Sunday, March 29, 2015


The List

If you knew that a college had its access to Federal financial aid money restricted due to concerns about risks to taxpayers and students, would you send your kid there?

I wouldn’t.  Which is probably why the Feds initially sat on the list of colleges on restricted status.  If enough parents and prospective students use the list as a warning, it could become a kind of self-fulfilling prophecy.  

That’s particularly true given that the colleges on the list are either proprietary or very small private schools.  In both cases, budgets are almost entirely enrollment-driven, so a dip in enrollments caused by a Federal scarlet letter could prove fatal.  I’d expect administrators at those institutions to make exactly that argument.

The easy -- and largely true -- counterargument to the “self-fulfilling prophecy” argument is that the prophecy is going to be fulfilled anyway.  The fire alarm didn’t start the fire.

But there’s a larger public interest to address.  When a for-profit closes abruptly, which happens more often than you’d think, the damage to the students is real.  Depending on accreditation status, the work they’ve done may be lost entirely.  They lose access to whatever records the institution kept, and whatever connections they may have made.  The loans survive, even if the college doesn’t.  (I’ve been following with interest the group of former Corinthian students who are on a debt strike.  To my mind, they have a pretty good case.)  To the extent that the loans go unpaid, taxpayers wind up making up the difference one way or another.  At least giving people a heads-up before it’s too late can contain the damage.

If the for-profit sector were savvier -- admittedly, a big “if” -- it would actually push for tighter regulation.  I say this having worked in one.

Tighter regulation could accomplish several worthwhile goals.  

First, it would shift the incentives within the sector.  Instead of racing to the bottom, they’d be forced to compete on quality.  If they did that, I’d have no problem with them at all.  If someone is able to make a buck -- hell, even a lot of them -- by building a better mousetrap, let them.  If an entrepreneurial sort identifies an underserved part of the market and finds a more effective way to serve that part, bring it on; the students will win in the short term, and over time, the publics and non-profits will have to raise their game, eventually benefiting everybody.  RIght now they compete largely on customer service and marketing, often at the expense of quality.  Require quality, and you have something closer to a fair fight.

Second, it would spur improvements in the public sector.  This can only be good.

Third, it would drive out the frauds who only survive by cutting corners.  This, too, can only be good.

Fourth, the reasonably rigorous measures of quality wouldn’t have to be unique to the for-profit sector.  There’s a genuine public good to be served by applying those measures across the board.  But the urgency is greatest in the for-profit sector, simply because of its incentives.

I have no theological opposition to for-profit education.  I do have a serious objection to institutions of any sort that cut corners to exploit students.  For-profits generally have a stronger incentive to do that, in the current system.  I don’t see prohibition as a viable strategy, but some sort of reasonably rigorous quality control could conceivably shift the field of competition to where it really should be.  

Simply releasing the watch list doesn’t amount to upfront quality control or regulation; at best, it’s a sort of rearguard action designed for damage control.  That’s fine, as far as it goes, but we need much more.  The discussion needs to shift from “for profits good” vs. “for profits bad.”  Let’s restrict the realm of competition to actual quality, and then let the best providers win, whoever they are.  In the meantime, I’m glad the list will be public.  The public needs to know.

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