For-Profit Education: Milking Students and the Taxpayers for Corporate Profits
In recent Solutions columns on for-profit prisons, Dina Rasor demonstrated how these privatized, formerly government-run institutions, have become home to self-dealing, destructive social behavior and wasted taxpayer money. In the spirit of looking at increasingly privatized institutions, I see similar aspects of the new and growing for-profit college system we are creating in this country. Enrollment at for-profit colleges and other for-profit educational institutions has increased by 500 percent in the past decade. This growth is much faster than enrollment at public and not-for-profit institutions.
The business model for the for-profits colleges includes heavy advertising to recruit a stream of new students, government loans and government-guaranteed loans to fund their education and intense cost control on educational costs. The government (read taxpayers) guarantees the loans on the highly possible chance students do not achieve anything close to their goals of an education and a job, and these students may also default on their loans while failing to even graduate. The institutions make a nice profit whether students graduate or not and whether they start a career or not. Should they default on the loan, the taxpayer will pick up the tab. This business formula of for-profit colleges continues the recent trend by businesses to make higher profits by socializing the risk, while privatizing the profit.
If you pay attention to the investment banking industry, the for-profit prisons, the health insurance industry and now for-profit colleges you will see this same pattern; private profits with public risks. When industries are structured in this manner, we also get intense lobbying for favorable legal treatment, the spreading around of campaign money and a revolving door for politicians and regulators. The public often foots the bill with little or no benefit from the process.
Read more: http://truth-out.org/news/item/9485-for-profit-education-milking-students-and-the-taxpayers-for-corporate-profits
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