Government to Claw Back College Scammers…Almost.

By Professor Doom

     For years, scammy “for profit” schools have been making a killing destroying our young people as they go to college. The plan is simple: first, open up a decent looking school. Second, exploit bogus accreditation to qualify to get tuition loans for students. Third, open up enrollment (especially online) and annihilate standards so the school can enroll hordes of students. Use aggressive recruiting to get the students, and help them max out loans, raising tuition in tandem with the loans. Then the money rolls in.

      I’ve covered a few schools that use this business plan (and many do), which generates great profits for the owners (and usually administrators) of the school, but churns out hordes of students with huge debts and bogus educations that do nothing to help pay those debts.

     The Federal government, the backer of those loans (until moved to the taxpayers), has, after 1.2 trillions of dollars of student debt, caught on that something’s not right here. It’s dimly become aware that accreditation, for all its shiny façade, is a festering pit of corruption that does nothing to verify schools are legitimate, and doesn’t penalize even outrageous acts of fraud.

     The Federal government has also become dimly aware that many, many, fake schools are operating, plundering and looting with abandon. It’s finally starting to shut down the schools, even schools that accreditation says are “perfectly legitimate,” and that certainly counts for something, but what of all the stolen money?

     Again, the government is thinking about doing something about it:

How The Government Plans To ‘Claw Back’ Loan Money From Shady Colleges

     Yes, the government is putting together a plan, but, alas, it’s heavily flawed. Allow me to discuss the plan, and the flaws.

"We want institutions to know, in no uncertain terms, that they are responsible for the malfeasance that they create."

“…adopt some form of “risk-sharing” that would require colleges to pay back some of the federal funds they receive when students cannot afford their loans. Earlier this month, a bipartisan pair of senators introduced a bill to do just that.”

     This is the first flaw right here. The government will be targeting institutions for the stolen money. Despite the “corporations are people” insanity that rules today, the simple fact is human beings are the ones actually committing the fraud. Yes, shutting down the institution is nice, but getting the stolen money from the institution will accomplish nothing: these institutions are being plundered, there is no money to claw back. Poo Bahs of higher education make a million a year in salary, and quite a bit more than that in perks (like planes, houses, cars and drivers, multimillion dollar bonuses for growth, and stellar retirement programs, to just list a few of the more common perks).

      Targeting the institutions, while the thieving rulers walk away with the money, is idiocy. By the time the government gets around to asking the college to pay “some of the federal funds,” there’ll be nothing left.

     Even more ridiculous, the administrators that plundered the school will have more than enough capital to start up a whole new school…and repeat the process again.

     Yo, Federal government! Target the human beings doing the stealing. Claw back the money from the people doing the stealing, or this plan will do nothing.

     One of the reasons the Feds are looking into changing how the student loan scam works is Corinthian Colleges, which the government shut down…stranding students with no way to pay their debts, and with lots of Corinthian credits which can’t transfer to a legitimate school…or even to another bogus school.

     Accreditation is supposed to make college work transferrable. Accreditors get paid lots of money to do this job, as well as make sure the colleges are legitimate. Accreditors took the money, but did not do any aspect of their job.

     Hey, Feds! Hold accreditation responsible for legitimizing bogus schools. Because of the regional monopoly of accreditation, simply shutting down accreditors (right now) would be problematic…but find the people responsible for legitimizing these schools, and claw back money from them, too.

     Corinthian’s example is also motivating the Federal government to focus on for-profit schools. Hey, nothing wrong with that, but let’s be a bit more efficient here.

     UNC’s 18 year long fraud scandal shows that state universities have been getting away with the financial murder of our kids for a very long time. It’s pretty obvious that many people graduate with worthless degrees. Even non-profit schools are quite capable of systemic plunder.

     Hey, Uncle Sam! Don’t just make the people at for-profits accountable for their fraud…realize what’s going on at for-profits is going on at many of our state and non-profit schools. You want to claw back money from those guys, too.

     Corinthian wasn’t actually targeted for its worthless degrees, incidentally. It was targeted for low graduation rates, and high defaults. The article only hints at where those low graduation rates were coming from:

“…should discourage bad behavior like growth at all costs since the company will have to show it has the money to reach the scale it desires.”

     Our institutions of higher education, of all types, are focused on growth over everything else. It’s why a state college with a 0.6% graduation rate over a decade is still considered successful, because it achieved great growth during that decade: that the growth was achieved by enrolling anyone with a pulse (even though 25%, perhaps more, of those students are scammers), and loading them up with student loan and Pell Grant fraud money—admin still gets great pay raises for growth, no matter how many fake students have signed up.

Admin: “We have over 1,000 students taking our night courses.”

Me: “How come we have only a dozen cars in the parking lot on nights where classes are held?”

--I didn’t ask that last question, but the school wasn’t on a bus route or anything like that. Granted, I asked that question after “check day” (i.e., the day that students get their checks for signing up for college), but the fact remains, anyone with eyeballs could tell we really didn’t have a lot of students there for the education…

     The Feds will foolishly start expecting higher graduation rates. This isn’t going to work—all a fake school has to do is just mail the diplomas to students that never show up on campus. Accreditation doesn’t care about even this level of fraud. Even though standards have been reduced to the point that many classes have no requirements now, no reading, no writing, no studying, no nothing, graduation rates are still low because fake schools often have many fake students—once they get the loan check (minus tuition), they’re gone. It’s tough to graduate those kinds of students, but I’m sure if Feds require it, it’ll happen. There’s nothing to stop a college graduate from re-enrolling, and playing the student loan scam game again at a different school, by the way.

      While my previous suggestions about how to effectively punish fraudulent schools are pretty obvious, the suggestion for dealing with low graduation rates is a bit more subtle:

     Restrict admissions. 

     Right now, our fastest growing (and, typically, most fraudulent) schools get their students by promising various levels of easy, convenient, and fun. I don’t have a problem with people doing easy, convenient, or fun things, but that’s not what effective higher education is, or ever was supposed to be (ok, maybe fun, but only if you really enjoy studying 1,000 page books on history, splitting subatomic particles, or similar esoteric things).

     The Feds should force legitimate entrance requirements, you know, like accreditation used to require before it became corrupted. 

     I know, asking the Feds to set entrance requirements is pretty silly, but right now many schools have no requirements for entrance, indirectly forcing no requirements in their classes…I’m actually a little curious to see if the Feds can be worse than the nothing we have now. 

      I again point out that non-accredited for-profit schools have entrance requirements…and have graduation rates in the 90% range, providing money-back guarantees on tuition. Meanwhile, our open admission schools can’t break 30% no matter how low the standards. And many students can’t pay off the loans for the tuition…with no chance of getting their money back no matter how fraudulent their coursework.

     The unaccredited schools can guarantee jobs to their graduates, while our accredited schools can’t seem to do much beyond guarantee a lifetime of debt.

      Right now, the Feds are thinking about clawing back money from the institutions that have been ripping off our citizens, and planning to have some graduation rate standards. These plans won’t work, and will likely do even more harm to our already deeply troubled higher education system.

     I doubt the Feds would even consider my more realistic fixes, above. If they’d at least stop the student loan scam while they try to figure out how to stop the fraud, that would stop creating millions of victims a year.

      I bet that’s not going to be considered, either.

www.professorconfess.blogspot.com