Is Obama at War With the For-Profit Universities?

by Richard Vedder

I have read and heard some commentators say that the Obama Administration is at war with for-profit private higher education. While in general agreeing with that I would amend that statement to say that the Obama administration has had several battles with the for-profits as part of a bigger war against capitalism. In my view, basically the president is a socialist, a person who craves for collectivist, government solutions to problems, and is deeply distrustful of private enterprise. Thus the government has taken control of iconic private automobile and financial service companies, has viciously attacked Wall Street greed, has tried to manipulate more than ever the private use of money and credit, is favoring a huge increase in taxes on capital gains, etc. I am among those who believe that the current anemic recovery directly reflects the fear that businesses have of Obama, and their corresponding unwillingness to hire workers and invest. Gold prices are soaring, and stock prices are stagnant, a classic indication of poor investor confidence.

For- profit companies are merely part of the capitalistic Evil Empire that Obama despises. Apollo Corporation, Corinthian Colleges, Bridgepoint Education, Kaplan University -- these companies are bad mainly because they are in the business of trying to create wealth for private investors. The current bashing of the for-profits by both the administration and Congress needs to be put it that context.

That said, there ARE abuses that the for-profits have committed. No doubt there are recruiters who have misled persons as to the potentialities of a for-profit education, putting them into debt. And abusive practices should not be subsidized by the taxpayer. That said, however, the beating up on the for-profits is largely ideologically based and manifestly unfair. A large portion --indeed probably a sizable majority--of the educational malpractice going on in American higher education is occurring at the not-for-profit schools so richly subsidized by the taxpayers --and they are being given a pass as Congress considers hearings.

It is a fact that the four year graduation rate at the University of Texas at El Paso is about four percent --only 1 out of 25 graduate in a timely manner. Where are federal hearings about that? A smaller proportion of students graduate from UT El Paso than from Corinthian Colleges, but why is Corinthian being threatened by tough new legislation and UT El Paso is not? The loan default rate at Central State University in Ohio is vastly higher than at Kaplan University --why is no one investigating Central State, at either the state or federal level, while Kaplan is scurrying to meet probable new federal mandates? By many indicators students fare more poorly at Chicago State or Denver's Metro State than at Strayer University, a major for profit. Why are we not talking about legislation curtailing Chicago or Metro State? Why is the government talking about limiting the percentage of graduates of schools like the ITT Institutes or DeVry who pay more than eight percent of their income in student loan interest payments, when almost certainly the problem is probably as bad at Grambling State or Northwestern State University?

In taking on the for-profits, the President and Congress are attacking the very schools that have contributed importantly to reaching an Obama goal --vastly increasing the proportion of high school graduates with exposure to higher education. Some 38 percent of the increase in student head count between 2008 and 2009 occurred at for profit schools --more than at not-for-profit four year public schools (27 percent) or two year public community colleges (32 percent). Many traditional universities don't want to recruit ghetto and inner city children, or teach in the evenings and Saturday mornings, or do other things distasteful to the life style of the academic elite.

The People (as in "government of the people, by the people, and for the people") like for-profits, but what Scott Rasmussen calls the Political Class, does not. This is just another example of the huge divide, unprecedented in modern history, between the Political Class and the general public and our political leaders. Our nation is out of political equilibrium, and that means big changes are coming politically, probably starting at the polls this November.

I would note that this huge brouhaha would not have occurred if we had not embarked on a disastrous expansion in federal loans for students beginning four decades ago. Bottom line, too many people are going to college. Too many people are ill-equipped for the rigors of higher learning, manifested in some watering down of standards and high dropout and loan default rates. There are too many students going to too many colleges and paying too much money and getting too few good jobs. Until we wake up to that reality, we will not have truly efficient and worthwhile higher education reform in this country.