Fraud and Waste

Candidates for office are notorious for promising to cut taxes and claiming that they will pay for them by reducing “fraud and waste.” Usually, this is bullshit; especially at the local level. Americans love to believe bloat exists in service delivery, but usually, the only way to pay for tax cuts is by eliminating services.

That said, a recent Congressional report has identified one way to save the federal government money by curtailing an activity that is actively harmful: funding tuition at for-profit schools of “higher education.” (Note quotes here.)

The Committee that issued the report was headed by Senator Tom Harkin. It hasn’t gotten the attention it deserves. The report documents aggressive recruiting, exorbitant tuition, abysmal student outcomes, regulatory evasion, and taxpayer dollars pocketed as profit.

According to the summary of findings published by the New York Times, students at for-profit colleges are charged, on average, four times as much tuition as students at public universities, and eighty percent of that comes from American taxpayers. Furthermore, according to the blog Political Animal, “these colleges do an exceptionally crappy job of educating students.”

Retention rates are horrendous: the majority of enrollees, according to the Times, leave without a degree, but even those who earn a credential usually discover it isn’t worth the paper it’s printed on. And–perhaps the most telling statistic from a taxpayer’s point of view– students at for-profit colleges make up 13% of the country’s college students, but account for 47% of defaults on student loans.

Think about that next time you see one of those gauzy–and expensive–commercials for a college you never heard of.

The Obama Administration has tried to change the student loan system so that tax dollars cannot be used at most of these schools, but the effort–like so many others–has been met with fierce lobbying and obstruction. You might think that all of those politicians running for office on a platform of reducing fraud and waste would applaud this recommendation. After all, refusing to fund con artists would actually protect those who are currently getting ripped off, as well as saving tax dollars.

You’d think this would be a no-brainer, one of those rare “win-win” situations. But you’d be wrong.

And we wonder why Congress has a 17% approval rating. (Maybe the 17% attended for-profit colleges.)


  1. Refer to the “Frontline” (PBS) documentary on the “University of Phoenix” also an Investor called “Michael Clifford”. This is a very unethical area of modern day education.

  2. Thar’s GOLD in them thar hills (of “higher education”)!

    Apparently, these schools have learned how to extract extra buckets of cash money from parents, students and the government. IIRC, Newt Gingrich, for example, made some extra moolah of his own advising these types on how to game the system.

    Most college students are liberalized anyways. Why not charge them extra for the privelege?

  3. A really interesting question is “where is the money going?”

    I taught for two years at a for-profit institution in a graduate degree program.

    In a normal, face-to-face, not-for-profit graduate school, I would have had 5-6 classes per school year (2 semesters, with summers paying extra if I wanted them), with 8-20 students per class, for a max of about 120 students per year.

    In a semi-normal, face to face, not-for-profit second or third tier graduate school, I would have had 8-12 classes per school year (4 quarters, with no extra money for summers as they weren’t optional), with 8-20 students per class, for a max of about 240 students per year.

    In the for-profit, online graduate school, I had 16+ classes per school year (4 quarters, summers not optional), with 20-25 students per class, for a max of 400 students per year.

    I can tell you that I was not making 3-4 times the salary of a normal grad school professor, or even twice the salary of a second-tier, overloaded, non-research-oriented grad school professor. And I was expected to be working 60+ hours per week on top of it all.

    So… where is the money going, if my students are paying MORE than students at a normal graduate school, but I have 200-400% more of them?

  4. I checked Strayer Education, DeVry, and Apollo Group. Since they’re publicly traded their financials are availalbe to the public. All have profit margins that look to be in the 50% range. And Strayer pays a dividend north of 5%. I’m assuming the rest aren’t all that different, though Strayer was the only one with a big yield. What I don’t understand is why you would have to take on all that debt if you’re an on-line based company. Accreditation?

    That’s probably where all the money is going.

  5. Looks like the next bubble to burst will be education. I wish the Obama Administration would be more aggressive about regulating this. I know a few Soldiers and Vets who have been suckered into these institutions so the predatory schools can bank off their G.I. benefits.

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