More Shenanigans in the Senate

by Daniel L. Bennett

The Senate continued its dog and pony show last week in support of imposing paralyzing new regulations on the for-profit sector of higher education. One of the most vocal Congressional opponents of the sector, Sen. Tom Harkin was quoted by Inside Higher Ed as saying about the for-profits:

They figured out how to be profitable even when the students are not successful

News flash Mr. Harkin: non-profit colleges are guilty of profiteering at the expense of taxpayers and to the chagrin of unsuccessful, debt-ridden students as well. The difference is that non-profits channel their profits into the pockets of employees in the form of higher compensation and other often unnecessary workplace perks instead of paying some of them out to the owners, in effect masking the fact that they are generating revenues that exceed their actual expenses.

Back at the carnival, Republican Senator Michael B. Enzi suggested something very similar to what Zac Bisonnette and I wrote for Forbes recently:

“I agree there is clearly a problem in higher education -- now you’ll notice I didn’t limit that comment to for-profit schools,” he said. “It’s naïve to think these problems are limited to just the for-profit sector. We’ve been looking at this in a vacuum.”

Apparently, Sen. Harkin needs a lesson in common sense economics to understand that public subsidies are costs, as he objected to Enzi's comments and believes punitive new regulations are needed because:

“.. only 16 percent of community college students borrow money; 95 percent of [students at] the for-profits borrow money and they borrow money at a higher amount than they do at the community colleges.” Tuition for for-profit programs can be significantly higher than for comparable programs at community colleges"

Lanny Davis sums up why this argument is shenanigans in an article for Huffington Post:

liberals who cite the excess "cost" of student loan defaults among the lower income and minority students ignore two inconvenient, indisputable facts: first, billions of dollars of taxpayer subsidies that go to non-profits and public colleges are not available to for-profits; and for-profits cost taxpayers substantially less per-student each year than non-profits and public colleges, when the approximately $1 billion of taxes/year paid by for-profits are taken into account.