Tuesday, September 18, 2018

Sub-Prime College Crash Quietly Continues




By Professor Doom

     “Sub-prime” refers to loans which basically should never be made, because the borrower has no legitimate chance of paying it back. The sub-prime real estate crash of 2008 came very close to revealing the fundamental fraud of the entire economic system, only the last minute printing of trillions of dollars and handing it over to the banks (i.e., transferring real wealth from citizens to bankers and the politically connected) allowed the illusion to continue until, well, the next big crash.

     The sub-prime real estate crash did lead to banks no longer allowing a wide range of fraudulent real estate loans, but other sub-prime loan categories, such as sub-prime car loans, emerged.

       Of course, I’m more knowledgeable of the largest new category of sup-prime loans: student loans. The official rate of default for such loans is around 11.3%, but this number is misleading, as many students with such loans cover up the default by using a host of special programs which shuffle numbers around without actually resolving the fact that the debt cannot, ever, be repaid.

      The College Meltdown is a blog which very sporadically addresses its title, and a recent post on the sub-prime college crash caught my eye.

University of Phoenix, now part of Apollo Global Management, continues to close campuses. In total, they have closed more than 450 campuses and learning sites. I expect UoPX to close half of their remaining campuses in the next 12-18 months.


      The crash has been particularly hard on for-profit schools like UoPX. Sadly, it’s not just the school which takes the hit here. Students escaping for-profits often find that, in addition to horrific debt, their credit hours they bought with that debt are worthless, to the point that other schools won’t even allow a transfer. The students with degrees likewise often find their degrees are worthless. Either way, the student loans cannot be paid back.

Art Institutes are closing most of their campuses in 2018 after being taken over by Dream Center Education Holdings.  David Halperin has been covering the story in the Huffington Post, but it has received little attention.  Argosy University, another system of DCEH schools, is teaching out at least 14 campuses.

--I’ll talk about Art Institutes soon.


       Even as the student base is dropping, the schools make so much money that they’re still easy enough to sell off. This eventually will lead to a name change, the better to lure in more suckers who might avoid an infamous for-profit school.

DeVry University will be closing more campuses after their parent company, Adtalem, dumped their brand and practically gave it away to Cogswell Education/Palm Ventures. They have already closed eight sites in 2018. Over the past few years, DeVry has closed 44 of their 90 learning sites.


       Just as the more astute banks saw the writing on the wall and bailed out early in 2008, saving themselves from huge losses, so too we are seeing the smarter for-profits selling out as quickly as they can. It’s a shame nobody in power outside of the for-profits can see the writing on the wall here and start making plans for the nosedive which must come to higher ed soon.

Kaplan University is now operating as Purdue University Global. But the school remains a subprime effort despite fraudulent claims that it offers a "world-class education."


     The site mentions many schools which are clearly heading towards bankruptcy, or at least shutting their doors while the getting out is easy, but the question here is: why is it only obscure sites are connecting the dots? If over the course of a few months, every fast food restaurant in your neighborhood closed down, yes, you could reasonably be glad people are no longer eating that crap but…wouldn’t you be a little curious why they were closing down?

       That’s my big puzzle over all this: why hasn’t the “mainstream” media noticed what anyone paying attention can see?

Ashford University (Bridgepoint) continues to profit amidst state and federal investigations, but enrollment is down as it pursues non-profit status. 


     One way the scammy universities get by is to change their name. Problem is, they still have to advertise themselves as “for-profit” institutions, and since nearly all for-profit institutions are scams, it doesn’t really matter what the name is.

     So, now formerly for-profit schools are getting themselves re-categorized as non-profit. Don’t be fooled by this, as accounting legerdemain can allow for non-profit schools to rip off their students every bit as voraciously as a for-profit (Hi NYU! There’s a reason why you’ve the most prostitute/students, honest).

    A school that claims to be non-profit can still rip students off, bottom line, but I digress.

   Why isn’t this massive, obvious, collapse in this segment of higher ed not triggering warning flags large enough for the media to notice? Much like with the 2008 crash being presaged by clear (but completely missed) signs that a crash was coming, I suspect when the big collapse in higher ed comes, we’ll be bombarded with talking heads on TV saying how “obvious” it was that the crash was going to come, because of the schools above I’ve identified as closing down.

      Hey, at least I and College Meltdown are pointing out what’s coming before it happens. Too bad I don’t get anywhere near the pay the “geniuses” on TV will get when they use their 20/20 hindsight to tell you in a few years what I’ve told you today.