April 27, 2012

Lobbying Makes Low-Performing For-Profit Colleges Highly Profitable

This guest post was written by United Republic’s Jasper McChesney. He also designed the infographic below:

Few would argue against spending tax-dollars wisely: eliminating ineffective and wasteful programs in favor of better ones. But when federal dollars flow to private industries with powerful lobbies, politicians can have a hard time closing the spigot.

The for-profit college industry is a case in point. Unlike Harvard or a state college, private, for-profit schools exist to generate shareholder returns. Yet that money doesn’t come from rich kids or their parents: up to 90% of it comes from tax-payers, in the form of sky-high federal student loans.

Of course, many students receive federal aid, as government policies have sought to get more Americans through college. But not all aid, and not all colleges are created equal. See the infographic below (click to enlarge):

For-profit college receive almost a quarter of federal aid money, although they enroll only 9% of American college students and graduate fewer still: just 5% of bachelor’s degrees. What’s worse, graduates from for-profit colleges default on their federal loans in huge numbers: 43% of all defaults in 2008. Tax-payers might ask what America is getting for their money. The answer: 16% to 37% profits at the same underperforming, predatory schools.

Why do these schools continue to receive disproportionately large federal subsidies? In word, corruption. By spending millions of dollars on advertising, congressional lobbying, and campaign contributions, the for-profit higher-education industry ensures favorable rules and regulations; ensuring they avoid accountability, and keep the money rolling in.