Subprime goes to college

NY Post ^ | June 6, 2010 | STEVE EISMAN

[Scanian]

Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task.

The for-profit industry has grown at an extreme and unusual rate, driven by easy access to government sponsored debt in the form of Title IV student loans, where the credit is guaranteed by the government. Thus, the government, the students and the taxpayer bear all the risk, and the for-profit industry reaps all the rewards. This is similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper.

In the past 10 years, the for-profit education industry has grown 5-10 times the historical rate of traditional post secondary education. As of 2009, the industry had almost 10% of enrolled students but claimed nearly 25% of the $89 billion of federal Title IV student loans and grant disbursements. At the current pace of growth, for-profit schools will draw 40% of all Title IV aid in 10 years.

How has this been allowed to happen?

[pnh102]

This has happened because many of the students of these for-profit schools fell for a snazzy sales pitch. They could have received a comparable, if not far superior education, at a local community college instead for far less money.

Education has become a commodity for most people these days, it is best to shop around for the best deal.

[Erik Latranyi]

Brick and mortar schools will one day be obsolete....online universities will displace the high-cost, politcally slanted, high-ego traditional school with focused, superior academic learning.

Anyone that argues students will miss the ‘socialization’, just remember that they will also miss becoming advocates for socialism as well.

[SkyPilot]

This was written in 2004:

The College Tuition Scam

Instead of "Health Care Reform" (which was nothing other than stealing our health insurance), Congress should have held hearings and subpoenaed college and university officials and professors.

These people are running a Ponzi scheme.

But, that won't ever happen. To get to the truth means goring a sacred cow of Democrats - the "education" lobby. Further complicating the search for the truth are racial preferences in admission (affirmative action) and tuition price paid by whites versus everyone else.

Even further preventing the light of day shining on this scam is the PC and moral degenerate agendas of the colleges and universities, which (what a coincidence!) is the same agenda of the Democrats.

[pnh102]

Anyone that argues students will miss the ‘socialization’, just remember that they will also miss becoming advocates for socialism as well.

Indeed. Most of the people in the hard majors in most colleges never had any time to "socialize" because we were so busy doing work!

[Diogenesis]

It all for the “children” and the Congressional ACORN brothels.

[James C. Bennett]

It will be hard to make it work for engineering, though. Perhaps a corporation of research facilities could be formed to solve this.

[mainsail that]

It costs money, but then it’s hard to put a price on a Women Studies degree from Cornell /s

[gthog61]

Uncle Sam is like your elderly relative who is easily taken by scams but there is nobody around to look out for him.

[billorites]

I work at one of the schools mentioned in the article. There is no admissions office, just a 'recruitment office.'

Are there great teachers and sharp students? Absolutely yes.

However, since acquiring the formerly nonprofit college the new corporate overlords have instituted a culture of fear via layoffs and by summarily firing faculty and staff that has employees running scared. Recently one professor, retired military officer, worried out loud that his phone was being tapped.

I cannot speak for other for profits, but this one seems to specialize in marketing 'college' to the offspring of parents who never attended any institution of higher learning.

[Erik Latranyi]

It will be hard to make it work for engineering, though. Perhaps a corporation of research facilities could be formed to solve this.

The private sector would probably allow engineering students in their facilities, providing employers the ability to pick the best and students to learn a work-ethic.

[elpadre]

listening to parents over the years whose children are headed for college I am amazed at how many kids appear to be choosing colleges based on costs - the higher the costs the better. The parents want the cheaper state schools but always give in.

[rbg81]

I taught briefly for the University of Phoenix. Never again. While many students benefit probably walk away satisified from UoP, their recruiting tactics are predatory to say the least. They literally pull people in off the streets and sign them up. Most of the students recruited are very marginal to begin with. Also their classes are long (as much as 5 hours per night) and short (5 weeks). This model forces students to take a lot of classes in a short period of time. It is intense enough that the already marginal students experience a high drop out rate—in my class, it was not uncommon for half (or less) to finish. But UoP doesn’t care—as long as it gets its tuition $$. There are always more suckers.

[maine yankee]

It costs money, but then it’s hard to put a price on a Women Studies degree from Cornell /s
__________________

Especially when all those recruiters start calling with those high end starting salaries upon graduation. /s

[Renkluaf]

Eisman is one of the first people to recognize the bubble and fraud in the housing industry & made a lot of money on the short side & with credit default swaps. He’s one of the people profiled in the book, “The Big Short.”

[q_an_a]

If republicans wanted to get some votes and have some fun with college profs they should allow college loans to default if young people can’t find work. Tuition would drop by 25% in two years.

[AzaleaCity5691]

That actually would be a good idea.

[pnh102]

The parents want the cheaper state schools but always give in.

Geez. When did the word "NO" leave parents' vocabulary.

[Bull Man]

I'm a professor at a state college, and the author of the article makes one very basic mistake - the problem is NOT the institutions (for-profit or otherwise) but rather the government for pumping this money into "education" resulting in an education bubble. Trust me, the same can be said about state colleges, only they have the ability to turn the argument into a virtue.

For example he chastises the for-profits for letting anybody in for the money, but state schools call this "open-enrollment" so as to not prevent anyone the opportunity for an education. The accreditation process...yep, the same for state schools - peer review boards.

The simple truth is, if government was not dumping more and more money into education then this issue would not even be an issue. And BTW, you would also discover that those virtuous state schools might actually have to reduce costs and not be on the 5, 6, or 7% autopilot rate increases they are so prone to do as they suck up every ounce of subsidy money...for the children!.

[steveab]

The government needs to get out of guarantee loan programs. I a loan doesn’t make sense in the free market then why should the tax payer / consumer be hook to pay back loans?