Posts Tagged ‘pell grants’

By Richard Vedder

I have read and heard some commentators say that the Obama Administration is at war with for-profit private higher education. While in general agreeing with that I would amend that statement to say that the Obama administration has had several battles with the for-profits as part of a bigger war against capitalism. In my view, basically the president is a socialist, a person who craves for collectivist, government solutions to problems, and is deeply distrustful of private enterprise. Thus the government has taken control of iconic private automobile and financial service companies, has viciously attacked Wall Street greed, has tried to manipulate more than ever the private use of money and credit, is favoring a huge increase in taxes on capital gains, etc. I am among those who believe that the current anemic recovery directly reflects the fear that businesses have of Obama, and their corresponding unwillingness to hire workers and invest. Gold prices are soaring, and stock prices are stagnant, a classic indication of poor investor confidence.

For- profit companies are merely part of the capitalistic Evil Empire that Obama despises. Apollo Corporation, Corinthian Colleges, Bridgepoint Education, Kaplan University — these companies are bad mainly because they are in the business of trying to create wealth for private investors. The current bashing of the for-profits by both the administration and Congress needs to be put it that context.

That said, there ARE abuses that the for-profits have committed. No doubt there are recruiters who have misled persons as to the potentialities of a for-profit education, putting them into debt. And abusive practices should not be subsidized by the taxpayer. That said, however, the beating up on the for-profits is largely ideologically based and manifestly unfair. A large portion –indeed probably a sizable majority–of the educational malpractice going on in American higher education is occurring at the not-for-profit schools so richly subsidized by the taxpayers –and they are being given a pass as Congress considers hearings.

It is a fact that the four year graduation rate at the University of Texas at El Paso is about four percent –only 1 out of 25 graduate in a timely manner. Where are federal hearings about that? A smaller proportion of students graduate from UT El Paso than from Corinthian Colleges, but why is Corinthian being threatened by tough new legislation and UT El Paso is not? The loan default rate at Central State University in Ohio is vastly higher than at Kaplan University –why is no one investigating Central State, at either the state or federal level, while Kaplan is scurrying to meet probable new federal mandates? By many indicators students fare more poorly at Chicago State or Denver’s Metro State than at Strayer University, a major for profit. Why are we not talking about legislation curtailing Chicago or Metro State? Why is the government talking about limiting the percentage of graduates of schools like the ITT Institutes or DeVry who pay more than eight percent of their income in student loan interest payments, when almost certainly the problem is probably as bad at Grambling State or Northwestern State University?

In taking on the for-profits, the President and Congress are attacking the very schools that have contributed importantly to reaching an Obama goal –vastly increasing the proportion of high school graduates with exposure to higher education. Some 38 percent of the increase in student head count between 2008 and 2009 occurred at for profit schools –more than at not-for-profit four year public schools (27 percent) or two year public community colleges (32 percent). Many traditional universities don’t want to recruit ghetto and inner city children, or teach in the evenings and Saturday mornings, or do other things distasteful to the life style of the academic elite.

The People (as in “government of the people, by the people, and for the people”) like for-profits, but what Scott Rasmussen calls the Political Class, does not. This is just another example of the huge divide, unprecedented in modern history, between the Political Class and the general public and our political leaders. Our nation is out of political equilibrium, and that means big changes are coming politically, probably starting at the polls this November.

I would note that this huge brouhaha would not have occurred if we had not embarked on a disastrous expansion in federal loans for students beginning four decades ago. Bottom line, too many people are going to college. Too many people are ill-equipped for the rigors of higher learning, manifested in some watering down of standards and high dropout and loan default rates. There are too many students going to too many colleges and paying too much money and getting too few good jobs. Until we wake up to that reality, we will not have truly efficient and worthwhile higher education reform in this country.

And the comments:


1. haohtt – August 31, 2010 at 08:16 am

The answer to the article’s question is, emphatically, yes. The Obama Administration is filled with traditional academics and career politicians–people who have never produced wealth or profit themselves, but always lived off the taxes and tuition of others. While unscrupulous actions by certain for-profits deserve to be exposed and dealt with, my Vedder is correct that similar actions by non-profits should not be ignored. The irony and blatant hypocrisy of an administration and congress that attacks any business that dares to run effectively and efficiently enough to make a profit, while they themselves are unable to run their own operations without sinking ever farther into the red, is the real scandal that needs investigation and action. What occurs at Phoenix and Kaplan are small potatoes compared to what occurs in Washington DC.

2. dank48 – August 31, 2010 at 09:26 am

Precisely. The question of for-profit or not-for-profit is a red herring. The real question is whether schools are in fact functioning as they should. Too many aren’t.

3. 11180655 – August 31, 2010 at 09:30 am

Take a look at ‘Top 100’ link and review the listings of associate degree producers in areas such as Computer Science, Engineering Technologies, African-Americans, and on and on, and you will see the tremendous successes these colleges have had in graduating the highest employer demand skills areas, including success with minorities. Look at much larger community college systems that have graduated a handful of minorities with computer science degrees, while there are smaller for-profit colleges graduating many times that of their local community college counterpart.

This administration has deservedly given non-traditional students year-round Pell Grants, increased loan limits, and an excellent military benefits program….but shame on these for-profit colleges for providing these students the programs and services they desire. This administration thinks these students are making poor decisions, but they deserve more credit than that. The majority of adult students pick the program and institution that provides them the most efficient and effective path to their career goals. Don’t take that away from them.

4. kolds – August 31, 2010 at 09:36 am

This article is full vitriol and gross generalizations (about viewpoints and categories of people). What I find amazing, in this needed debate about for-profit higher ed (and how it is and should be regulated), is that you rarely find constructive enagement with the issues and options. As a foreigner living in the US I know people like to debate, but the tone of the debate, as exemplified in the tone of this piece, is really rather sad. More ideological warfare, more heat vs light.

5. giana711 – August 31, 2010 at 09:40 am

Obama comes from the education field as he himself was a professor for many years and knows firsthand the long term damage that FP’s do to their students. While his administration has made some mistakes, he is NOT a socialist and he was born in Hawaii.

The main difference between Obama and the rest of the past few presidents is that he gets it when it comes from higher education. Obama understands that Community College plays a vital role and knows about the bad FP apples. He advocates for one and fights the other.

Fear mongering,partisan politics should have no place higher education. FP’s growth should be limited and wee need to seriously look into our accreditating agencies and regulating them or eliminating them for one strickly regulated national agency funded by congress to eliminate conflict of interest.

a bit dissapointed that the chronicle even went ahead with this opinion piece…

6. hms3683 – August 31, 2010 at 10:14 am

Poor Obama! Stand up against the right to turn a good deal into a rip-off and you become a socialist. The business model of the FP guarantees that more money will be spent on less educational service than the NFP – while ever-growing profit is returned to the stockholder.
The records of UTEP and Chicago State appear abysmal in terms of what they offer for the time and money students invest. But the tax dollars flowing into these institutions could ultimately be subjected to the scrutiny of public oversight. If they reach a bad enough point, the public will demand that they revise their services and priorities. In theory, barring coruption and dealmaking, UTEP and CS should be seeing greater oversight of their accreditation. FPs can operate without accreditation. In the FPs, there is no accountability. The worse the deal to the student, the greater the profit to the ownership.

7. cwinton – August 31, 2010 at 10:20 am

It’s always a nice diversion to excuse misbehavior by citing the misbehavior of others. Without question the federal student loan program has drawn a lot of bad actors, including the financial middlemen who quietly profit while others are left holding the bag. Apparently Mr. Vedder has no problem with the kind of business plan that characterizes many for-profits, namely one based almost exclusively on tapping taxpayer backed resources, in this case student loan money. Well, if you live off taxpayer money in my estimation that makes you in effect a government agency and so subject to government regulation. The for-profits are on the hot seat because they are the new kids on the block. Whatever happens with them will inevitably, Mr. Vedder notwithstanding, come down on misbehaving not-for-profits. Interestingly, Mr. Vedder is one of those traditional academics haohtt (#1) is so quick to criticize.

Since Mr. Vedder chose to stray off into areas unrelated to his thesis (e.g., his feeble attempt to link Obama and socialism), I might as well do so as well, the point being that a major role of government is to provide a sound monetary system, which means that for any market based on the monetary system (i.e., the financial sector), it is incumbent on the government to insure it is run in a manner that will not endanger the stability of the monetary system. We don’t have to look any further back than 2008 to see what lax regulation of financial markets leads to. Tightening the screws on Wall Street and banks is not socialism, it’s sound government practice. As for the rest, massive spending beyond our means (which was actually initiated early on in the previous administration) is simply an attempt at keeping our increasingly unsustainable economic approach afloat for awhile longer, hoping against hope to come up with some means of avoiding runaway inflation or the economic collapse of a major depression, likely accompanied by anarchy. I think we all had better hope for another bit of economic good fortune such as the Clinton administration enjoyed, since tax cuts absent spending constraint certainly hasn’t helped, and it’s hard to imagine how continued spending beyond our means can possibly do so. One thing is for certain, we need fresh ideas, something economists like Mr. Vedder are quite short of supplying.

8. isambard – August 31, 2010 at 11:12 am

If Obama had a few more socialist inclinations, the country would stand a better chance of surviving the next thirty years or so. The first thing he’d have done is looked for ways of getting health care down from 16 percent of GDP to around 12 – higher than France or Germany, whose systems are vastly more effective than the USA’s. No socialist could have hired Obama’s economics team. As for for-profits, there’s no reason in principle why they can’t deliver perfectly decent, non-academic, training; the dodgy area is a problem they share with community colleges, which is the claim that a fairly low-level general, non-vocational education will do a lot to increase the earnings of the students who take it. It may make them nicer, better citizens, or more interested in their existences, but absent an enormous number more jobs of the appropriate sort than the economy seems likely to produce in the next decade, it won’t improve their earnings, and has to be a bad bargain, economically speaking. Attacking them for selling something they can’t deliver is hardly an attack on capitalism. Not, for the matter of that, that American capitalism as practised for the past few years has been anything a true capitalist could be proud of; it’s depended almost entirely on leaching off government in innumerable obvious ways, while berating government for the sloppiness that allows it to do so. Talk about biting the hand that feeds you…

9. senecan – August 31, 2010 at 11:57 am

The “president is a socialist, a person who craves for collectivist, government solutions to problems, and is deeply distrustful of private enterprise”? Why is this appearing on the Chronicle Web site rather than the Wall Street Journal editorial page?

10. betterschools – August 31, 2010 at 12:20 pm

Growing bodies of evidence will convince the open-minded that Mr. Vedder is correct in his assessment of President Obama’s intentions.

Through sources present in the Whitehouse discussions, we have learned of his belief that the community colleges can assimilate the business he is intentionally taking from the for-profits. Somehow, he believes the taxpayers can and should come up with the $800 billion it will take to meet his education goal of having the highest graduation rate among developed nations.

In October, President Obama plans to announce a stimulus package for the community colleges. Apparently, he is not a student of history. Were he so schooled, he would know that public colleges quickly suck up federal stimuli with tuition and fee increases, returning access to its pre-stimulus level.

I recognize that different ideologies can lead us to different positions with respect to the for-profit v. public debate. I hold mixed views myself and I especially want to see the publics succeed in their challenge of becoming efficient and adapting to changing needs. What is so personally disappointing is to have witnessed the uninspiring bag of dirty tricks the Obama administration used to get its way by trashing the for-profits. Does it not have the skill to get its way on the high road?

This administration spread lies (for-profits do not cost the taxpayer more, they cost significantly less, even with all defaults loaded into the equation), half-truths (for-profits do have problems with graduation rates, loan amounts, and loan repayments when educating the underclass but the nation’s state institutions operating in underclass areas of the nation have even lower rates; see Alexander’s analysis, at the link below), and innuendo (employers do not disdain the for-profits; we have conducted employer impact research for 16 years, interviewing more than 20,000 employers in depth and can easily refute this claim with hard empirical evidence). As an early supporter of this administration, I have been disappointed to see the arrogance and deceptive practices with which it pursues its agenda.

If you hate for-profits or if you think they can do no wrong, little will change your mind. If you recognize the complexity of this issue and can understand that the healthy functioning of the for-profits, publics, and independents is essential to meeting the nation’s education needs, you will be informed by the information posted at this document repository.

Take a look at Apollo’s report. DeVry’s response to the NPRM, Carl Barney’s response to Secretary Duncan, Steve Alexander’s analysis of loan amounts and repayments in public universities serving a portion of the underclass, Mark Kantwowitz’s FA analyses, The Parthenon Group’s comparative analysis, and others.

If you think the publics are already healthy, look at this review

President Obama won the election and his party holds Congress. He has the right to change education policy in accordance with his vision. He does not have the right to lie about, cheat, and steal from the private sector. I thought it was a crisis of exception when he did all three with respect to securing largely undeserved benefits for unions at the expense of Chrysler’s legally secured bond holders. No such crisis can serve as an excuse today.

Keep the President’s education goals in front of you. Unless all of us speak out, this approach to secure those worthwhile goals will fail badly. Besides, its methods are deplorable.

11. 11132507 – August 31, 2010 at 12:46 pm

Well, the Chronicle does have to keep things fair and balanced, which in the rest of the world outside Fox News, means presenting multiple viewpoints. So Chronicle readers can read Mr. Vedder’s perspectives. Or turn the page.

Face it, if Obama announced today that the sun rises in the East, the right wing would find ways to use that as evidence that he’s a socialist, a Muslim terrorist and I don’t know, is going to force us all to wear leisure suits. But as much as the Chronicle does have, I suppose, a journalistic responsibility to present different opinions, it’s still disheartening to see a piece in which we get phrases such as “war against capitalism” and “the capitalistic Evil Empire.” All you’d need to do to this piece to make it Glenn Beck-ready is add a comparison or two to Hitler or Stalin, and you’re good to go.

When Republicans question government spending on flawed programs, it’s done in the name of fiscal responsibility and stewardship of taxpayer money. When Obama does it, it’s because he’s trying to destroy America.

12. jakarlson – August 31, 2010 at 02:52 pm

Indeed disappointing that The Chronicle would publish such a ‘slam’ about our president. You should know better. I think I’ll push the ‘report abuse’ button so you can re-read Vedder’s article.

13. leekantz – August 31, 2010 at 03:36 pm

Didn’t this investigation begin in Congress, not the Executive Branch? And doesn’t Obama’s Secretary of Education repeatedly say that the for-profit education sector has an important role to play in higher ed? I guess that makes Obama a socialist, huh?

There can be a reasoned argument that the for-profits are being portrayed in a negative light, and in an unfair light compared to the inadequacies of the non-profit education sector. But if you’re going to start that argument with the premise that our president is a socialist, it’s a poisonous politics that turns off 50% of our country (and probably a higher percentage of Chronicle readers), and it adds absolutely nothing to this discussion.

Obama may be guilty of silence on this issue, but I would imagine the issue is somewhere below 590 on his list of things to attend to.

Let’s have a reasoned discussion on this issue without turning into Glenn Beck’s and Keith Olbermann’s.

14. reisberg – August 31, 2010 at 04:00 pm

I am not convinced that giving Mr. Vedder (Darth Vedder?) space for his views is required for us to have “balance” in The Chronicle. Mr. Vedder plays fast and loose with data and makes outrageous accusations that have no basis. I think Fox news is a more appropriate platform for this type of ideological rhetoric.

The most laughable part of his specious argument is that the for-profits would not be profitable if they did not exploit federal programs to fund their students. If you take government out of the equation, they collapse. Additionally recruiting practices of the for-profits (paying commission to people for recruiting students) has to make you wonder whose interests they serve–the incentives in the operation are skewed against the students.

15. betterschools – August 31, 2010 at 04:24 pm


Reasonable questions but, no, the assault began with the Whitehouse, specifically the President’s untested vision of new community colleges and the thought that he could secure the foot traffic to make them work by suppressing the successful for-profits and, in effect, stealing their business. A former member of the planning committee the community college logic in a conference call two weeks ago. Best guess, the Harkin committee represents a back-room quid pro quo as part of the coordinated discrediting strategy. I agree that this topic has to come in low on a stressful presidential agenda but honesty is honesty. This guy whom I once respected highly is looking more and more like another Chicago trained politician who happens to possess exceptional public speaking abilities and personal charisma.

If you have more than a passing interest in this, look at the plethora of documents at and make up your own mind.

16. tgroleau – August 31, 2010 at 04:35 pm

Rather than argue about the tone of the article, I’ll hit two points:

1) Yes, of course the standards and regulations should be the same for both for-profit and not-for-profit schools. If our tax dollars flow into either type of school, they should have to meet the same standards. Based on the Chronicle articles I read, I didn’t think many of us felt otherwise.

2) Speaking of tax dollars… I’m generally a big fan of capitalism – bring your products or services to the market and see if you can make it. Therefore, I would never present for-profit colleges as examples of capitalism. They aren’t making profits in the open market, they’re making profits from government subsidies of higher education. Without our tax dollars, most of them would go bankrupt. Some industries need government subsidies to get started (and we can all debate the pros/cons of that startup help). But the for-profit college business model requires never ending tax subsidy. I’m not willing to call that capitalism.

17. betterschools – August 31, 2010 at 04:50 pm


Have an economist map this out.

– Loans are made to students who then choose on their own where to attend (unless you want to argue they are automatons).

– The feds make money on student loans, even including defaults where they are estimated to collect $106 for every defaulted $100 (fines, etc.)

– Including the widest possible range of estimates of all political persuasions, for-profits cost the taxpayers — all in, including 100% of the loan defaults (which are lower than comparable publics serving the underclass) — between minus $500 per student per year and plus $1,700 per student per year.

– Again, including the widest possible range of estimates, publics cost the taxpayer between $11,500 and $16,500 per student per year.

Given this information, where do you get the idea that the for-profits are luxuriating in a tax subsidy? I have an agenda for the improvement of the for-profits but it is not advanced by the lies the feds have spread, and the ill-informed disseminate per their bidding.

Check my facts and if you have counter-evidence (not opinion), post it at . Many of us are only interested in setting the record straight on all issues before proceeding.

18. 11132507 – August 31, 2010 at 04:57 pm

Excellent point #16 – the for-profit schools have done quite well with the so-called 90/10 rule, which allows them to receive up to 90% of their revenue purely from federal aid, and even then they have tried fuzzy math accounting tricks to skirt that gaping loophole of a law.

This is very similar to another group of Republican “capitalist” buddies (and like for-profit schools, very reliable campaign contributors), the banks who made zillions in the Stafford Loan program…all in the name of the free market, but creating no product other than moving other peoples’ money around, and being rather handsomely subsidized by taxpayers for doing it. But it made rich guys richer, so the Republicans were all for it, and the program’s demise is reason #6,714 on the “Why Obama Is A Socialist” list.

19. trendisnotdestiny – September 01, 2010 at 09:30 am

@ To All Readers

After reading this thread, it concerns me that too many here are discussing the power of one person; a figurehead who represents a multiplicity of branded ideologies fused together by monied interests. I can think of several hundred people who have more influence and power to create change than our president, but that is for another time…

Why is it that when the right feels some pressure they yell unfair or uncle using socialism as the great fear weapon? (culturally embedded in our Rocky movies and hockey victories. Dr. Vedder your understanding of Obama’s positions are not supported by his choices of financial advisors, supporters and legislative efforts thus far (all which have supported industry firtst and the middle class last)… Remember, he was funded en masse by the finance sector and would not have received their support if he was… So once again you prove that any movement away from the right in this country requires a corpulent call of socialism… Well done! Predictable… So I will reiterate some things for you to chew on:

First, a president is not the most powerful force in our country, economy or even in policy matters. We must acknowledge this first. No such thing as Obama bailouts or plans of a socialist takeover unless you consider the corporate socialism of the past two decades…. It is important to identify who has the most power to affect outcomes here. In any analysis, the groups that move this country are uniformally from industry: finance, pharma, media and energy…. In the land of predatory capitalism, who has the money controls the power! These people fund elections, lobby legislators and control politicians of what we call government.

By acknowledging this, it is not a far leap as to why all our systems are incurring massive debts all at once (state and local budgets, government deficits, personal and familial debt). This is a planned consequence of a consumer driven economy where credit has been cheap, markets have been gutted/de-regulated and control have moved into elite or private hands for the final consolidation of patriotic selling points (9/11). Government has colluded with this process of being bought off, but the governing power in this society is the corporation. Very rarely can you sue it, change it or vote it out…. It replicates itself into our culture: sports teams, college adminstrations, and our consumption of media…. Let’s not be naive here, presidents who make $400K are more about branding and salesmanship than actual policy. They are told what to do and say by their corporate financiers and our choices as voters are limited to the flavors (Yale or Harvard) that power provides as they whisper their intentions to the lackey adminsitrations…. As a result, each adminsitration is most concerned about GDP growth. Their policies often reflect it, people be damned….

Second, when we read that people want government intrusion out of thier lives, this plays into the hands of both the corrupt government officials as well as their corporate benefactors. However, for most the corporate influence is less visible in the divide and conquer rhetoric designed to break critically thinking people into camps: spending stimulus versus paying down debt, cutting social supports versus soliciting entrepreneurism or shared governance in higher ed versus a top down approach….
We live in a society where the distraction of professional sports entertainment like the NFL often take up more time in our culture than critical thought. Obama is here to distract us just like every president over the past 30 years aided by television and corporately owned media…. In essence, we have a distracted and highly stressed population with a public-private marketing arm designed to create more division between and among (pure Edward Bernays here 1928)…

However, people who are angry about how profits are privatized and losses socialized do have legitimate concerns, but little access to the inside narratives as to why this happening. So, I will speculate and suggest something rather troubling.

One — wealth and currency from FR banking systems are created from debt. This is important to understand that those who issue debt have the most power in a global capitalistic system. They influence and control political figures who serve as their defacto shields for anonimity. (so calls of socialism are disingenuous at best and moronic at worst)….

Two — the world’s resources are dwindling; there is a massive race for information, access, and ownership of the various depleted resources: water, food, oil, precious metals, minerals etc. When you combine this race to privatization with an unsustainable global population demographic, you could begin to see why bubble economics (neoliberal economics) are needed to clearly bifurcate and distinguish the people who have and have not. These bubbles are an instrument of social darwinism….

Three — The forces that led to the creation an indebted population are same ones leading the push for eliminating social security, medicare and spending programs for the poor calling them “entitlements”. You have to ask the why now question. After a period where there have been massive bankruptcies, home foreclosures and systemic unemployment, why would power want to cut social supports now during one of the worst periods in economic history… The answer is that during times of shock, it is the perfect time for power to inflict changes that would have normally been resisted. Again, Obama is helping to dismantle these programs as many democrats before him (see Clinton & many congressional leaders)…. Government officials are more dependent upon industry than the populace; this means that they are the mouthpieces of power not the final decision makers….

four — consolidation of power in every industry has been the corporate culmination of this project. This is the most critically ignored and unexplored issue out there. Very few of us critically analyze why there are so few companies soliciting product in a free market. Banking there are the top 6 who control the industry. Healthcare there are slightly fewer. Energy companies are even less. Media too…. These companies ability to impact our lives is far greater than one person in the white house, one party, one supreme court nominee….

five —- SUMMARY
money is created by debt
future natural resource shortages
over populated and polluted biosphere
transfer of risk onto individuals
cutting supports & renaming them entitlements
disparity between have & have nots grows
consolidation of power at every level
prices rise, jobs disappear
social unrest, anger and competing narratives

Figure it out people! Its right in front of you…. Oh! and quit spewing this nonsense that it is the left’s fault or right’s fault. There are in together. It was obvious when Geithner first spoke about the stress tests….. power calls it a public-private partnership (PPP)…. this does not bode well for the third group: consumers…. So, maybe we should be working together as we all are legitimately angry and have vested interests that have been co-opted…. but socialism is so far off the map as to make this article the comic section instead of an academic article.


20. tgroleau – September 01, 2010 at 09:56 am

betterschools –

I’m taking about Pell grants not loans:

21. adanz1 – September 01, 2010 at 10:44 am

I applaud Mr. Vetter’s cogent and coherent expression of the real driver of Durbin’s and Hawkin’s witchhunt wrapped in public “hearings.” This is, fortunately, an election year in which the democrats are looking to find any cause to which they can point to success for their socialist bent. Why are the “for-profit” institutions being pursued when the “non-profits” are not? Why is nobody bringing into the debate the dependence of the non-profit sector on public financing? Why is such dependence not equally evaluated for what it is? Community colleges depend upon state and federal subsidies to keep their prices down. Yet, somehow, the price point analysis fails to incorporate the full cost of non-profit programs when making comparisons to the students using Title IV funds at the for-profits who, by the way, pay taxes. Fully loaded, folks, the “dependence” of the non-profits on taxpayer funds is virutually identical to reliance of for-profit institutions on Title IV. It’s time that we see this exercise for what it is: another attack on the free market system that has made this country a bright star in the global economy.