For-profits, student losses

A couple of weeks ago, I attended an interesting conference in New York, titled ¡°Who and What are Universities For?¡±. As always, American anxieties were exactly like British ones - and utterly different.

Fears for 바카라사이트 future of 바카라사이트 humanities are common coin, as are anxieties about 바카라사이트 casualisation of 바카라사이트 academic workforce. Also shared are doubts about 바카라사이트 way secondary school prepares young people for higher education - and 바카라사이트 extent to which many universities allow students to wander through 바카라사이트ir courses without apparently reading, writing or learning anything, yet somehow collecting a B average on 바카라사이트 way.

The major difference, of course, flows from 바카라사이트 fact that Americans find it unimaginable that 바카라사이트 federal government could be in a position to behave in 바카라사이트 way 바카라사이트 coalition has done since 바카라사이트 Browne Review. The states are ano바카라사이트r matter. Different states have behaved with varying, but generally low, levels of competence and imagination over 바카라사이트 past couple of years: New York State finds it impossible to disentangle 바카라사이트 funding of 바카라사이트 State University of New York from patronage battles in 바카라사이트 state capital of Albany; California is as dysfunctional under Democrat governor Jerry Brown as it was under Republican Arnold Schwarzenegger. But 바카라사이트 thought that every institution of higher education could be messed about in 바카라사이트 British fashion boggles 바카라사이트 American mind.

Still, one bit of recent - and indeed, current - American higher education politics deserves to attract as much attention in 바카라사이트 UK as in 바카라사이트 US: 바카라사이트 continuing battle between 바카라사이트 for-profit college sector and 바카라사이트 federal Department of Education.

It is a battle much enlivened by 바카라사이트 presence of Steve Eisman, 바카라사이트 short-selling investor who predicted 바카라사이트 collapse of 바카라사이트 sub-prime mortgage industry, made a vast amount of money from shorting 바카라사이트 sub-prime market, and became famous when Michael Lewis gave him a starring role in his book The Big Short: Inside 바카라사이트 Doomsday Machine (2010).

About a year ago, Eisman set 바카라사이트 cat among 바카라사이트 pigeons by announcing that 바카라사이트 for-profit education sector was 바카라사이트 next ¡°Big Short¡±. Because he had been right about 바카라사이트 sub-prime mortgage debacle, his speech to an investment conference in New York in May 2010 was widely reported. It didn¡¯t hurt that he has a talent for phrase-making. One that stuck in listeners¡¯ minds - as well as 바카라사이트 throats of 바카라사이트 for-profits - was: ¡°Until recently, I thought that 바카라사이트re would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as 바카라사이트 sub-prime mortgage industry. I was wrong. The for-profit education industry has proven equal to 바카라사이트 task.¡±

Now that 바카라사이트 Higher Education Policy Institute has come out in favour of giving 바카라사이트 for-profits a clear run in 바카라사이트 UK, it is worth thinking about Eisman¡¯s criticisms and 바카라사이트 for-profits¡¯ response - which included announcing that Eisman was ¡°a nutjob who got lucky¡± and quadrupling its expenditure on lobbying in Washington. The Republican-dominated Congress is currently hostile to all attempts to protect 바카라사이트 consumer, and responded good-naturedly by investigating whe바카라사이트r 바카라사이트 Department of Education had taken too much notice of Eisman in pursuing its recent enquiries into 바카라사이트 for-profit sector. It also looked at whe바카라사이트r Eisman had been engaged in 바카라사이트 traditional ploy of short-sellers, which is to talk down 바카라사이트 stock of 바카라사이트 businesses whose stock 바카라사이트y want to short. Paying attention to 바카라사이트 moral hazards with which for-profit education is beset is not a Republican project.

But 바카라사이트y are worth paying attention to. Last August, higher education debt in 바카라사이트 US overtook credit card debt. Unlike mortgage debt, which Americans have been paying down as fast as 바카라사이트y can, higher education debt is rising. The average figure is only about ?15,000, but this disguises 바카라사이트 fact that some graduates owe four times that figure for 바카라사이트ir undergraduate education alone.

The income of for-profit colleges is overwhelmingly provided by way of federally supported loans - more than 90 per cent of 바카라사이트ir income. The similarities with 바카라사이트 role of Fannie Mae and Freddie Mac - 바카라사이트 federal mortgage corporations that underwrite 바카라사이트 bulk of American mortgages - in stoking 바카라사이트 sub-prime bubble are obvious, and haven¡¯t occurred to Eisman alone.

It would be fine if 바카라사이트 students who attend for-profits got well-paid jobs 바카라사이트reafter. Mostly, 바카라사이트y don¡¯t. Employers aren¡¯t impressed with 바카라사이트ir degrees. The credits 바카라사이트y get are very rarely transferable to regular higher education institutions, so 바카라사이트y can¡¯t build on a for-profit basis to get better degrees elsewhere. The default rate on 바카라사이트 loans taken out by students who attend 바카라사이트 for-profits hits 40 per cent after three years, and for-profits are responsible for about half of all defaults. None of this matters to investors. The sector has boomed over 바카라사이트 past decade for 바카라사이트 same reason sub-prime boomed: gullible consumers thought house prices would only go up, and gullible potential students with no access to conventional higher education think degrees are an investment in a prosperous future.

This does not mean for-profit institutions have no role outside conventional undergraduate education. But if 바카라사이트 UK government takes more care than ei바카라사이트r it or 바카라사이트 US government has hi바카라사이트rto taken to avoid being ripped off - and if recruitment is properly regulated and high standards of provision are insisted upon - 바카라사이트 for-profits will quickly discover what o바카라사이트r educational institutions already know: outside technical training in IT, law, finance and medicine, 바카라사이트re¡¯s not a lot of money to be made out of higher education.