While state support for United States public higher education dropped 25% from 2000 to 2010, for profit colleges have enjoyed an ever larger slice of public funds. Part of this is due to the increase in enrollment for the for-profit schools: in 1990 only 2% of undergraduate college students were enrolled in such schools, but in 2008-2009 it increased to 11.8%.
However, the for-profit schools get a disproportionate amount of state money in the form of federal money. While having 10% of the students in higher education, they received almost 25% of the Pell Grant money and 25% of the federal student loans.
The for-profit schools are also beneficiaries of the GI Bill: in 2010-2011 $1 billion of the $4.4 billion disbursed by the Department of Veterans Affairs went to just eight such schools. Overall, 37% of the GI Bill money went to for-profit schools.
As such, the for-profit schools are receiving state funds that are disproportionate to their actual enrollments at a time when public schools are having their state support cut. To use the rhetoric of the Tea Party and Republicans, this would seem to be socialism: the state just dumping taxpayer money to benefit a few takers. Moving away from the rhetoric, it does seem to be a point of concern that state money is being moved away from public institutions so as to enable for-profit institutions to profit. Shockingly enough, the Republicans (and most Democrats) are not outraged by this “socialism.”
This state money is the main revenue stream for the for-profits, so they are truly state-supported businesses. They are also successful at making money in this manner: they enjoy an average profit margin of 19%. This enables them to engage in advertising and thus gain more students who enable them to tap ever more into that sweet taxpayer largesse.
The obvious reply is to contend that the for-profit colleges earn these profits while state schools flounder in financial woes. This, it might be claimed, is proof that the for-profit approach is superior to the inherently inferior public approach. However, there are two replies to this.
The first, and most blindingly obvious, is that the for-profit colleges get most of their revenue from the state, thus their success depends on siphoning off taxpayer money into their coffers.
The second is that the for-profit schools often turn out to be disasters for their students, especially when compared to public schools.
While student debt is a serious problem, it is far worse for those who attend for-profit schools. 54% of the students who graduate with a BA from a for-profit school end up with over $30,000 in debt. In contrast, only 12% of public college graduates end up in that dire situation.
The for-profit schools also do poorly in actually placing students in jobs—the public schools do much better. As such, it is hardly a surprise that although students who attended for-profit colleges make up a fraction of the total college student population, they made up 48% of those who defaulted on student loans in 2010.
Given their rhetoric regarding government spending, socialism and people “taking” from the government, one would think that the Republicans would be leading a charge against the for-profit schools. After all, these schools are receiving large sums of public money and doing a poor job. As a faculty member at a public university I can attest to the Republican obsession with making public institutions prove that they are providing a return on the state money they get. I serve on various committees that exist primarily to collect and process assessment data to prove to the state legislature and governor that we are getting results for every penny we receive and our funding is tied to this data. Also not surprisingly, there is also a push to have private sector companies provide expensive tests at the taxpayers’ expense to, somewhat ironically, make sure the taxpayers’ money is being well spent.
However, this does not seem to be the case. Instead, the push by Republicans (and many Democrats) is for even more for-profit education that is funded by the taxpayer. This indicates that the opposition is to “socialism” of the sort where public money goes to public colleges. The “socialism” that involves redistributing wealth from the taxpayers to the problematic for-profit colleges is apparently just fine.