Subordinating the Public Good to Private Profit: The Abuses of the Department of Education Under DeVos

It is one of the many ironies of contemporary American politics: On the one hand, portions of the Republican Party attack the nation’s leading public institutions of higher education. On the other, the federal government withdraws scrutiny from for-profit colleges, some of which do nothing more than exploit vulnerable populations of students.

Like so much Republican Party propaganda, the campaign against American universities, which have contributed enormously and in multiple ways to U.S. global leadership in the decades since World War II, has been effective. The consequences have been popular discourses ranging from the insistence that universities smother free speech to the more fundamental claim that college may just not be “worth it.”

One consequence of this assault on not-for-profit higher education institutions is to make for-profit colleges look less unattractive in comparison – a development in synch with the current administration’s elevation of activities that generate private profit over investments in the public good.

The Department of Education under Betsy DeVos has embarked on a systematic deconstruction of efforts to investigate and punish fraudulent activity at for-profit colleges. Why, in a capitalist economy, would we wish to encourage and abet fraud?

Last week it became public that DeVos has appointed as the head of one of the Department’s teams that had been investigating fraudulent activity at for-profit institutions a Dean from one of the largest colleges formerly under scrutiny.

De Vos has appointed other officials from for-profit institutions to senior positions in the Department of Education – displaying the blatant disdain for rule of law and the public good repeatedly demonstrated by this administration.

This week, the New York Times reported on the frustrations of New Jersey’s Attorney General as the Department of Education withdraws its cooperation on efforts to punish fraudulent activities exploiting students at for-profit colleges in that state.

The scope of federal support for for-profit colleges is not new, and has been a problem in our system of higher education for years. In 2010, a Government Accountability Office (GAO) report documented the explosion in enrollment at for-profit colleges, which were the beneficiaries of $4 billion in Pell Grants and $20 billion in federal loans provided by the Department of Education in 2009.

In 2008-9, for profit institutions received 23% of the $105 billion total in federal grant and loan funding to higher education. Furthermore, for-profit colleges garner a large share of their funding from the federal government; in 2014-15, 30% of 1838 for-profit institutions received more than 80% of their funds from federal financial aid.

These institutions do enroll a disproportionate share of financially needy students; nonetheless, a model in which institutional existence is based on pulling in students and their federal loan money should at the very least face tough public scrutiny to ensure students are well-served. In the event they are not, the model comprises a grossly ironic federal subsidization of the for-profit system.For-Profit-College-List-4.png

The GAO report focused on 15 for-profit institutions, identifying fraudulent activities at 4 of these, and deceptive practices (including misleading information about graduation rates, accreditation, program costs and earnings potential) at all 15. While there are undoubtedly some honest for-profit institutions, the GAO report establishes that deception is the prevailing business model.

The Obama Administration drafted regulations to address these issues, citing the high debt to earnings ratio of student borrowers at for-profits as well as their high loan default rate – 11.9%, nearly double the 6.2% rate at public colleges.

Federal regulations drafted in 2010-11 established debt to earnings limits, adjusted based on program-completion and job placement rates.

According to the Sunlight Foundation, when the Obama Administration began pursuing regulations to address the high level of student loan defaults at for-profit colleges, the industry responded by tripling its funds spent on lobbying to more than $7.5 million. Lobbying activity intensified in 2011, focused on contact with officials in the then-Democratic administration. Reporting from the time refers to the industry’s “aggressive efforts, even by Washington standards.” As a Penn State education professor who studied the process concluded, “the industry did largely what it set out to do.”  “The Department of Education,” he added, “really bent to the lobbying push.”

With the new administration, subordination of the public good to private profit, and the misallocation of federal resources, have become far more egregious.

In recent weeks I’ve written about the evisceration of the Consumer Financial Protection Bureau; policy making there, at the Department of Education, the Environmental Protection Agency, etc. reveal a very clear pattern: industry personnel are being ushered into the federal government not for their business expertise, but so that they may systematically restructure federal regulation in the service of private profit and at the expense of American citizens.

Other than those who are profiting from predatory financial and marketing practices, which Americans are served by these policies?

No citizen, regardless of political inclination, has an interest in supporting this massive fleecing of the American people and the resources of the federal government at the hands of a colossally corrupt administration. The damage is spreading; Americans of all political persuasions should be alarmed.

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