Saturday, November 29, 2014

Feds Committed To Preserving Crappy Colleges

You may recall that the Corinthian College for-profit chain was in trouble. Specifically, they were in trouble for 1) running a massive scam and 2) not even running it successfully.

For-profit colleges are a great study in how a voucher system really works. The feds grant higher ed vouchers to a sector of potential students, and then various institutions compete to get those vouchers. Do they compete by being the most awesome providers of the most excellent education? Don't be ridiculous. Do Coke and Pepsi compete by trying to create the most excellent, healthful beverage, or by piling on the marketing and putting in just enough sugary sweetness to trigger the monkey pleasure centers in our brains?

So these for-profit colleges specialized in marketing techniques like Empty Promises and Lying About Previous Results.

And of course, there's one significant difference between this system of vouchers as compared to the usual-- these are vouchers that students have to pay back with interest (which turns out to be difficult when you've sunk all your money in an education that doesn't get you a good job).

Anyway, the full story is here. Short version: feds threatened to shut down predatory loan-sucking for-profit scam schools, but decided to bail them out instead. Kind of like finding people in a burning building and saying, "You guys just stay there inside. We're going to hire someone to paint the place."

Now we've arrived at Chapter 2. After bailing Corinthian out so that students could continue to stay warm and toasty inside the burning building, the feds are supporting a new deal. As reported in the Washington Post, a chunk of the chain has been bought up by----- a debt collection company!

“What we are seeing is an unprecedented attempt on the part of a regulator to prop up one of the very worst companies in the industry,” said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities. “You could debate which is better — allowing a predatory operation to collapse, or keeping it on life support so that it could victimize more people. That is what the federal government has done.”

Nassirian is being generous-- I'm not sure exactly what the argument for allowing predatory operations to collapse, other than it would be disruptive for the students sooner than letting them finish school and then finding out that they've been had.

Educational Credit Management Corporation is the buyer, and if you've heard horror stories about students being relentlessly pursued to pay up school debts, these guys were probably the monster under those stairs. They've been spanked a few times for overzealous pursuit of the money. They might seem to be, to say the least, an odd choice to own and operate a for-profit college chain.

ECMC is an odd choice to run chunks of Corinthian only if you think the purpose of these schools is to provide an education. If you understand that the whole for-profit college biz exists only to move school loan money around so that outfits can make money from the process every time the dollars change hands. For-profits exists in order to convince students to go into debt; the school collects the principal, and the owners of the loans collect the interest, and the students collect the debt. It is a great model for privatizing profit while sloughing the risk and debt off on citizens. So ECMC, as a debt collector, is simply getting into some vertical integration, making money from the loans both coming and going (earlier this year they also acquired College Abacus "the of college loans). They can hire somebody to maintain the illusion that there is an actual school at the center of this giant scam, and do it through their own Zenith Education Group subsidiary so that not a single delicious dollar leaks out of any of the seams.

How do federal authorities feel about these efforts to keep a shark in the educational waters? Are you kidding? They helped broker the deal. Because in all of this, it's far more important that the for-profits remain intact and viable than the futures of tens of thousands of students be safeguarded. This is as if Gerber laced a hundred thousand jars of baby food with arsenic and the fed's first priority was to make sure the company was okay while leaving the babies to just fend for themselves.

I'm sure that the obscene profits that the fed makes from student loans has nothing to do with this. It couldn't be that nobody called it a bad idea, because many, many people have spoken out at every step of this process. From the Huffington Post:

“While bailing out 56 schools, the sale treats the more than 30,000 students like financial assets,” said Maggie Thompson, manager of the Higher Ed, Not Debt campaign.

“If you’re supposedly a regulatory agency, and your mission is to protect students, why wouldn’t you want students to know that?” said Mark Huelsman, a senior policy analyst at policy organization Demos. The Education Department, in effect, allowed Corinthian to enroll as many students as it wanted, even as it teetered on insolvency -- ignoring the demands of a dozen Democratic senators.

From the Washington Post:

“Corinthian faced enrollment challenges and regulatory scrutiny common to other for-profits, but the thing that did them in at the end of the day was plain old mismanagement,” [Trace Urdan, a higher education analyst at Wells Fargo Securities] said. “They failed to cut costs like they needed to, operating under the assumption that next year would be better — and it never was.”

Rep. Steve Cohen (D-Tenn.) said he was “shocked” that the Education Department would support the deal and questioned whether keeping Corinthian open under any management was in the best interest of students or taxpayers.

“To prop up a school whose main purpose seems to be to get federal money is a misguided use of federal funds,” Cohen said. “When a school like [Corinthian] that has a checkered history is on the mat, throw in the towel. It’s over.”

But here's who liked it:

“We are glad that Corinthian has reached an agreement with ECMC Group and believe that this transition will allow students to maintain progress toward achieving their educational and career goals and protect taxpayers’ investment, while Corinthian moves out of the business,” Undersecretary of Education Ted Mitchell said in a statement.

The whole Corinthian mess is as clear an example as we've ever seen of the federal government putting corporate interests ahead of the interests of citizens. It's also a fine example of the federal policy of say one thing, do another. Just last month, Arne Duncan said

“Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable.” 

It's unacceptable. But not so unacceptable that we're going to do anything about it.

It's not complicated. If you want an example of for-profit colleges that bury hard-working least-able-to-afford it students under debt while giving them nothing to show for it, you could not find a clearer example than Corinthian. If the feds couldn't bring themselves to intervene on behalf of students in this situation, they never will. The US ED can talk all it wants, but its actions show the truth, and the truth is that predatory for-profit schools get no punishment and plenty of profitable help from Arne Duncan's department.


  1. And remember that Arne gets a kickback - student loan interest goes to the DOE so they can give it to TFA, CAEP, TNTP and whoever.
    If Corinthian had been closed down outright, the student loans would have had to be forgiven. This way, everyone gets a piece of the action - as the students pay.

  2. This is a great article. You are right. The Obama administration and Arne Duncan's Department of Education talk a good game. President Obama even introduced a "Students Bill of Rights" recently. But DOE had an opportunity to do the right think when Corinthian folded, but opted to allow ECMC, a heartless student-loan debt collection agency, to keep Corinthian's operations afloat. Actions speak louder than words.