Hedgies, noting the same grotesque corruption in the for-profit education sector that the United States government has noted, are betting that the industry will soon fall as low as the homeless people it recruits for its entering classes.

Short sellers are betting that a combination of new laws withholding federal tax dollars from schools that don’t graduate anyone (the schools rely almost entirely on tax dollars), and HUMONGOUS rates of loan default on the part of their hapless homeless (one expert anticipates defaults of “$275 billion in government loans over the next 10 years”), will put these corporations on the same skid row their recruiters haunt in search of bodies to which to attach federal loans.

“People have worked out that these companies are overvalued. They’ve put on bigger and bigger short positions as the price keeps going down. And they have been right because the price keeps dropping, [says one observer].”

A for-profit executive complains that the short sellers “are hiring people who are semi-disguising who they are and not being candid with people about their role in trying to drive down the stock price of certain companies.”

To which UD responds:

1.) I thought you liked the free market. You’re always touting it in what you write about your industry. You put down traditional universities because they don’t operate by the clear cool astringent free market principles you do, which is why, you boast, you’re doing so well compared to those elitists…

The free market is why for-profit university presidents make six million dollars a year, while Drew Faust makes $800,000 or so to run Harvard. Now you’re getting all snivelly because hedgies operate in the same free market you do?

2.) You’re upset about people who aren’t candid? You, who troll the mean streets of America looking for desperate losers and signing them up for humongous loans?

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Update: Inside Higher Ed has an excellent account of the current controversy.