. But it is important to remember that this loan money flowed to fraudulent institutions that fleeced people and gave them nothing in return. Congress needs to tighten the standards against which these schools are judged and the rules under which they operate.”
This was a good move on the part of Arne Duncan. More definitely has to be done in Congress but the for-profit colleges make huge contributions to candidates of both parties running for office to say nothing about a well-funded lobbying operation. Below is an excerpt from the book, The Great-American Education Complex.
Tony
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[Private, for-profit higher education] has a major lobbying organization, the Association of Private Sector Colleges and Universities, as well as a number of smaller organizations and committees that pay and press government officials on behalf of its interests. In 2010, it was estimated that for-profit higher education spent more than $8 million dollars on lobbying federal government lawmakers and administrators. Among the highest lobbying payments made by the for-profit colleges for a fifteen month period in 2010-2011 were:
- Kaplan University – $1.7 million
- Corinthian Colleges – $1.5 million
- Career Education Corporation – $1.5 million
- Education Management Company – $1.1 million
- Apollo Group – University of Phoenix – $1 million (Burd, April 28, 2011)
In addition, it contributed more than $2 million directly to political action committees. These campaign contributions were given to candidates from both parties and include congressmen and senators such as:
- Harry Reid (Democrat, Senate majority leader),
- George Miller (Democrat),
- Barbara Mikulski (Democrat)
- John Boehner (Republican, House majority leader)
- Howard McKeon (Republican)
- Lamar Alexander (Republican)
- John Kline (Republican)
(Kirkham, April 25, 2011)
Furthermore, for-profit college representatives support, contribute and are otherwise active in major political campaigns. In 2012, at the height of the Republican Party’s presidential primaries, the New York Times reported that at a New Hampshire town hall meeting, Mitt Romney, in a response to a question about the cost of higher education, suggested that students should consider for-profit colleges like the Full Sail University in Florida. A week later in Iowa, Mr. Romney offered an unsolicited endorsement for:
“a place in Florida called Full Sail University.” By increasing competition, for-profit institutions like Full Sail, which focuses on the entertainment field, “hold down the cost of education” and help students get jobs without saddling them with excessive debt, he said”. (Lictblau, 2012)
The article went on to comment on several issues associated with Romney’s endorsement.
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Picciano, A.G. & Spring, J. (2013). The great American education-industrial complex: Ideology, technology, and profit. New York: Routledge. pp. 111-112.
