Read Good Riddance by David Halperin. ‘Tis all ye need to know.
… their ex-employees can always find work in Pakistan.
Scummy for-profit universities are by now a notorious national scandal; Paul Campos reminds us that that you can get the same thing in a law school:
[S]chools accredited by the American Bar Association admit large numbers of severely underqualified students; these students in turn take out hundreds of millions of dollars in loans annually, much of which they will never be able to repay. Eventually, federal taxpayers will be stuck with the tab, even as the schools themselves continue to reap enormous profits.
It’s the very same scheme as the college scheme we’ve followed on this blog for years.
Campos features an amazing story that could have come out of North Korea (or, even worse, Chicago State University). The worse a university (the worse a country), the more repressive it is, particularly about threats to its propaganda machine. A candidate for dean at arguably America’s worst law school (one of the for-profits) not long ago tried to give a truth-telling presentation to its faculty. As the candidate spoke about the school’s astonishingly, cynically, low admissions standards, the school’s president stood up and told him to stop immediately, to leave the room, and if he didn’t leave, the president would call security.
The life of mind’s a beautiful thing, ain’t it? America can be proud of its ABA approved law schools and their commitment to the robust exchange of ideas…
I mean, to be sure, if fellow travelers, fair weather friends, and enemies of the state happen to appear among us, it is not only our right but our duty to rise up as one and eliminate them from our midst…
Low-ranking not for profit law schools, Campos points out, are pretty much just as brazen in their sordid profit-taking.
A glance at New England Law’s tax forms suggests who may have benefited most from this trajectory: John F. O’Brien, the school’s dean for the past 26 years, whom the school paid more than $873,000 in its 2012 fiscal year, the most recent yet disclosed. This is among the largest salaries of any law-school dean in the country. (By comparison, the dean at the University of Michigan Law School, a perennial top-10 institution, was reported to make less than half as much, $420,000, in 2013.)… Richard A. Matasar, a former dean of New York Law School, was, until his resignation in 2011, quoted regularly in the national press about the need to reform the structure of legal education, even as he collected more than half a million dollars a year from a school with employment statistics nearly as poor as those of [for-profit law schools].
Congress, meanwhile, would occasionally hold hearings to allow elected officials to wring their hands over the growing scandal in for-profit higher education, but like any multibillion industry, its leading proponents answered by throwing around money in Washington. The Apollo Group (the University of Phoenix), for instance, made $11 million in political donations in 2007 and 2008, Mettler reports — about double the campaign contributions of Goldman Sachs, Time Warner and Walmart that election cycle. In her telling, John Boehner is speaker of the House largely because the for-profit colleges and private student-loan bankers gave so generously to his leadership PAC during his years as chairman of the House Committee on Education and the Workforce.
(For more on America’s ongoing for-profit college scandal, click on this post’s category, CLICK-THRU U.)
[F]or-profits entice students (particularly low-income students) with low upfront costs while offering little instructional support, thereby saddling them with large debts and few marketable skills.
…Education Management Corporation (EDMC)… was founded in 1962, and had long been reputed as one of the higher quality for-profits in an industry plagued by questionable practices. In 2006, EDMC was taken over by a private equity consortium led by Goldman Sachs along with Providence Capital Partners and Leeds Capital. Goldman and its partners installed new executives who promptly reallocated resources from instruction to marketing and recruitment.
… Total enrollment across EDMC’s brands, which include Argosy University, South University, Brown Mackie College, and the Arts Institutes, more than doubled between 2006 and 2010. By 2011, colleges in which Goldman Sachs was the dominant owner enrolled over 150,000 students, captured over $486 million in federal Pell Grant funds, and netted an operating profit of over $501 million. However, these financial successes were not mirrored in students’ outcomes: among those students enrolled in 2008, over 62 percent had withdrawn two years later without completing a degree. Yet two of EDMC’s Art Institute campuses were among the 10 for-profit colleges that that issued more than $25,000 in student loans per enrolled student in 2012.
… The takeover of the for-profit sector by investors has seen the principles and techniques of “shareholder value maximization” imported wholesale into a major segment of American higher education. This finance-driven model is very efficient at increasing enrollment and generating profits. It has a poor track record, however, when it comes to helping students successfully graduate and preparing them for a competitive labor market. Indeed, graduation rates for all four-year for-profit colleges for cohorts beginning six years earlier fell from 46 percent in 2002 to just 28 percent in 2012.
UD thanks Dirk.
It was the electronic monitor around a student’s ankle that first gave Kelli J. Amaya serious doubts about the Harris School of Business.
The young man with the monitor was studying to be a pharmacy technician, and Ms. Amaya, who worked at Harris, a for-profit chain of trade schools, knew that the most widely recognized certification for pharmacy technicians excludes anyone convicted of a felony or even a low-level drug offense.
But the student received federal financial aid, and for the school to keep collecting it, he had to remain in the program and complete an internship. So Ms. Amaya said she was told to find him an internship, even if that meant deceiving the employer.
“I saw students who never should have been there, students with whopping gaps in learning abilities and major psychiatric problems who were just not capable of doing the work,” said Ms. Amaya, an administrator at Harris’s Linwood campus, and then at its Wilmington, Del., campus, from 2009 to 2011. “The bosses were always like, ‘Stop asking why they’re enrolled, just get them to graduation however you can.’ ”
… to its most basic moving parts.
Two academic men in suits chat. Looks like Harvard Yard in the background.
So the for-profits mop up $32 billion in taxpayer money a year, even though a majority of students quickly drop out!
And for presiding over these empires of failure, the average for-profit CEO is paid over $7 million!
— 7 million? Seriously?
— Does it come with balloons and a 4-foot check?
No, I imagine it’s a discreet transfer of wealth.
UD thanks Dirk.
K-12 and university online for-profit education – always an incredibly trashy business model – is collapsing left and right as people and states begin to realize that their education taxes are going to the schools’ CEOs and advertising budgets, while the dupes the schools talk into enrolling are dropping out (“these [K-12] cyber schools might as well have a turnstile as their logo for the volume of withdrawals they experience”). Cyber university students get the added benefit of dropping out burdened with huge loan repayments.
Kaplan’s closing a Florida campus “that opened to great fanfare two years ago, but quickly lost students after a federal investigation raised questions about its admissions practices.”
Boohoo! But see that’s the business model there – you take in anyone with a pulse and syphon off all the tax dollars they come with and then … fuck them! You got their money. They can twist slowly in the wind.
You want to understand this business model? Read Glengarry Glen Ross.
Now investors are pissed because word’s out about the utterly shitty education on offer and how all the students are dropping out and all.
But why are people so obtuse when it comes to understanding how markets work? You set up a tax-syphoning enterprise. You take most of the money that pours in for yourself and your investors, and you set aside some dollars for blitz advertising (you need a steady flow of money-bodies). Oh, and you devote a bit to greasing the hands of politicians.
With the seventy five cents or so left over you hire a teacher to handle hundreds of students per class… Maybe some faceless unqualified drudge in India… Much cheaper to outsource…
Oh, but here come headlines like EDUCATION ON THE CHEAP and articles predicting that “these companies probably won’t have much luck if they continue to offer shoddy educations while raking in profits.”
So now you’re kind of tinkering with the business model. Your basic philosophy – take the money and run – hasn’t altered, but there are many things you can do around the edges to look respectable enough to continue to attract investors and student dupes.
UD has confidence in you. This is only a temporary setback.
With a 7 percent decline in overall enrollment since 2009, a 42 percent drop in new enrollments between March 2010 and March 2011, a 9 percent six-year graduation rate (versus 65 percent for private colleges and 22 percent for all for-profits), a dependence on Pell grants and federal loans for nearly 90 percent of total revenue, excessive defaults on student loans, and intensified regulatory reviews, Phoenix wilted. Since March 2009, Apollo has ranked as the third-worst performer of publicly traded companies and the third worst among the S&P 500 in 2010. Apollo’s market cap nosedived 57 percent to $5.8 billion in 2011. In March 2011, Apollo reported a quarterly loss of $64 million and the stock price plummeted from a high of $90 in January 2009 to a low of $33.75 in November 2010. It currently trades in the mid 40s. Capital markets are no longer bullish on for-profit universities. Under the headline “Apollo Sent to Back of Class,” Barron’s declared in March 2011 that “shares are rightly getting a failing grade….We would steer clear of the uncertainty surrounding Apollo and its industry….”
Richard P. Chait and Zachary First, in Harvard Magazine.
The Clintons were just as willing to enrich themselves via the scummy tax-syphons as many Republicans were and are. Bill’s bogus chancellorship at a for-profit school paid him many millions to jet around the world now and then making inspirational speeches. UD is obviously a strong Hillary supporter, but the Clintons are paying now for what they did, and I’m afraid they deserve to.
Go to my Click-Thru U category for years of incredulity and anger that this should-be-criminal enterprise continues to thrive.
UD hasn’t encountered many totally corrupt American universities. We’re not like Italy and Greece, where one can find schools whose main function is to transfer all available funds to the institution’s leadership. The closest we’ve come is the University of Medicine and Dentistry of New Jersey, and even there they’ve had to shutter much of their shake-down operation after endless unpleasantness with the FBI. (I’m of course talking here only about legitimate universities. The for-profit tax syphons are almost entirely about transfer of all possible funds to management and investors. Whole other category.)
But the University of Louisville, some of whose students and faculty, as a local reporter notes, are “reeling” from one financial or sexual scandal after another, is emerging as America’s new UMDNJ. And it might be instructive to pause at its latest scandal – high-level med school resignations in the wake of an FBI investigation into allegations that (in the words of the only worthwhile UL trustee – a man who subsequently left the board in disgust) a university vice president “owns a piece of a company getting paid by a part of the university that he controls.” It’s alleged that he and several of his UL cronies have essentially stolen around eight million dollars from the university.
No bid contracts and bogus high-paying jobs to friends and family also seem to be part of this particular scandal. But that’s the typical threesome at corrupt schools, where no one’s around to stop you from total corruption:
1. conflict of interest for personal enrichment;
2. no bid contracts to cronies (these often feature kickbacks to you);
3. the creation of pretend jobs for cronies and relatives.
At schools like UL, you don’t do just one or two of these things; you do them all.
How does a school become systemically rotten in the way UL is systemically rotten? How did things get so out of control in virtually all areas of the school’s operation? (I’m not even going to talk about UL athletics, which has been a sewer for years.)
If you ask UD, this can only happen when absolute ignorance of – maybe even contempt for – the nature of a university prevails not only in parts of the local culture (that y’all and shut ma mouth land) but in the president’s office and on the board of trustees. UMDNJ was run by brainless Jersey wise guys; UL seems to be run by corporate backslappers. Even now, with the school in absolute tatters, UL has chosen as its spokesperson a look on the sunny side nitwit who attacks the press for its negativism, denies anything’s the matter, and says stuff that’s too stupid to parse:
“I’m not willing to cross that bridge and give you any information that’s going to appease your accusations.”
A school run – flamboyantly run – largely to make money for the people who lead it will attract unsavory people. Unsavory people want to work at places like UL, since it seems unlikely that anyone at the institution will impede their corrupt activities. This is the way that corrupt schools stay corrupt, and indeed tend to become more corrupt. They attract corrupt people.
UD predicts that UL will, under this extraordinary pressure, finally ditch its president, who has lost all vestige of institutional control. But getting rid of him will cost the school many millions of dollars, and the chance of replacing him with anyone better is small.
All the way down (and I mean way down) the line, Noah Feldman’s defense of basically accepting any applicant for law school follows the talking points of the scummy for-profit colleges.
Law school has always had a shaky time thinking of itself as flying at a similar altitude to med school, but as the profession downsizes, and schools like UD‘s own George Washington University, for instance, start stealing students from American University, while Georgetown University steals students from GW, things are really moving toward the death spiral.
Feldman’s argument against the “infantilization” of people who want to assume $200,000 in debt to law school (even though their scores and grades make it obvious they won’t be good students and will either drop out with lots of debt or will fail to get a job that will allow them to repay the debt) is just as inspiring as Corinthian College’s spokespeople who for all the years it was in existence (it was recently forced to shut down its federal-tax-syphon operation) remonstrated against us for the same thing: How dare you, in an America founded on personal liberty and Horatio Alger etc etc etc how DARE you keep every person who fantasizes that she can be a lawyer from going to law school and sticking the American taxpayer with their loans? Our law schools are heroically reaching down into non-traditional places (the for-profits, for instance, hang out at homeless shelters and sign people up) and finding the inspiring social activists of this country’s future…
Feldman argues that “A standardized test score, taken alone, shouldn’t determine your future.” Hell yeah!
But no school accepts students merely on the basis of their scores… Jordan Weissmann is even unpleasant enough here to suggest that Feldman’s “very much arguing against a straw man” throughout his essay…
Feldman teaches at Harvard and is very worried that schools like his will be “accused of elitism and denial of opportunity” if they don’t override the conspiratorial pope-like “infallible admissions process” with its oligarchical buttressing of this country’s evil “technocratic elite.”
Thank God this doesn’t come anywhere near describing the Harvard of today, and thank God Feldman’s right there to make sure nothing like that happens in the future.
UPDATE: Paul Campos, a friend of this blog, adds this:
[Feldman] ignores the rules under which law schools are actually required to operate. ABA-accredited law schools have something close to a complete monopoly on qualifying American students to sit for state bar exams (California is the major exception), and in order to be an ABA law school, you at least in theory have to abide by the organization’s rules of accreditation, which both forbid schools from admitting students who don’t appear capable of passing the bar, and threaten with de-accreditation schools that have insufficiently high bar passage rates.
… Bar exams, ABA rules, and indeed law schools themselves are all designed as barriers to entry. This is especially true of law schools, which require people to invest three years and many hundreds of thousands of dollars in direct and opportunity costs after acquiring an undergraduate degree, before their graduates even have the right to try to take the bar exam. Now the public-regarding justification for these barriers is, not surprisingly, to protect the public from incompetent and/or crooked lawyers. Nowhere in his piece does Feldman even allude to this core regulatory function.
Well. Now that the tax syphons have syphoned up our taxes and subjected a population used to exploitation to yet more exploitation, what’s next? Goldman Sachs has made its money on the for-profit ed scam and will no doubt soon be getting the hell out while the getting’s good. Goldman Sachs stands at the opposite end of the social spectrum from the exploited masses. Goldman Sachs knows what’s what, and is unhampered by morality.
As for the suckers left holding the bag (you, me, and the students of for-profit schools): I’m sure Lloyd Blankfein has a little lecture to give us all on how markets operate.
UD just scored “Solid Liberal” on the Pew Political Typology quiz, and she’ll certainly vote for Hillary Clinton (unless Elizabeth Warren runs); but let her say again that Clinton should stop taking hundreds of thousands of dollars from American universities in exchange for giving speeches on their campuses.
It doesn’t matter that she takes their money and puts it in her charitable foundation; it doesn’t matter that the universities get the money they give her from ticket sales and booster organizations. It matters that
1. large sums of money that might have been used for education – and, at places like SUNY Buffalo, public education – are being syphoned off for the use of a politician; and that
2. the outrageously inflated amounts – in exchange for Clinton standing up for thirty minutes or so and reading a speech someone wrote for her – make Clinton look as money-grubbing as Eric Cantor.
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