Prall: The trouble with for-profit colleges

BY JACOB PRALL | MARCH 04, 2015 5:00 AM

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Online for-profit colleges are the perfect way for you to get a degree while living your life. If they aren’t elaborate predatory lending schemes, that is.

One of the largest for-profit schools, Corinthian College, was dissolved and sold off after coming under scrutiny from the Consumer Financial Protection Bureau. It is not unique in its garnering attention from the federal government; many for-profit colleges that live on the web are coming under fire as predatory lenders.

There is a mountain of lawsuits accumulating against Corinthian. The problems cited are not new to the online college industry. Many have been accused of skewing job-placement data, giving defunct degrees, and charging extortion-level interest.

What is to become of the alumni of Corinthian? Tens of millions of dollars are owed by students across the country. After they wrote an open letter to the Department of Education, the federal government agreed to create some assistance programs, but they aren’t much. An offshoot of Occupy Wall Street, the Debt Collective, bought and forgave more than $13 million in student debt. Unfortunately, for-profit colleges often cost just as much as your average private school, so a dent was made in the debt — but not a big one.

The litigants against Corinthian have started a debt strike. They refuse to pay the massive debts they owe to a now-extinct college for an education they deemed unworthy.

This brings into attention a problem the Education Department has been dealing with recently — is the business of education morally sound and economically safe?

For-profit colleges have exploded. The web has allowed for widespread enrollment and classes at anytime. Though helpful for the full-time worker, shareholder colleges have very little incentive to provide a quality education.

There are plenty of arguments against online schools about what the student misses out on: classrooms, dorms, professors, whatever you consider the “college experience” to be. What worries me is the exploitive nature of these schools. They prey on aspirations and target those who desire an education but for whatever reason cannot access it by traditional means. 

The problem is similar for the business of health care. Because consumers can’t negotiate properly (because their health is literally in the hands of the providers), standard economics don’t apply. A simple free-market system with just the consumer and provider is impossible. Whether you believe in government intervention or not, the problem exists and is handled in a variety of ways.

Capitalism can lead to progress, innovation, and growth. It is based on incentives, though. For-profit schools exclusively cater to their stockholders. There are very few, if any, incentives to provide a quality education or be straightforward with their students. In the end, they are not accountable to those they teach, only the stockholder.

Education is already a complicated and easily exploitative thing. There are incentives for a government to educate its people as high education translates to high GDP. Even this fact changes how and what we are taught. Having the decisions being made solely by a small group of investors sounds like a terrible idea, as they have no interest in education, just the interest on loans made to students.

Is there a place for online schools in the future? Probably, yes. It is already a massive industry and is on the rise. It’s a real lion’s den, though. Government regulation will end up being necessary to protect “consumers” of education from dishonest sources. Corporate colleges are here to stay, but if you ask the Corinthian alums, I bet they’d tell you to steer clear. These colleges aren’t out to help you. They’re a business, and like any business, they are out to help themselves.

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