Wednesday, December 31, 2014

Libertarianism Fails In For-Profit Education?

By Professor Doom
      Last time around I discussed how a degree from a for-profit institution is worthless, and how getting a degree from such a place is usually a big mistake. And someone asked me a question:

“If you’re Libertarian, you  believe that capital, for-profit, enterprises are always better than government enterprise. So how can you call for-profit schools worse than the other schools that aren’t in it for the money?”
      That’s a good question. My Libertarian leanings mean I generally believe doing things for profit leads to better results than when there’s no profit involved…but there’s no way to look at those expensive-but-worthless for-profit school degrees and claim they are an improvement over those cheaper-and-still-mostly-worthless degrees from state schools.

     And, of course, the situation at for-profits is even worse the more you look at it.

     ---I’m all for jobs training, at least if you’re going to tell students that you’re training them for jobs.

     Now, we’ve already established that, for many for-profits, their degrees are basically worthless in the real world. This is mostly because the actual training in the degree is minimal. Instead, students just swirl around in irrelevant activity until all that loan money is drained away.

      But, at least they get that worthless slip of paper at the end, right? Actually, those are the lucky ones:

The University of Phoenix, for example, is the industry leader, yet it graduates less than 9 percent of its bachelor's degree candidates within six years.

     Isn’t that amazing? All those commercials for University of Phoenix, talking about the awesome success of their graduates, how useful it is to go there, are rubbish. Their degrees are worthless, and 91% of their students don’t even manage such a degree. But they rake in lots of student loan money, to pay for those commercials. And, not to put too fine a point on it, University of Phoenix is the INDUSTRY LEADER.

     The state school systems catch grief for their low graduation rates (in the area of 20 percent within 6  years for many state schools), but it’s clear they’re doing a superior job to the for-profits. And yet state schools are always being threatened with shutdown if they don’t improve graduation…

     One might think that the accredited for-profit students, even if they don’t get a degree, can just transfer over to the accredited non-profit schools. I mean, accreditation was to assure some legitimacy to institutions of higher education, and to allow students to transfer to different schools if they have to. Now, this blog has pretty thoroughly shown that accreditation fails miserably in the “assures some legitimacy” department, and the simple fact that these for-profit schools are all fully accredited demonstrates that failure once again.

     Accreditation is a fraud when it comes to legitimacy, but it helps with the whole “transfer” thing, right?


Former students of for-profit colleges now account for about half of all student-loan defaults. "I don't think I learned anything at the Art Institute [of Philadelphia], other than how to get scammed by somebody," said Taryn Zychal, who accumulated $150,000 in loans, only to find that no other institution would recognize her academic credits. Legions of other students tell similar stories.

     I just give a small chuckle, but I assure you administrators in higher education laugh uproariously with amusement at students that actually think their credits are going to transfer. They totally could, mind you, there’s no law against it, such transfers are completely subject to administrative whim. I’ve seen transfer policies violated many times for those favored by admin, not that any random student will be the beneficiary of such whims.

     To summarize for-profit education: worthless degrees, 91% failure rate, and coursework “recognized” as worthless and thus non-transferrable. Failure at every level, then.

      So, confronted with the clear evidence that for-profit education is inferior, do I concede that libertarianism is wrong?


     See, the thing is, there’s a government involvement here that distorts things greatly. Now, I grant, blaming government is something of a cop-out for libertarianism. Government is involved in every single aspect of my life, so any time anything goes wrong, it’s pretty easy to go with the libertarian explanation of “government always fails”. 

     Just to give one example of how pervasive government involvement is, I had five scallops with my meal a few nights back, instead of the eight I had with my meals last year. Why? Because government involvement in the monetary system means the money that could buy eight scallops last year, can only buy five today. So, yeah, government tells me how many scallops I may eat with a meal. Government is also heavily involved in the wine the scallops were cooked with, as well as the butter, the beans, the soap used to wash the dishes, and so on. But I digress...

Let’s get back to talking about what for-profits are actually selling, first by talking about what government is actually paying for.

Who pays the colleges' tuitions?

Mostly the taxpayers. For-profit colleges receive an average of three quarters of their revenue from federal grants and loans. "Some for-profit schools are efficient government-subsidy collectors first and educational institutions second,"

     So, back to today’s discussion. Government subsidizes education right now, via student loans. Actually, it’s not education that government subsidizes, instead, it subsidizes credit hours at accredited institutions. That’s the distortion here: credits at accredited institutions, not education.

    It doesn’t matter what those credit hours are for, which is why accredited state institutions have college coursework on Lady Gaga or The Walking Dead, paying faculty to teach, well, crap, with massive overhead that goes to legions of administrators. (For what it’s worth, I really enjoy The Walking Dead…but I just don’t see 4 months’ worth of college-level study there, except for perhaps technical training in make-up work and other aspects of making things, which is not even remotely what goes on in the linked course).

      Libertarianism says for-profits will do it better, and indeed, they do, once you understand what the student loan money is truly going for. Since it is credit hours, and not education, that the federal government is paying for, for-profit education offers completely empty credit hours, quite comparable to the paper courses at UNC.

      Naturally, getting accredited is a slow and expensive process (it took years to bring my state institution through the accreditation process) and only then can the deluge of tax loot come flowing in. Of course, for-profits get accreditation with much more efficiency:

In 2005, California-based Bridgepoint Education bought Franciscan University of the Prairies, a failing religious college with 332 students in Clinton, Iowa. Six years later, the school, renamed Ashford University, has been transformed into one of the biggest online colleges in the country, with 78,000 students. Bridgepoint posted $216 million in profits last year, while collecting nearly 87 percent of its revenue from federal aid. Sen. Tom Harkin (D-Iowa) says the college is "an absolute scam"

   Once you take integrity out of higher education, and throw in endless student loan loot, the sky really is the limit on what you can do. For-profits may be quicker about it, but I assure you state schools are little different, in many cases.

     The improved efficiency in plundering isn’t just about growth, of course. The guy at the top must get his share:

In 2009, the CEO of Strayer, a chain of for-profits with more than 60,000 students, took home nearly $42 million... 

     WOW, that’s some sweet loot there. The Poo-Bah at a state school with 60,000 students only rakes in a couple million at most of the tax plunder—admittedly, he splits the loot with legions of other administrators, while for-profits don’t waste time with irrelevant bureaucracy.

     And so, my faith in Libertarianism is not shaken: for-profits are indeed better at providing what the government is truly paying for.

      Just because government gets what it pays for, doesn’t mean it’s a good idea for human beings (in fact, it usually isn’t). For-profits are scams, and a waste of time for most students. The scam is not the result of them being for-profit, but rather the result of the student loan scam, which, combined with bogus accreditation, pays for accredited courses, and not education.

     Thus, I do not advocate, as many do, for the shut-down of for-profit schools. Instead, SHUT DOWN THE STUDENT LOAN SCAM. Do so, and I have considerable optimism this will take care of the for-profits quite nicely, and allow for integrity to seep back into the higher education system.


  1. Doom, hope you like thinkpieces on Libertarian-interest/-driven alternatives at the LIO site e.g. (Sorry if this multiple posts) and

    Another problem with some of these 'for-profit' colleges is they're scams created by government officials out to make a buck.

    Keep up the good work.

  2. 3100 students awarded fraudulent grades:

    1. Yep, and it's only a scratch of the tip of the iceberg of fraud in higher education (it took 18 years and many investigations to get this much). If you look at my posts for December 2014, you'll see several on this very topic at UNC.

  3. “If you’re Libertarian, you believe that capital, for-profit, enterprises are always better than government enterprise."

    That's a faulty premise to begin with. Libertarianism doesn't imply that for-profit enterprise is "always better" than government enterprise. The U.S. has always been what economists call a "mixed market" economy--one with with some degree of regulation. Politically, the question (same one Thomas Jefferson posed) is with how much weight should the hand of government regulation rest on the market. Libertarians believe that government interference should only go so far as to maintain the conditions needed for the market to function efficiently, such as enforcement of anti-trust regulations, prosecution of fraud, etc. Right now the market for education is very inefficient, because of the lack of consumer protection and information. Nobody would knowingly invest in a worthless diploma.

    1. Oh, I concede it's something of a loaded start, but the gist of the question, "evil capitalists herpderp yadda yadda" is clear enough.

      Even your final statement "nobody...worthless diploma" is a little loaded. Those diplomas ARE worth something, even though their fake. Many government employees purchase fake diplomas, because they need a degree to get a promotion...a promotion often awarded by a boss with a fake degree, so that nobody is particularly motivated to look into the legitimacy.

      "worthless" is in the eye of the beholder.