For-profit universities are the main culprits behind the massive student debt problem. These institutions are bent on extracting billions of dollars from the student market, which relies on massive federal student borrowing. The for-profit sector has left a wake of indentured student borrowers, unable to find good jobs and decent salaries. Unfortunately, this is not the only problem facing the student debt system. It also has serious ramifications for the economy and its people.
The for-profit history cycle began with generous federal leeds on finance aid programs. But as the for-profit sector grew, abuses of government programs and student debt led to widespread scandals and government action. After the scandals broke, lawmakers and federal agencies began to implement reforms. But industry leaders initially deny the problems, promising that the “bad old days” would never come back. They also eased restrictions on federal aid to these schools.
Another problem was low-performing programs. These programs targeted economically disadvantaged students and single parents, and misled borrowers about earning potential and repayment ease. Then, the for-profits became the worst examples of student debt. Currently, only the Corinthian system is financially stable. Other big institutions have been in trouble as well. This reflects the problem of low-quality education at for-profit institutions. However, in the long run, these schools will benefit from regulating their operations to protect students from future financial crises.
The conservatives’ decision to end federal accountability of for-profit career programs is devastating for students. Their ideological war against the for-profit industry, which they call an “ideological war,” has short-circuited conservatives’ willingness to deal with the problems faced by the for-profit sector. This has also given conservatives license to think of low-performing for-profit schools as victims and not villains. It also has a negative effect on the economy and the public perception of higher education.
Students who attend for-profit universities have dismal career prospects. Studies show that graduates of for-profit institutions earn 11% less than their non-profit counterparts, and they take on more debt than their non-profit peers. The government should stop subsidize for-profit universities. And stop giving out loans for degrees at for-profit schools, online schools, and online colleges. These programs only exacerbate the problem and make students worse.
Senators from both parties are calling on the Obama administration to take action to help students. Senator Bernie Sanders and Patty Murray have both written to the President about the issue. They are asking him to expedite the process to recover student debt. A full letter to the Obama administration can be read here. The government must ensure that every dollar of student debt relief goes to deserving students. If students cannot pay their bills, they must seek legal action.
The Education Department is trying to make up for this by eliminating sanctions for institutions that failed to meet certain benchmarks. Their appointees try to spin this as a win-win for accountability. Unfortunately, the for-profit system continues to devour taxpayer dollars and to burden millions of disadvantaged students with unmanageable debt. The ramifications are huge. But we must act quickly to stop the escalating student debt crisis before it gets worse.