Blog Two: College, Inc.

                What makes education more special than the everyday items that we purchase? For Michael Clifford, John Sperling, and countless others who have obtained success by asking this question, a new type of industry has emerged within our nation, one with immense consequences on our economy and politics.

                Michael Clifford is deemed an "educational entrepreneur," because he invests capital in failing universities, and sells shares of these schools to investors. His rescued schools then become "for-profit" colleges. John Sperling, of whom Clifford formerly apprenticed for, believed he could "mass produce" education, thus running a school more like a corporation rather than a traditional university. Sperling is the founder of the University of Phoenix, a booming for-profit school with over a 500,000 students enrolled.

                What exactly are "for-profit" schools? In comparison to traditional universities, for-profits sell shares to investors, as opposed to raising money from alumni and other donations. The majority of their courses offered are available online. Their calendar differs than that of the norm, so opposed to having semesters, classes are constantly starting every few weeks.  The University of Phoenix, for example, only offer short term contracts to teachers to keep costs of education low. Campuses are generally built near highways (for easy access and convenience) and are separated by roughly a 20 minute drive. For-profits are seen as the "open doors" to those who were shut out of traditional education. Many students want to increase their job prospects by going back to school, because it is incredibly difficult to sustain a "good" living-wage job with only a high school or associate's degree. Higher education is the answer to many people who need to obtain knowledge. For-profit schools are taking full advantage of this situation.

                For-profit schools are enrolling students into their systems at incredibly high rates. With these schools in place, they are constantly having to add students to keep revenue coming in. It has been determined that about 25 percent of revenue of any given for-profit is spent on advertising, while only 10 to 20 percent is spent on their faculty. These schools rely on "sales people," or recruiters, to keep enrollment rates up. There are many issues with this, however, because recruiters use sales-like phone calls with high pressure tactics to convince potential students that "a college degree can solve all of their problems." Many of the students who enroll in for-profit schools are generally from low socioeconomic backgrounds, mainly because it is their only option. However, because of this population, the majority of these students have to take out loans to pay for their education, which is having a tremendous impact on the economy and political sector of our nation.

                A for-profit tuition is expensive. The costs are about five to six times that of a community college. The students that enroll at for-profits generally have to take out many federal loans. Out of all of the students obtaining higher education, only 10 percent are from for-profit schools. However, these students make up around half of all the students who are at default with their loans - and these numbers only include a two year period from "graduation," which does not include the big picture of debt, so the percentages are actually higher than shown. Because of the student population and its large growth, there is much concern in Washington and on Wall Street that many of these students are going to fail to pay back their loans and that the government will then become responsible for them.  Congress sees the danger in this. The concern parallels that of the crisis in 2008 with the housing market collapse: people were buying houses that they couldn't afford, much like students who are taking out loans that they probably won't have the ability to pay back. This critical factor raises the question: are for-profit schools setting up students for failure?

                What steps is the government (and Wall Street, for that matter) taking to ensure that no economic crisis occurs? Congress has imposed a gainful employment test, which is a test to figure out whether for-profits are training students well enough for their intended degree. The for-profit schools dislike the regulations, but as Jack Welch (better known as the former and very successful CEO of General Electric and the founder of the business school at Strayer University) puts it, "you can't be afraid to go into a business because of regulation risk." This regulation is also expected to make education stocks fall, so lobbyists are trying to fight them in Washington. President Obama, on the other hand, has a goal that our nation will have the highest amount of people who have a college education by the year 2020. Therefore, Obama will need the for-profit sector to meet his goal. However, many students are now finding (upon completion of their degree) that their education is unsatisfactory for the work that they have to do and are finding it troubling to get a job, which then causes them to fail to pay back their debt. Some students faced with this dilemma (of realizing that their school lacked credentials or the accreditation they needed) are filing lawsuits against their school. Even if they won their case, the government would not be able to take back the debt of the student.

                With all of this said, are for-profit schools becoming "too big to fail," like many of the banks on Wall Street? Is our country adopting a culture of apathy towards its future? Our nation's population has gained an attitude of "buy now, pay later (even if I can't pay later)" to meet all of its needs, as we have clearly seen throughout history (resulting in Great Depression of 1929 and the 2008 housing market collapse, for example). Should we worry about the "fast-food-ization" of education (the very essence of making a slowly-gained and traditional education worthless)? Are these for-profit schools making education lose value and reducing the quality of a college degree? We may be able to answer yes, but who is to say what holds value or not? Only time will be able to allow us to find concrete answers to these potential obstacles that for-profit schools have induced.

 
"College, Inc." Frontline. PBS, n.d. Web. 25 Nov. 2012. <http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/>.