Publicly Traded For-Profit Colleges and Law Schools

[xiao_long]

In the January 2015 issue of Fortune magazine, former FDIC chair Sheila Bair wrote an article about for-profit schools. As I was reading it, I couldn’t help but to draw a parallel between the tactics such schools employ, and that of law schools. Here are some selected quotes:

Government investigations have uncovered multiple instances of misleading recruitment tactics. Because enrollment numbers drive profits, the game is to attract as many new students as possible. One school, for example, was inflating its job placement stats by paying employers to hire their graduates temporarily and counting as a “placement” jobs that lasted only one day.

Defenders of for-profits protest that they are providing opportunities to disadvantaged students that would not otherwise be available. To be sure, these schools target low-income and minority students, but what kind of “opportunity” are they providing by loading these kids up with a debt they can never escape – student debt is not dischargeable in bankruptcy – to pay for an educational experience that does little to improve their job prospects?

Like any crony capitalist, they privatize profits and socialize losses, making money by gaming the government instead of providing a service the market values. We need to close loopholes in the 10% test and require the schools to cover 20% of a defaulting student’s loan out of their own pockets. This would give the schools stronger incentives to make sure their students graduate and find jobs.

http://fortune.com/2014/12/29/for-profi ... taxpayers/