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Forum Post: "A HUGE STUDENT LOAN SCAM : For-profit colleges are massively ripping off U.S. taxpayers", by Andrew Leonard.

Posted 10 years ago on April 18, 2012, 4:28 p.m. EST by shadz66 (19985)
This content is user submitted and not an official statement

A Huge Student Loan Scam.

For-profit colleges are massively ripping off U.S. taxpayers.

By Andrew Leonard.

April 18, 2012 "Salon" ( http://www.salon.com/2012/04/16/a_huge_student_loan_scam/ )

Earlier this year, the U.S. House of Representatives voted to pass a bill with the impressive, everybody-can-get-behind-this title “Protecting Academic Freedom in Higher Education Act.” Sponsored by the ultra-conservative North Carolina Republican Virginia Foxx, the bill ostensibly took aim at an issue close to small-government-loving hearts: intrusive federal regulation of for-profit colleges — fast growing, highly profitable outfits like DeVry University or the online-only University of Phoenix.

Like so many of the bills passed by the House since Republicans gained the majority in the 2010 midterm elections, the bill was designed to repeal specific actions taken by the Obama administration. In this case, the issue at hand was the Obama administration’s efforts to ensure greater “program integrity” in the for-profit educational sector. Specifically, a new federal definition of what constitutes a legitimate academic “credit hour” and a new requirement that all online providers of post-secondary education be accredited in each and every state in which they do business.

Foxx’s bill repealed both measures. (The Senate has yet to address the measure.) According to Foxx, the new federal regulations threatened “innovation” in the educational sector. As reported by InsideHigherEducation, Foxx is on record as declaring that for-profit colleges do a “a better job of being mindful about efficiency and effectiveness than their nonprofit peers.” By, for example, flexibly providing online education when and where low-income working Americans want it, the for-profit free market delivers the kind of quality higher education that Americans so desperately need. The government should just stay out of their business.

I stumbled upon this story while researching the student loan crisis and at first I was perplexed. I didn’t understand why Republicans were opposed to higher academic standards for the for-profit sector, and I didn’t get the connection to student loans. But it didn’t take much research to discover what was really going on: an example of blatant hypocrisy sufficient to outrage even the most jaded observer of American politics.

The for-profit educational sector is an industry almost entirely subsidized by the federal government. Around 70-80 percent of for-profit revenues are generated by federal student loans. At the same time, judging by sky-high dropout rates, the for-profit schools do a terrible job of educating students. The Obama administration’s efforts to define a credit hour and require state accreditation were motivated by a very understandable desire: to ensure that taxpayers are getting their money’s worth when federal cash pays for a student’s education. In contrast, Foxx’s legislation is designed to remove that taxpayer protection. So here’s a more accurate title for her bill: “The Protecting the Freedom of For-Profit Schools to Suck off the Government Teat Without Any Accountability Whatsoever Act.”

The for-profit educational sector has been growing extraordinarily rapidly for the past decade: 12 percent of all post-secondary students are now enrolled in for-profit schools, up from 3 percent 10 years ago. But the main beneficiaries of the growth appear to be the shareholders and executives of the largest publicly traded for-profit schools, not the students.

  • In 2008, for-profit schools registered a a graduation rate of 22 percent. (Public and private non-profits registered 55 percent and 65 percent respectively.)

  • 54 percent of the students who enrolled in 2008-2009 in 14 publicly traded for-profit schools had withdrawn without a degree by 2010.

  • The biggest player in the for-profit sector, the University of Phoenix, graduated only 9 percent of its B.A. candidates within six years.

The pathetic performance of the for-profit sector in delivering actual degrees becomes all the more alarming when you realize that most of the students who are dropping out paid for their educations with student loans that have to be paid back: According to a report released in the summer of 2010 by Sen. Tom Harkin, D-Iowa, “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education,” in 2009, the five largest for-profit schools reported that government grants and loans accounted for 77.4 percent of their revenue.

The Harkin reports comes to a stark conclusion:

  • The Federal government and taxpayers are making a large and rapidly growing investment in financial aid to for-profit schools, with few tools in place to gauge how well that money is being spent. Available data show that very few students enroll in for-profit schools without taking on debt, while a staggering number of students are leaving the schools, presumably many without completing a degree or certificate.

It is precisely this situation that the Obama administration’s efforts to ensure “program integrity” were designed to address. Student loans are tied to credit hours: By requiring a more rigorous definition of credit hour, the administration was attempting to make sure that government money was paying for actual education. Similarly, the requirement that all for-profit schools must be accredited by the individual states in which they do business was a measure designed to keep fly-by-night online schools operating out of states with weak accreditation requirements from enrolling out-of-state students and ripping them off. The issue is not “innovation.” The issue is basic consumer protection.

One would imagine that Republicans, who theoretically oppose government involvement in the private sector, and are always looking for ways to cut government spending, would approve of efforts to seek greater accountability for taxpayer funds. Virginia Foxx, after all, was notorious for being one of only 11 members of Congress to vote against a federal relief package for victims of Hurricane Katrina, citing the “high potential for the waste, fraud and abuse of federal tax dollars.”

But as it turns out, Foxx herself is benefiting from the waste and abuse of federal tax dollars. Among the top 20 financial contributors to Foxx in the 2011-2012 cycle are the Association of Private Sector Colleges/Universities, the Apollo Group (owner of the University of Phoenix), and Corinthian Colleges. Since federal student loans comprise the vast majority of the revenues of those for-profit schools, it follows that their campaign contributions to Foxx are also made possible by U.S. taxpayers.


avarita facit bardos ...


Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard - http://www.salon.com/writer/andrew_leonard/ .

Copyright © 2012 Salon Media Group, Inc.

[This article is copied verbatim under "Fair Use" from : http://www.informationclearinghouse.info/article31114.htm . Please use this ICH link or the salon.com link at the top in order to access all the corroborative and supporting links.]



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[-] 3 points by beautifulworld (23646) 10 years ago

These for profit schools are a blight on American society. They will contribute to our downfall. And, the government's involvement in supporting these phony institutions through providing student loans is just despicable. One more reason to Occupy Wall Street.

[-] 2 points by shadz66 (19985) 10 years ago

These institutions are propagandised by the usual 'Prophets of Private Profit' and will look to hoover up public funds and divert them (yet again) into private pockets. 'Education' stands to become second only to 'Healthcare' in the annals of domestic American fiascos if these proposals go through.

Further, please also see :

praemonitus ; praemunitus ...

[-] 2 points by beautifulworld (23646) 10 years ago

Right. It's like they basically don't give a crap about our health or our education. What's next?

Profits over people. When will it end?

[-] 2 points by shadz66 (19985) 10 years ago

Frankly 'bw' NEVER !!! Unless they are stopped !! Resistance Is Fertile ! Also please see :

  • "Emerging Risk ? : An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education - The United States Senate HEALTH, EDUCATION, LABOR AND PENSIONS COMMITTEE (Tom Harkin, Chairman) : http://harkin.senate.gov/documents/pdf/4c23515814dca.pdf .

pro deo et patria ...

[-] 2 points by beautifulworld (23646) 10 years ago

Thanks for the link. Very interesting info there. No school listed on the U.S. stock exchanges can properly educate students in the pure pursuit of knowledge. Money will always be the raison d'etre of these organizations and will drive what they do and what they teach.

[-] 2 points by shadz66 (19985) 10 years ago

Furthermore, not only will the public purse be ripped off but it is students themselves and their long suffering parents as well, who will also be impoverished and cheated :

caveat emptor ...

[-] 2 points by beautifulworld (23646) 10 years ago

You are right and the social costs of receiving a sub-par education combined with the economic costs to family finances is appalling.

[-] 1 points by shadz66 (19985) 10 years ago

Pertinent to your comment, I append the following :

ipsa scientia potestas est ...

[-] -1 points by takim (23) 10 years ago

so why don't you go and occupy harvard?

[-] 2 points by Nevada1 (5843) 10 years ago

Hi shadz66, Good post. Best Regards

[-] 2 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

Hey Nevada1 thanks for stopping by earlier, I couldn't message back as I was over the limit on PM's.

[-] 2 points by Nevada1 (5843) 10 years ago

Hi DKA, Always a pleasure to hear from you.

[-] 2 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

You too, you always show-up in good form and willing support.

[-] 2 points by toukarin (488) 10 years ago

Oh... and lest we forget... you cannot readily declare bankruptcy on a student loan...

[-] 2 points by shadz66 (19985) 10 years ago

Indentured Debt-Bondage !!! Ain't it GR8 ?!! Oh for the halcyon days of mere Wage-Slavery !

verum ex absurdo ...

[-] 2 points by toukarin (488) 10 years ago

LoL... Indeed...

I have been fortunate in that I have never had to take out a loan of any significant size or term... then again... I don't own the home I live in and I drive a 2nd hand vehicle... Taking care of the property for my brother in law while paying below market rent... but I put myself through college up to my Masters degree without a loan...

My grandfather always said that if you cant pay cash upfront. You don't deserve it yet... a difficult rule to live by... but for sure.. it means financial security...

[-] 2 points by shadz66 (19985) 10 years ago

Good for you bro' - but this is not possible for most folk. In any wealthy and civilised society Education should be a right and free of the advantages of family wealth and connections. IF we can finance Empire we can educate the kids, give them life opportunities, make them more employable and then tax them accordingly on their incomes to finance the next generation.

Too reasonable and naive ?!!! What do I know ?!! I never went to college and don't have a degree !

experientia docet ...

[-] 2 points by toukarin (488) 10 years ago

Public Education and State funded universities are great... and should be free or cost next to nothing... but they are being hamstrung by the politicians who have decided to turn over the field to for-profit private universities.

All the ratings keep on saying that the private for-profit universities are the best... and yes... there are many which are really top class... but they are not the real danger... the danger is from the fly by night online course providers offering degrees 'on the cheap.'

It was a brilliant scheme really... it used to be that simply a Bachelors degree meant a great deal...

The first step was to make it passe... a bachelors degree is basically the equivalent of a High School Diploma nowadays for most decent paying jobs...

This made it necessary for those seeking to differentiate themselves from the competition to seek Masters degrees and the MBA's...

Frankly speaking... I have had the opportunity to look into the classes offered for many 'masters level' courses and as a Masters degree holder myself... I can honestly say that the one and a half years I invested in that degree would have been better spent picking up actual skills in a job...

This is basically true for every field... instead of masters degrees... we should have apprenticeships... win win... great education for the student and someone to do the grunt work for a nominal fee (if anything) for the employer...

Thanks to the current system however, most students are forced into what is usually close to, or over 6 years of higher education at exorbitant cost (the really good private universities tuition rates are too high for me to even contemplate)... banks and the government step in with loans... except that you HAVE to pay them back... bankruptcy wont save you in most cases...

Combined with a stagnant economy... and staggering unemployment among the youth... its a loan bubble that could be much more painful to the common man than even the housing crisis...

Financing education does not require all that much money... its all there already... its the political will to put the interests of the people above the corporations that is lacking...

But... really... in my humble and also naiive opinion... too much emphasis on degrees is part of the problem... A bachelors degree... a rigorous one... is more than enough for most positions which call for a masters degree or higher... we need to bring back the prestige associated with a bachelors degree... and we need to bring back apprenticeships for graduates...

[-] 2 points by shadz66 (19985) 10 years ago

I appreciated and enjoyed your comment and it sounds like you are describing the dynamics of an 'arms race' and 'spiralling inflation' !

The systems you are alluding to sound very much like the Scandinavian / German Model of Education and are far too sensible for us living in Anglophone Countries - where we'll be cooking and eating our own children soon !!

absit omen !!!

[-] 2 points by toukarin (488) 10 years ago

Once the public education system and govt subsidized colleges get mangled badly enough... people will have no choice but to turn to the for-profits... which is when they will really turn the screws...

Also... I have seen some of these so called online course materials... Most were not nearly up to par... There is always the problem of accountability... getting someone to stick to a code of educational integrity when taking tests in the privacy of their homes is kinda hard...

IMO online courses and materials are great educational aids... but cannot be used to give out degrees unless there is real accountability for the students built into the system and the materials are rigorous and include practical examples in some shape or form.

The key is rigor. Colleges need to be harder to get into... education needs to rigorous and industry oriented... In essence, degrees need to be worth what students are paying for them... if everyone and their grandma have a degree... its basically worthless...

[-] 2 points by shoozTroll (17632) 10 years ago

Look what I found!!!!

Our friends at ALEC!

I wonder if they consider this an "economic" issue?


[-] 2 points by shadz66 (19985) 10 years ago

Damn fine link !!! Bloody good web-site !! Going on my favourites right now !

Cue : A Wee Boogey via http://www.youtube.com/watch?v=Epf5YaGhPKY ~:-)

primum non nocere ...

[-] 1 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

You do find some interesting items.

[-] 2 points by shoozTroll (17632) 10 years ago

Are you that surprised?

They were behind the 916 (R)epelican't anti-womens rights bills too.

Here's something I can't prove, but you tell me if it makes sense.

It was during the Bush years, that folks like the Pentagon and many corporations, finally accepted global warming.

It was also during the Bush years that the Kochs bought Georgia Pacific.

Global warming= lot's of buildings getting wrecked.

Georgia Pacific makes home building products.

[-] 2 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

Insane greed is not blind to opportunity or making opportunity where possible. It is only that the opportunity is usually at someones expense and the expense has been driven very high. The greed has gotten out of control and has pushed too hard it has redoubled on itself over the last thirty or more years and has reached critical mass. This can not continue and people are beginning to realize this is a different situation than a normal system fluctuation. Though everyone involved is trying to pass off this near depression as no big deal. Yeah they are trying to deny it prior to our getting past it. That is how insane this situation is - and they believe to this day that they can get the public to swallow it one more time.

[-] 2 points by shoozTroll (17632) 10 years ago

One would have to wonder, how much the prices on said materials have gone up in the last 12 years.

With ALEC passing the laws they do and the Koch desire to corner "niche" markets.

Now they want CATO back, to corner the libe(R)tarian market again.

They are moving faster than any political party around.

[-] 2 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

Political parties don't move fast it's not in their make-up, so when you see speed applied you know it is business ( the speed of business ) and when it is political that is the telling sign of corrupt maneuvering.

[-] 2 points by shoozTroll (17632) 10 years ago

With the aid of ALEC, bad law moves at the speed of sound.

It takes the Australian press to show it as it is once again.


[-] 2 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

Thanks for the link.

You didn't actually think that this issue would be covered by Corporate owned USA Main Stream Media?

[-] 2 points by shoozTroll (17632) 10 years ago

When will they notice that the whole World really is watching?

When will WE learn that we don't have freedom of the press?

When will we admit that it was Reagan that made it so.

[-] 2 points by DKAtoday (33802) from Coon Rapids, MN 10 years ago

Watching the upcoming 4/24/2012 Frontline episode should help. As we all are helping - those who are here in support and are sharing out and circulating this information. It will reach critical mass and then we will see an explosion of speaking out and hopefully directed positive action. That is one reason I was glad to see FriendlyObservers Post to get a petition listing on this site.

[-] 1 points by francismjenkins (3713) 10 years ago

For the life of me I don't know how people get roped into something like a Univ. of Phoenix or DeVry (although maybe a DeVry could be okay if you want to be an auto mechanic or a welder or something like that ... but definitely not for a rigorous subject like computer science). There are decent online programs out there (but you'll find them at your local bricks and mortar college, where you may have to enter a classroom occasionally, but for a major that isn't science oriented, it's certainly a viable option for someone who has time constraints).

[-] 1 points by zoom6000 (430) from St Petersburg, FL 10 years ago
[-] 2 points by shadz66 (19985) 10 years ago

Thanx for this link. I watched it broadcast & will copy the link to other threads. pax et lux ...

[-] 1 points by XenuLives (1645) from Charlotte, NC 10 years ago

Trust me, I'm NOT voting for Foxx this November. Now I just have to convince the rest of the people in my state to do the same...

[-] 2 points by shadz66 (19985) 10 years ago

Liberally e-mail this article ; print, photo-copy and distribute it ; leave copies on buses ; paste or stick copies in public places like libraries, schools and colleges. Anything to spread the word about the conflict of interests and corruption of Virginia Foxx and her nefarious ilk. Good luck ...

lux et veritas ...