Senator Harkin's Horse and Pony Show

by Daniel L. Bennett

If you follow education news, then you're probably aware that the Senate held a hearing yesterday, ostensibly to, according to Kelly Field's Chronicle of Higher Education's article, take

"aim at for-profit colleges...[in order] to crack down on "bad actors" in the rapidly growing sector to protect federal student aid dollars from being wasted through fraud and abuse."

The hearing was, perhaps unsurprisingly, stacked with critics of the industry such as short-seller Steve Eisman, ED Inspector General Kathleen Tighe, former San Francisco Supervising Deputy Attorney General Margaret Reiter, and a former student who had a bad experience with a for-profit college. Devry's Sharon Thomas Parrott was the lone representative of the industry.

According to Field's CHE article:

Congress, which recently provided billions of dollars in additional Pell Grant aid, wants to be sure that taxpayer dollars are being spent wisely.

Mr. Harkin [said] "We don't know how many students graduate, how many get jobs, how schools that are not publicly traded spend their Title IV dollars, and how many for-profit students default over the long term. More broadly, we don't know exactly what risk we are taking by investing an increasing share of our federal financial-aid dollars in this sector."

I would tend to agree with Congress that we need to ensure that our tax dollars are being spent wisely and that we need better data on outcomes; however, as Sara Goldrick--Rab points out on her blog, Education Optimists:

We should have the same concerns about our current public and private non-profit institutions of higher education. Many of us do have these concerns. We are just less vocal about them, perhaps because it is so much easier to object to treating people badly while making a buck, compared to treating people badly while not making a buck.

Our concerns are well placed, but they are also too narrow. We are looking for trouble only under a single lamplight, simply because that’s the spot illuminated. We need to look more broadly. There is a reason enrollment in the for-profit sector is growing, and it has at least partly to do with student demand. Our public colleges and universities aren’t sufficiently equipped to do the job—and blame for that is shared by states and localities, institutions, researchers, and taxpayers. It’s a little hard to know where the buck stops in that situation. It’s not so hard in the case of for-profits—so we disparage them more easily.

In other words, the for-profits are perceived to be an easy target to scrutinize, although they shouldn't be, as the industry has the financial capability to defend itself through lobbying, and Harris Miller of CCA makes a strong case for the industry's legitimacy. This also isn't the first time that there has been an all-out attack on the for-profit industry. There were similar efforts to reign in the growth of the sector through federal regulation in the late 1960s and early 1970s, and again in the late 1980s and early 1990s. The industry has proven incredible resilient and capable of adapting to change forced upon it.

Although I'm optimistic that the for-profit industry will once again weather the storm and adapt to whatever changes in policy occur, the growing debt levels and loan defaults are serious problems that need to be addressed by not only the for-profits, but also the public and non-profit colleges. In an editorial for Forbes, I suggested a change in loan policy that Steve Eisman put forward in yesterday's trial, mainly that

colleges be required to bear some of the loss when their students default.

Perhaps requiring that colleges put a "little skin in the game" would motivate them to put the interests of their students first. Stay tuned for more analysis of the for-profit industry, as CCAP will soon release a full-length study.