Simple Solutions for Regulating For-Profit and Non-Profit Higher Education

Until recently the Republican presidential primary has been largely devoid of arguments about higher education.  Occasionally it’s been a topic, but the discussion has largely centered on taxes, immigration, and foreign policy.  So, it’s refreshing to see that the candidates have turned their attention to regulating higher education.  Unfortunately, the debate has largely focused on the mythical Trump University and whether it provided a worthwhile return-on-investment for students.

Some of Donald Trump’s most vocal detractors, such as Marco Rubio and Mitt Romney, have argued that Trump University was basically a scam that took students’ money and gave them useless seminars, so in essence he is a con man.  That may be true, but that argument sounds a little hollow coming from them given that not very long ago these same people were clamoring for his endorsement and both have a history of praising predatory for-profit colleges that charge far more than Trump University ever did.[i]  Marco Rubio even lobbied the Department of Education on behalf of one of the worst for-profit colleges, Corinthian, before it was shut down.

The sad reality is that many American non-profit universities operate the same way.  They take in far more students than they should and then charge them exorbitant amounts.  Then the students borrow money, usually from the federal government, to study there.  When they graduate some of them are unable to find decent-paying jobs and are stuck with student loans that are extremely difficult to discharge, even in bankruptcy proceedings.  Now, we can debate what higher education’s goals should be, but I think there is a general consensus that placing students in crippling debt with no decent job prospects is not one of them.  These non-profit universities may not be as callous or cynical as the worst for-profit schools, but there are plenty of non-profit colleges, including public ones, that place the welfare of the institution over students’ interests.  However, there are several easy solutions to this problem, which include holding schools accountable, creating a transparent higher education market, and capping the amount schools can charge.

1) Holding Schools Accountable- During a 2010-12 U.S. Senate investigation into for-profit colleges, internal documents from for-profit Vatterott College revealed that recruiters were instructed to target “people that live in the moment and for the moment. Their decision to start, stay in school or quit school is based more on emotion than logic. Pain is the greater motivator in the short term.”[ii]  In other words, recruiters were advised to find uninformed people whom they could emotionally manipulate into signing up for Vatterott.  One of the saddest motifs one picks up on when you read enough articles about for-profit colleges is that many of the victims are single moms, people down on their luck, etc.

Maybe these people should have known better than to trust sketchy employment statistics and used-car salespeople, but that doesn’t mean they deserve to be tens of thousands of dollars in debt with no palpable job prospects.  One also needs to bear in mind that not only are students being taken advantage of, but so are American taxpayers because when college students take out tens of thousands of dollars in government loans and can’t repay them, American taxpayers suffer rather than the university.  Frankly, that doesn’t make a lot of sense.  However, if universities were required to repay their graduates’ government loans if they are unable to because of having little-to-no income post-graduation, they would have a very strong incentive to ensure their degrees are worthwhile.  We will save the debate about at what income level schools should shoulder the financial obligation for another post, but the main point is holding universities accountable for the product they are selling to students.

2) Creating a Transparent Higher Education Market- The drastic increase in tuition fees at American universities has led to an increasingly nasty debate about the value of the humanities and social sciences versus STEM (Science, Technology, Engineering, and Math).  As somebody who took mostly humanities and social science classes as an undergraduate I don’t think they are useless, and I know plenty of humanities and social science majors who are doing amazing things post-graduation.  However, I also know plenty of people who majored in these fields, even at decent universities, and have had (and still are having) a tremendously difficult time finding decent long-term employment.  So, students need to have a better idea of what they are buying before they agree to pay tens of thousands of dollars for university degrees.

Universities should be required to publish the outcomes of their students by major.  So, if a prospective student at the University of South Carolina is making a decision whether to study economics or political science they should not have to guess the career outcomes of the average past student from these majors.  The higher education market can only work if it is transparent and information is readily available, but unfortunately that is not true today.  So, if we were to create some type of national system that tracks the outcomes of students in various majors at colleges throughout America that presents the information in an unbiased fashion, students will have a better idea of what they are purchasing before they choose what university they should attend and what they should study there.

3) Capping what Universities can Charge- I don’t think it is very hard to make a strong argument that at some point the federal or state governments need to put a cap on what public universities can charge.  In most states the sticker price of a four-year degree at your local state university is close to or over six figures.  Universities are not the only ones who bear responsibility for outrageous tuition hikes, as during the past decade many state legislatures have made dramatic budget cuts to higher education, which universities usually pass on to students in the form of higher tuition.  However, higher education institutions are at fault because during the previous few decades, tuition soared despite generous government subsidies.  Unfortunately, most of this money went towards hiring more administrators, rewarding research-focused faculty members, etc.[iii]  Unfortunately, since universities, just like other government institutions, have little oversight how they allocate their funds they tend not to very cautious financial stewards.  Plus, the people who tend to be most impacted by this, students, have a relatively limited voice in politics compared to the people they compete with for government funds, e.g. seniors, unions, and the military.  Of course, this is partially the students’ own fault as many college students seem more interested in pushing extremist political agendas, but that doesn’t make it okay to burden the average college graduate with tens of thousands of dollars in student debt.

Private universities often escape oversight because people assume they are “private,” and thus receive little, if any financial support from taxpayers, but this is false.  Almost all universities, both public and private, are subsidized by the federal government in the sense they all have students who receive federal loans, professors who receive federal grant money, etc.  However, private universities, especially elite ones, receive far more than public ones.  According to Richard Vedder the average student at an elite private university receives more than $50,000 per year in federal government subsidies, mostly through tax deductions for rich donors.[iv]  Every time you read about somebody giving millions of dollars to Harvard, Penn, etc. you should bear in mind that these large donations are tax-deductible, which means a large portion of the money Harvard or Penn receives is actually from American taxpayers.  Now, there is nothing illegal about that, but if you are going to receive large subsidies from American taxpayers you owe it to your fellow citizens to spend that money wisely and efficiently.

Christopher Linnan is a second year Indonesian Fulbright English Teaching Assistant (ETA) placed in Medan, North Sumatra at SMA Unggulan CT Foundation. Last year he taught at SMAN 2 in Palangkaraya in Central Kalimantan. He graduated from Emory University in May 2014 and enjoys sports, eating candy, and solving his Rubik’s Cube. You can read more from him at http://clthoughts.com/.

[i] To be fair, Trump University was less of a university and more of a seminar.
[ii] David Halperin, “Romney and Rubio Attack Trump University, But Both Are Tied to Predatory Colleges,” Huffington Post 3 March 2016, http://www.huffingtonpost.com/davidhalperin/romney–rubio-attack-trum_b_9373710.html, accessed 5 March 2016.
[iii] Both of my parents are tenured faculty members, so I do not suffer from the illusion that tenured professors sit on the beach all day drinking cocktails.  However, I think it is indisputable that the current promotion system for university faculty places far too strong of an emphasis on research and not enough on teaching.  For more details please see my previous piece http://clthoughts.com/2015/12/10/mortgaging-the-future-how-american-colleges-and-universities-are-fostering-inequality-and-disillusioning-young-americans/.
[iv] Robert Reich, “Why Government Spends More Per Pupil At Elite Private Universities Than At Public Universities,” Robert Reich 13 October 2014, http://robertreich.org/post/99923361875, accessed 23 March 2016.

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