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Monday, June 14, 2010

For Profit Schools Re-Visited

A couple of days ago, comments about For Profit Schools by Steve Eisman were included in a post. You can find the entire article, "Subprime goes to college" at the New York Post website, dated June 6, 2010, and you will find it fascinating reading.

Here are a couple of the highlights. First of all, the whole thing is about Federal Government loans and grants.

From 1987 through 2000, the total amount that went to for profit schools varied from $2 to $4 billion annually. When Bush was elected, the flood gates opened and now the for profit schools receive over $21 billion.

How did this happen? Try this on for size. In 2001-2002, Sally Stroup was the head lobbyist for the Apollo Group (University of Phoenix). From 2002 to 2006, she was the assistant secretary of post-secondary education for the Dept. of Education under Bush. Put the dots together. It is not hard.

The for profit schools have operating margins of about 40%. Most other businesses have operating margins of 7%-12%. And out of those incredible margins, they pay just 9 Cents out of every dollar received from the Federal Government on actual education. Huge amounts go to executive salaries.

At for profit colleges, 96% of the bachelor's degree holders had student loans and they averaged $33,050. At other colleges, 65% of those getting BAs had loans and they averaged $22,750.

And here is one you have to like. Corinthian Colleges charge $16,000 for an eight month course in medical assisting. Physician Assistant is a VERY good job. But the credits from Corinthian cannot be transferred to any other school, and the degree is not recognized by the American Association for Medical Assistants. And to top that, hospitals won't even interview Corinthian graduates.

The real point Steve Eisman is making is truly chilling. In the sub prime mortgage debacle, loan orginators went to the poorest, least credit worthy, people and loaded them up with mortgages they could not afford. Recruiters from for profit school focus on poor neighborhoods to find prospective students. They have even been know to troll homeless people looking for loan prospects.

Right now, for profit students account for 44% of all college loan defaults and Eisman forecasts that over the next ten years, for profit student loan defaults will reach $330 Billion!!

Eisman is absolutely correct. The factors driving for profit education are exactly the same ones that drove the sub prime market, e.g. scumbags without principles taking advantage of poorer people solely to get huge paydays for themselves.

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