There is a mortifying Frontline documentary out at the moment, produced by the USA’s answer to the BBC (PBS). Called College, Inc, it takes it as granted that US education is increasingly commoditised, and a fundamental commodity to future employment. A degree is considered invaluable to the productivity of the member of a workforce. And it’s rare to see that view challenged by the media these days, so no surprises there.
It then delivers a fairly devastating exposé of the booming for-profit model in higher ed, which is worth discussing in depth. This is part 1 of 3; I’ll save my personal interest in the issue for last.
It’s crucial to understand what the for profit model offers. It operates in the following way: “underperforming” (for which read: financially troubled, not: delivering crap education) US schools/colleges are bought, and the ‘Three M’ are brought in: Money, Management and Marketing. Tenured professors are thrown out, class sizes boosted, and a big emphasis is placed on online courses, which scale incredibly well – they’re convenient to the thousands of students that can now follow a class, and incredibly capital-efficient for the investors. The keyword is leverage.
Intermediaries broker these investment opportunities, linking rich investors to the underperforming colleges. The Frontline documentary focuses on a broker named Michael Clifford (here’s his company’s website, ignore the sinister background music and videos of people without eyes reading cringeworthy scripts; and here’s his page on it – he is titled the ‘Man To See’), who is a ‘passionate believer in education’ though he himself doesn’t have any higher education (as you could guess from his LinkedIn profile (live at time of writing), which describes him as an ‘Education entreprenaur’ [sic]) – this even though he does have a ‘Dr’ title before his name, two honorific degrees from institutions he has turned around. Clifford was flung out from the overheating West Coast music biz, and became a born again Jack Welsh-worshipping entrepreneur.
The financing for these deals is mostly unexceptional Wall Street stuff. As I’ll discuss later, we even see the notorious Carlyle Group (a Michael Moore favourite) getting involved.
The financing occasionally gets a little more kooky than that, all involved parties tending to be quite agnostic as to where the money comes from. The documentary gets an inside peek into the purchase of a failing college by the Dream Centre.
The Dream Centre is an arm of a Los Angeles megachurch complete with neon-backlit, full-production stage with synth-driven electro-pop bands with toyboy haircuts, even its own music label. It’s housed in an old hospital providing both religion and rehab to LA’s myriad ex-convicts, prostitutes and drug addicts. It forms part of the wider International Church of the Foursquare Gospel, which apparently has 8,000,000 members and 60,000 churches worldwide. The Dream Centre was looking to purchase the college so as to provide educational courses to both its rehab-ees, and the social workers, and gain more presence out in the community served by the college. The deal on the table was ‘keep it nonprofit (i.e. tax efficient) unless we can’t find enough financial backing in which case we let outside for-profit investors in’.
The Dream Centre was interested in this college, in particular, because it had Regional Accreditation. Everything turns on that status, and it alone is estimated as being worth $10,000,000 to a deal. In reality, to investors, it’s worth a lot more. Why?
Well one aspect is evident: marketing. To be Regionally Accredited is to have something in common with Harvard and the rest of the Ivy League schools.
But it also means that people enrolling to the school can get federal student loans. Big, easy loans that are largely blind to your credit history or even to whether you’re suitable to the education that the loan is about to fund. The loans are real bastards once it comes to paying the back though – NOTHING, not even bankruptcy, will wipe them out, you’ll be dragged in front of courts, interest is considerable, and you’re banned from taking a job funded with public money.
But they put paid-for bums on seats; the fall-out post-graduation is the graduate and government’s mess to sort out, not the businesses’. It’s a fantastic scam on the public purse and the private individuals involved; according to PBS:
Though they enroll 10 percent of all post-secondary students, for-profit schools receive almost a quarter of federal financial aid. But Department of Education figures for 2009 show that 44 percent of the students who defaulted within three years of graduation were from for-profit schools
(I’ll cut off here and deal with other subjects – like quality of education, future prospects, and close with personal comments and an explanation of my connection to this story – in later posts)