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From TFA: "For-profit schools now enroll 8 percent of students—but as Eisman’s report shows, they take in a full 24 percent of federal student aid. [...] Right
by shaddi 16y ago
From TFA: "For-profit schools now enroll 8 percent of students—but as Eisman’s report shows, they take in a full 24 percent of federal student aid. [...] Right now, colleges bear none of the risk of defaulted loans. It’s the same separation of risk and reward that Eisman saw in the subprime industry. The solution he’d advocate is simply making the colleges pay back the government a share—as much as 50 percent—of the loans that go back."
I would note that graduates of for-profit institutions have default rates significantly higher than those public and non-profit institutions [1], even when comparing for-profit institutions to community colleges. For-profit colleges have every incentive to maximize enrollment and encourage students to max out their loans while spending as little as possible on instruction. We agree that reigning in education spending is important, but the for-profit system, as currently incentivized, will keep costs to the public and the students the same as it ever was while redirecting money from teaching to shareholders.
> Unlike Rutgers or CUNY, Ashford is 100% dedicated to education (rather than partially education, partially research).
Research is an important part of education (perhaps not vocational education). Ashford is 100% dedicated to maximizing returns to shareholders; education is necessarily secondary. This is demonstrated by the fact they spend more on marketing than instruction. I'm not saying it's wrong for them to do this, but as a for-profit entity they have no incentive to behave otherwise.
[1] http://online.wsj.com/article/SB126075983194590097.html http://online.wsj.com/article/SB126075983194590097.html
- yummyfajitas 16y agoNon-profit colleges have the same incentives. The main difference is that instead of rewarding shareholders, they reward administrators and some faculty. Also, the WSJ article you cite shows that for-profit colleges have only marginally higher default rates than community colleges. It makes no effort to control for the quality of student, which could easily be the cause of the small gap. Research is an important part of education (perhaps not vocational education). The point is that unlike Ashford, Rutgers also gets research money from Big Pharma, etc. This lowers the proportion of money Rutgers gets from the government. Regarding research, while it's important for a small minority of students at top schools, it's irrelevant to the sort of students who would enroll at ITT Tech or Ashford.
- earl 16y agoNo, nonprofit colleges have nothing like the same incentives as for profits. For starters, eg community colleges often, by design, lose money on each student they educate. They also, as demonstrated by points upthread, do a better job of education when education is graded as investing in successful student education.
- yummyfajitas 16y agoWhat does "lose money" mean? Does that mean tuition < cost per student, or that tuition + govt funding per student < cost per student? You might be correct if government funding for community colleges is given in a lump sum rather than on a per-student basis. But even then, you are only correct for students above N=(lump sum)/(cost per student), which is true even for for-profits (where N=max occupancy of their classrooms). The fact is, plenty of non-profits try to increase enrollment to whatever level they can reasonably support. The non-profit I attended as an undergrad advertised widely (and fraudulently), and even tried to make early/on time graduation as difficult as possible (just another way to increase enrollment).