Kapitalist Kollege

The Nation takes a look at one of the more egregious scams in the scam-ridden US: for-profit colleges that flourish because of the egregious scam of our college loan “system.”

More than half of the students who enroll in for-profit colleges—many of them veterans, single mothers, and other low- and middle-income people aiming for jobs like medical technician, diesel mechanic or software coder—drop out within about four months. Many of these colleges have been caught using deceptive advertising and misleading prospective students about program costs and job placement rates. Although the for-profits promise that their programs are affordable, the real cost can be nearly double that of Harvard or Stanford. But the quality of the programs [is] often weak, so even students who manage to graduate often struggle to find jobs beyond the Office Depot shifts they previously held. The US Department of Education recently reported that 72 percent of the for-profit college programs it analyzed produced graduates who, on average, earned less than high school dropouts.

Well that’s the programs they analyzed: maybe they analyzed programs they had reason to suspect were bad. But it’s pathetic that any of them should be as bad as that.

For-profit schools are driving a national student debt crisis that has reached $1.2 trillion in borrowing. They absorb a quarter of all federal student aid—more than $30 billion annually—diverting sums from better, more affordable programs at nonprofit and public colleges. Many for-profit college companies, including most of the biggest ones, get almost 90 percent of their revenue from taxpayers.

Well that’s the free market, dammit.


On March 14, the administration released its much-anticipated draft “gainful employment” rule, aimed at ending taxpayer support for career college programs that consistently leave students with insurmountable debt.

This rule would have a real impact: it would eventually cut off federal student grants and loans to the very worst career education programs, whose students consistently earn far too little to pay down their college loans, or whose students have very high rates of loan defaults.

Some critics say the rule is too weak – but the industry on the other hand says oh no no it’s much too strong.

APSCU and other lobbyists for the for-profit college industry are now out in full force, hoping to extract from the gainful employment rule its remaining teeth. Supporters of stronger standardsto protect students from industry predation—among them the NAACP, the Consumers Union, Iraq and Afghanistan Veterans of America, the Service Employees International Union and others (including, full disclosure, myself)—will push back, but they have far fewer financial resources for the battle. This is a crucial round in a long fight, one in which the industry has already displayed a willingness to spend tens of millions to manipulate the machinery of modern influence-peddling—and with a remarkable degree of success.

Well that’s how the system works, dammit. It’s pay to play. If you have more bucks, you get to win all the battles. That’s democracy.


For-profit colleges have also sponsored policy events held by media outlets. Officials at The Chronicle of Higher Education admitted to me that they had allowed Career Education Corp. not only to sponsor the Chronicle’s Washington, DC, event on student loan defaults but also to select all the speakers, despite CEC’s own terrible record on these defaults. Education expert Barmak Nassirian likened it to “a conference about preventing lung cancer, with the tobacco companies…presented as credible interlocutors.”

Why yes, it is. And?

That’s what we do.

Then David Halperin details the money going to people in Congress. Then there’s the pointlessly respected Washington Post.

Perhaps the most effective lobbyist for the for-profit colleges in 2010-11 was Donald Graham, CEO of the Washington Post Company, which obtained 55 percent of its revenues from its Kaplan education subsidiary, which was, in turn, dominated by the Kaplan for-profit college. Meeting with Obama administration officials and members of Congress, Graham insisted the proposed rule would deny low-income students educational opportunities.

For Washington leaders, Graham was a pillar of the community, someone who attended the same social functions—someone they could trust. And intended or not, Graham’s entreaties may have seemed to come with an implied threat: Cross me and risk my paper’s wrath.

While Graham’s august presence led many fancy Washingtonians to believe that Kaplan was, amid a sea of shady for-profit college operators, “one of the good ones,” the record showed otherwise.

Don’t tell us that; it’s the Washington Post.

Aaaaaaaaaaaand then there are the banks, that make out like bandits from the college loan swindle.

When it came to lobbying against accountability, one more powerful force was in the mix: large financial institutions. The companies making the most money off student loans have included America’s biggest banks: Citi, Wells Fargo, Bank of America and JPMorgan Chase, along with the number one student loan company, Sallie Mae. These companies earn big profits in the lucrative private, nonfederal student loan market, with particularly strong revenues from for-profit colleges, who are eager to share in the benefits. Some banks have an even more direct interest: Goldman Sachs owns 43 percent of EDMC, while Wells Fargo has a 19 percent stake in Corinthian.

But they’re banks, what could possibly go wrong?


The whole thing is a scam and a rip-off and the people who are making a lot of money out of it are using some of that money – ultimately via taxes, don’t forget – to frustrate efforts at reform.

I feel so proud to be an American.


  1. RJW says


    When I last attended university (in Australia) more than 20 years ago students could defer fees until, and if, their income reached a specific threshold, then they were required to pay it off through a surcharge on their income tax, effectively the Federal government paid the student’s fees and acquired the debt. It was equitable and there were no greedy private snouts in the through, so, naturally, conservative governments hated it and have been ‘reforming’ the system out of existence.

    We have our own ‘education scams’, unfortunately foreign students are usually the victims of phoney ‘private colleges’ and worthless qualifications.

    BTW When I first attend ended university in the late 1960s, education was free, apart from a small compulsory student union (activities) fee, conservative governments hate that as well, probably because of the term ‘union’.

  2. says

    Nearly all colleges and universities in Canada are run by the provincial and federal governments. This sort of stuff mentioned isn’t possible. There are a few private institutions, but they are reputable. There are private businesses technical programs (e.g. microsoft’s server IT certifications), but even they are usually government funded employement training programs connected with job training, and heavily regulated.

    Many Canadian colleges offer one and two year technical programs (e.g. bookkeeping, electronics, etc.) similar to the ones mentioned at for-profit scammers schools, but the difference is they are regulated and often lead to employment, sometimes with job-placement opportunities. And if you check out colleges and universities in many European countries (e.g. France, Norway, etc.) they do far more.

    There is no excuse for the travesty that passes for “education”. Any other business run the way “private colleges” are run in the US would have been regulated or shut down by now.

  3. A Masked Avenger says

    Federal funds should not be available at all, except for select programs meeting stringent standards. If these are free market schools, they should only get paid free market dollars. Of course students who can afford to pay are less likely to be deceived about the program’s quality, less likely to blindly trust their money to someone without due diligence, and more likely to sue for fraud after. These scams thrive precisely because there’s federal money to vacuum up, through people who are more desperate and less savvy, without adequate fraud protection on the issuing end of the deal.

  4. dmcclean says

    This bit is crappy journalism: “the real cost can be nearly double that of Harvard or Stanford”.

    Intended to leave the reader with the impression “holy crap, those are like, the best schools, they must be the most expensive.” And nominally they probably are among the most expensive. But they also have huge endowments that they use to make the real cost far away from the nominal cost.

    I would have preferred to see this expressed as a dollar figure or quoted as a comparison to state university tuition or to some sort of median tuition.

  5. sailor1031 says

    In today’s USA regulation isn’t going to happen. Too many of the legislators at state and federal levels have been corrupted by campaign donations, gifts, other perks such as free trips etc. to get anything done about such scams. Besides many legislators are totally consumed with sex and sexual matters and haven’t time for anything else. One issue in this context is how on earth do some of these ‘colleges’ get accreditation? That’s a question that could also be asked about many of the private ‘christian’ colleges around the nation. How in hell did Liberty, with it’s antiscience programs, ever get to be an accredited university for example?

    “For profit” (including nominally ‘not for profit’ organisations like RCC Inc) doesn’t mix well with public service – be it education, health care, mass transit, telecoms, power generation (all of which are in chaos, as in the UK) or whatever. I’m old enough to remember that many things actually worked quite well under public ownership even if innovation was a little slower.

  6. A Masked Avenger says

    I dislike the implication that contributions turn selfless politicians bad, because it’s crap. As just one illustration, “milker bills” are a thing. That’s when you introduce a regulatory bill you have no intention of passing, to extort money from the industry as a payoff for killing it. It’s a symbiotic relationship, and the politicians are no more “changed” into symbionts than leeches are “changed” by sucking blood.

  7. iknklast says

    The for-profit colleges have also had an effect on the other colleges, and not a good one. I work at a public college, where we try to maintain low prices and high standards, but the public colleges are increasingly being run as if they need to make a profit (partially because legislatures are doing so much to cut funding, and few areas will increase their tax base to pay for needed improvements). So we are encouraged to “promote retention”, “increase completion”, and “maintain a high FTE” – all of which is in direct conflict with maintaining the high standards that cause students to drop your class to take an easier one.

    The for-profit mantra of the Randian universe we are currently being subjected to is ruining education. I do my best to maintain a high standard; about 75% of the students who enrolled in my classes this semester dropped when they realized they had to work for the A. For my bosses, this is disaster, especially if they drop in the first week when they get all their money back. We are now treated as though our main goal is to make the “customers” happy (I’ve even been told that by one of the deans), rather than to encourage the students to learn and explore new ideas.

  8. Blanche Quizno says

    When I went to the University of Kansas at the end of the 1970s, tuition was between $400 and $450 per semester – full time, or about $900/yr. Now? It’s $9,225 per year.

    I was listening to listener-supported radio, which said that, back at the end of WWII, the government set up public colleges and universities, because there was distinct value to having a well-educated populace. So higher education was made accessible to everyone instead of only the rich. The ratio before Reagan was about 67% of the cost of higher education was subsidized by tax revenues allocated to the universities and colleges; now, that ratio is only about 37%. (Figures approximate – can’t really remember exactly) So it’s, as they say in La Belle France, boulversé, or turned upside down.

    “The portion of state budget funding spent on higher education has decreased by 40 percent since 1978, while at the same time most tuition fees have significantly increase. Between 2000 and 2010, the cost of tuition and room and board at public universities increased by 37 percent.

    During the early 1980s, higher education funding saw a shift from reliance on state and federal government funding, to a greater reliance on family contributions and student loans. Pell Grants, which were created to offset the cost of college for low-income students, started funding more middle-class students, stretching the funds thinner for everyone. During the mid-1990s 34 percent of the cost for college was covered by the maximum offered Pell Grant, compared to 84 percent during the 1970s.” – http://en.wikipedia.org/wiki/Higher_education_in_the_United_States#Indebtedness

    “By 2011, inflation-adjusted state spending per student had declined to $6,290, a 22-percent drop from 1986. Over the same time period, tuition revenue per student nearly doubled. When states passed the buck to colleges, colleges passed it right along to students and their parents. As the nonprofit Delta Cost Project has documented, students are paying an increasing share of their higher-education costs, across all sectors and types of institutions, public and private, two-year and four-year, undergraduate and doctoral.

    As states spend less and colleges spend more, students and their families are making up the growing difference in tuition that is increasingly financed by debt.

    Damningly, the money hasn’t even been spent on the students who are picking up a larger share of the tab. Instead of hiring more tenured professors to teach them, colleges have brought on board legions of low-paid adjuncts. In 1975 most instructional faculty were tenure-track or full-time. By 2009, that percentage had dropped below 40 percent. At the same time, the ranks of college administrators have grown. And anecdotes of universities’ building elaborate recreational facilities featuring things like lazy rivers (these having replaced climbing walls as emblems of excess) are commonplace, as are money-losing sports programs, aggressive building programs, and other expenditures that belie any sense of financial restraint.” http://chronicle.com/article/Fixing-Financial-Aid/137593/?cid=wb&utm_source=wb&utm_medium=en

    “Changes in the finance of HE introduced in the past twenty years include introduction of tuition fees or other charges in countries where HE tuition was previously free, substantial increases in tuition fees in several countries where they did previously exist, and changes in student aid systems, including in many countries a shift towards student loans to supplement or replace grants.” http://siteresources.worldbank.org/EDUCATION/Resources/278200-1099079877269/547664-1099079956815/Funding_HigherEd_wps8.pdf

    What is happening is that most students graduate with crushing amounts of debt and limited employment options, which effectively turns them into wage slaves. Education is returning to a privilege of the wealthy, with the perceived necessity of a college education being used as a means of turning vast sectors of the populace into indentured servants. This is a crisis of epic proportions, and one that will not be addressed, not so long as corporations run our government for their own benefit and profit. Can we fix the problem without a bloody revolution? Only time will tell…

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