5 ms·

Subprime goes to college

16 points by robg 16y ago

TomOfTTB 16y ago
I don’t see this as that big a deal. It’s bad but it’s the bad part of a good cycle. Essentially the traditional University system didn’t bother to adjust it’s curriculum to the real life needs of students. So a bunch of private companies rushed in to fill that void. These people (ITT Tech, Devry, University of Phoenix) are the startups in many ways. They were willing to take a risk when no one knew if there was any profit in private education and as a reward for that they’re making a big return on investment. But now that the doors are open to private endeavors and it’s clear you can make money there’s going to be competition and that makes everything better. You already see signs of this (Most notably in the incredible achievement that is Western Governors University: http://en.wikipedia.org/wiki/Western_Governors_University http://en.wikipedia.org/wiki/Western_Governors_University) Right now there’s an artificial stigma that’s still keeping a lot of the internet based competition down but as that begins to fade there will be no way for companies like ITT Tech to maintain their huge profit margins.
- spamizbad 16y ago
  Education quality is a red herring: the real concern is the abnormally large amount of student debt tied to these schools. When the student loan bubble burst (and believe me, it will), these schools are going to suffer as their customers opt for more affordable learning at community colleges and state universities which are increasingly offering distance-learning programs. But that's not even the bad part. The bad part: like the subprime mortgage crisis, when enough people default on loans, and lending standards tighten, it will send ripples through the credit market impacting the entire economy. And like the subprime crisis you can anticipate a government bailout towards the student loan industry as so few people can afford to out-of-pocket their education in the United States. It's going to be messy.
  - Retric 16y ago
    How can the student debt bubble burst and hurt the school? The vast majority of the debt is backed by the government and survives bankruptcy. At some point the growth curve for these schools will slow down, but that's the case for all institutions that grow faster than the economy at large.
    - spamizbad 16y ago
      > How can the student debt bubble burst and hurt the school? Because for-profit educational institutions don't have large endowments to bankroll them through tough times and are completely dependent on revenues from continued enrollment. If student debt becomes more difficult to come-by, and/or the government tightens the criteria for student loans, these schools will see their enrollment drop as a significant portion of their clientèle will be unable to afford their services.
      - Retric 16y ago
        These for profit schools are the low cost carriers of the education world. Changes to student aid would harm traditional private schools much more dramatically because they have far tighter margins much like how rising fuel costs impacted the Aviation industry. And while federal funds prop up the secondary education system, they can continue to prop up an industry for decades ex: corn farmers. Individually they may be susceptible to loss of accreditation, however without the massive legacy costs they are far more capable of jumping though new hoops. I would suggest rather than being dependent on an unstable bubble they are exploiting the inefficiency’s of an entrenched industry. PS: There is a difference between profiting from a bubble (Home Depot) and being dependent on it (Lehman Brothers).
  - cma 16y ago
    You can't default on a student loan (unless you die or something).
    - spamizbad 16y ago
maukdaddy 16y ago
An opinion article in the NY Post? Really HN? This is what we've come to?!
- Unseelie 16y ago
  Post something better, then.

16 points by robg 16y ago

I don’t see this as that big a deal. It’s bad but it’s the bad part of a good cycle. Essentially the traditional University system didn’t bother to adjust it’s curriculum to the real life needs of students. So a bunch of private companies rushed in to fill that void. These people (ITT Tech, Devry, University of Phoenix) are the startups in many ways. They were willing to take a risk when no one knew if there was any profit in private education and as a reward for that they’re making a big return on investment. But now that the doors are open to private endeavors and it’s clear you can make money there’s going to be competition and that makes everything better. You already see signs of this (Most notably in the incredible achievement that is Western Governors University: http://en.wikipedia.org/wiki/Western_Governors_University http://en.wikipedia.org/wiki/Western_Governors_University) Right now there’s an artificial stigma that’s still keeping a lot of the internet based competition down but as that begins to fade there will be no way for companies like ITT Tech to maintain their huge profit margins.

spamizbad 16y ago
Education quality is a red herring: the real concern is the abnormally large amount of student debt tied to these schools. When the student loan bubble burst (and believe me, it will), these schools are going to suffer as their customers opt for more affordable learning at community colleges and state universities which are increasingly offering distance-learning programs. But that's not even the bad part. The bad part: like the subprime mortgage crisis, when enough people default on loans, and lending standards tighten, it will send ripples through the credit market impacting the entire economy. And like the subprime crisis you can anticipate a government bailout towards the student loan industry as so few people can afford to out-of-pocket their education in the United States. It's going to be messy.
- Retric 16y ago
  How can the student debt bubble burst and hurt the school? The vast majority of the debt is backed by the government and survives bankruptcy. At some point the growth curve for these schools will slow down, but that's the case for all institutions that grow faster than the economy at large.
  - spamizbad 16y ago
    > How can the student debt bubble burst and hurt the school? Because for-profit educational institutions don't have large endowments to bankroll them through tough times and are completely dependent on revenues from continued enrollment. If student debt becomes more difficult to come-by, and/or the government tightens the criteria for student loans, these schools will see their enrollment drop as a significant portion of their clientèle will be unable to afford their services.
    - Retric 16y ago
      These for profit schools are the low cost carriers of the education world. Changes to student aid would harm traditional private schools much more dramatically because they have far tighter margins much like how rising fuel costs impacted the Aviation industry. And while federal funds prop up the secondary education system, they can continue to prop up an industry for decades ex: corn farmers. Individually they may be susceptible to loss of accreditation, however without the massive legacy costs they are far more capable of jumping though new hoops. I would suggest rather than being dependent on an unstable bubble they are exploiting the inefficiency’s of an entrenched industry. PS: There is a difference between profiting from a bubble (Home Depot) and being dependent on it (Lehman Brothers).
- cma 16y ago
  You can't default on a student loan (unless you die or something).
  - spamizbad 16y ago

maukdaddy 16y ago

An opinion article in the NY Post? Really HN? This is what we've come to?!

Unseelie 16y ago
Post something better, then.