For-Profit Colleges as Factories of Debt

Yves here. The American higher education system has been sucking more and more of the economic life out of the children that supposedly represent our best and brightest, the ones with intelligence and self-disipline to do well enough to be accepted at college.

But even though the press has given some attention to how young adults, and sometimes their hapless parent/grandparent co-signers, can wind up carrying huge millstones of debt, there’s been comparatively less focus on the for-profit segment of the market. While their students constitute only 13% of the total college population, they account for 31% of student loans. Why such a disproportionately high debt load? As this post explains, the for-profit colleges are master predators, seeking out vulnerable targets like single mothers who will do what they think it takes to set themselves up to land a middle class job. This is the new American lower-class version of P.T. Barnum’s “a sucker is born every minute.” These social aspirants are easy to exploit because they haven’t gotten the memo that the American Dream is dead.

By Hannah Appel and Astra Taylor. Originally published at TomDispatch. Hannah Appel is a mother, activist, and assistant professor of anthropology at UCLA. Her work looks at the everyday life of capitalism and the economic imagination. She has been active with Occupy Wall Street since 2011.

Astra Taylor is a writer, documentary filmmaker (including Zizek! and Examined Life), and activist. Her book, The People’s Platform: Taking Back Power and Culture in the Digital Age (Metropolitan Books), was published in April. She helped launch the Occupy offshoot Strike Debt and its Rolling Jubilee campaign*.

Imagine corporations that intentionally target low-income single mothers as ideal customers. Imagine that these same companies claim to sell tickets to the American dream — gainful employment, the chance for a middle class life. Imagine that the fine print on these tickets, once purchased, reveals them to be little more than debt contracts, profitable to the corporation’s investors, but disastrous for its customers. And imagine that these corporations receive tens of billions of dollars in taxpayer subsidies to do this dirty work. Now, know that these corporations actually exist and are universities.

Over the last three decades, the price of a year of college has increased by more than 1,200%. In the past, American higher education has always been associated with upward mobility, but with student loan debt quadrupling between 2003 and 2013, it’s time to ask whether education alone can really move people up the class ladder. This is a question of obvious relevance for low-income students and students of color.

As Cornell professor Noliwe Rooks and journalist Kai Wright have reported, black college enrollment has increased at nearly twice the rate of white enrollment in recent years, but a disproportionate number of those African-American students end up at for-profit schools. In 2011, two of those institutions, the University of Phoenix (with physical campuses in 39 states and massive online programs) and the online-only Ashford University, produced more black graduates than any other institutes of higher education in the country. Unfortunately, a recent survey by economist Rajeev Darolia shows that for-profit graduates fare little better on the job market than job seekers with high school degrees; their diplomas, that is, are a net loss, offering essentially the same grim job prospects as if they had never gone to college, plus a lifetime debt sentence.

Many students who enroll in such colleges don’t realize that there is a difference between for-profit, public, and private non-profit institutions of higher learning. All three are concerned with generating revenue, but only the for-profit model exists primarily to enrich its owners. The largest of these institutions are often publicly traded, nationally franchised corporations legally beholden to maximize profit for their shareholders before maximizing education for their students. While commercial vocational programs have existed since the nineteenth century, for-profit colleges in their current form are a relatively new phenomenon that began to boom with a series of initial public offerings in the 1990s, followed quickly by deregulation of the sector as the millennium approached. Bush administration legislation then weakened government oversight of such schools, while expanding their access to federal financial aid, making the industry irresistible to Wall Street investors.

While the for-profit business model has generally served investors well, it has failed students. Retention rates are abysmal and tuitions sky-high. For-profit colleges can be up to twice as expensive as Ivy League universities, and routinely cost five or six times the price of a community college education. The Medical Assistant program at for-profit Heald College in Fresno, California, costs $22,275. A comparable program at Fresno City College costs $1,650. An associate degree in paralegal studies at Everest College in Ontario, California, costs $41,149, compared to $2,392 for the same degree at Santa Ana College, a mere 30-minute drive away.

Exorbitant tuition means students, who tend to come from poor backgrounds, have to borrow from both the government and private sources, including Sallie Mae (the country’s largest originator, servicer, and collector of student loans) and banks like Chase and Wells Fargo. A whopping 96% of students who manage to graduate from for-profits leave owing money, and they typically carry twice the debt load of students from more traditional schools.

Public funds in the form of federal student loans has been called the “lifeblood” of the for-profit system, providing on average 86% of revenues. Such schools now enroll around 10% of America’s college students, but take in more than a quarter of all federal financial aid — as much as $33 billion in a single year. By some estimates it would cost less than half that amount to directly fund free higher education at all currently existing two- and four-year public colleges. In other words, for-profit schools represent not a “market solution” to increasing demand for the college experience, but the equivalent of a taxpayer-subsidized subprime education.

Pushing the Hot Button, Poking the Pain

The mantra is everywhere: a college education is the only way to climb out of poverty and create a better life. For-profit schools allow Wall Street investors and corporate executives to cash in on this faith.

Publicly traded schools have been shown to have profit margins, on average, of nearly 20%. A significant portion of these taxpayer-sourced proceeds are spent on Washington lobbyists to keep regulations weak and federal money pouring in. Meanwhile, these debt factories pay their chief executive officers $7.3 million in average yearly compensation. John Sperling, architect of the for-profit model and founder of the University of Phoenix, which serves more students than the entire University of California system or all the Ivy Leagues combined, died a billionaire in August.

Graduates of for-profit schools generally do not fare well. Indeed, they rarely find themselves in the kind of work they were promised when they enrolled, the kind of work that might enable them to repay their debts, let alone purchase the commodity-cornerstones of the American dream like a car or a home.

In the documentary “College Inc.,” produced by PBS’s investigative series Frontline, three young women recount how they enrolled in a nursing program at Everest College on the promise of $25-$35 an hour jobs on graduation. Course work, however, turned out to consist of visits to the Museum of Scientology to study “psychiatrics” and visits to a daycare center for their “pediatrics rotation.” They each paid nearly $30,000 for a 12-month program, only to find themselves unemployable because they had been taught nearly nothing about their chosen field.

In 2010, an undercover investigation by the Government Accountability Office tested 15 for-profit colleges and found that every one of them “made deceptive or otherwise questionable statements” to undercover applicants. These recruiting practices are now under increasing scrutiny from 20 state attorneys general, Senate investigators, and the Consumer Financial Protection Bureau (CFPB), amid allegations that many of these schools manipulate the job placement statistics of their graduates in the most cynical of ways.

The Iraq and Afghanistan Veterans of America, an organization that offers support in health, education, employment, and community-building to new veterans, put it this way in August 2013: “Using high-pressure sales tactics and false promises, these institutions lure veterans into enrolling into expensive programs, drain their post-9/11 GI Bill education benefits, and sign up for tens of thousands of dollars in loans. The for-profits take in the money but leave the students with a substandard education, heavy student loan debt, non-transferable credits, worthless degrees, or no degrees at all.”

Even President Obama has spoken out against instances where for-profit colleges preyed upon troops with brain damage: “These Marines had injuries so severe some of them couldn’t recall what courses the recruiter had signed them up for.”

As it happens, recruiters for such schools are manipulating more than statistics. They are mining the intersections of class, race, gender, inequality, insecurity, and shame to hook students. “Create a sense of urgency. Push their hot button. Don’t let the student off the phone. Dial, dial, dial,” a director of admissions at Argosy University, which operates in 23 states and online, told his enrollment counselors in an internal email.

A training manual for recruiters at ITT Tech, another multi-state and virtual behemoth, instructed its employees to “poke the pain a bit and remind them who else is depending on them and their commitment to a better future.”  It even included a “pain funnel” — that is, a visual guide to help recruiters exploit prospective students’ vulnerabilities. Pain was similarly a theme at Ashford University, where enrollment advisors were told by their superiors to “dig deep” into students’ suffering to “convince them that a college degree is going to solve all their problems.”

An internal document from Corinthian Colleges, Inc. (owner of Everest, Heald, and Wyotech colleges) specified that its target demographic is “isolated,” “impatient” individuals with “low self-esteem.”  They should have “few people in their lives who care about them and be stuck in their lives, unable to imagine a future or plan well.”

These recruiting strategies are as well funded as they are abhorrent. When an institution of higher learning is driven primarily by the needs of its shareholders, not its students, the drive to get “asses in classes” guarantees that marketing budgets will dwarf whatever is spent on faculty and instruction. According to David Halperin, author of Stealing America’s Future: How For-Profit Colleges Scam Taxpayers and Ruin Student’s Lives, “The University of Phoenix has spent as much as $600 million a year on advertising; it has regularly been Google’s largest advertiser, spending $200,000 a day.” 

At some schools, the money put into the actual education of a single student has been as low as $700 per year. The Senate’s Health, Education, Labor, and Pensions Committee revealed that 30 of the for-profit industry’s biggest players spent $4.2 billion — or 22.7% of their revenue — on recruiting and marketing in 2010.

Subprime Schools, Swindled Students

In profit paradise, there are nonetheless signs of trouble. Corinthian College Inc., for instance, is under investigation by several state and federal agencies for falsifying job-placement rates and lying to students in marketing materials. In June, the Department of Education discovered that the company was on the verge of collapse and began supervising a search for buyers for its more than 100 campuses and online operations. In this “unwinding process,” some Corinthian campuses have already shut down. To make matters worse, this month the Consumer Financial Protection Bureau announced a $500 million lawsuit accusing Corinthian of running a “predatory lending scheme.”

As the failure of Corinthian unfolds, those who understood it to be a school — namely, its students — have been left in the lurch. Are their hard-earned degrees and credits worthless?  Should those who are enrolled stay put and hope for the storm to pass or jump ship to another institution? Social media reverberate with anxious questions.

Nathan Hornes started the Facebook group “Everest Avengers,” a forum where students who feel confused and betrayed can share information and organize. A 2014 graduate of Everest College’s Ontario, California, branch, Nathan graduated with a 3.9 GPA, a degree in Business Management, and $65,000 in debt. Unable to find the gainful employment Everest promised him, he currently works two fast-food restaurant jobs. Nathan’s dreams of starting a record label and a music camp for inner city kids will be deferred even further into some distant future when his debts come due: a six-month grace period expires in October and Nathan will owe $380 each month on Federal loans alone. “Do I want to pay bills or my loans?” he asks. Corinthian has already threatened to sue him if he fails to make payments.

Asked to explain Corinthian’s financial troubles, Trace Urdan, a market analyst for Wells Fargo Bank, Corinthian’s biggest equity investor, argued that the school attracts “subprime students” who “can be expected — as a group — to repay at levels far lower than most student loans.” And yet, as Corinthian’s financial woes mounted, the corporation stopped paying rent at its Los Angeles campuses and couldn’t pay its own substantial debts to lenders, including Bank of America, from whom it sought a debt waiver.

That Corinthian can request debt waivers from its lenders should give us pause. Who, one might ask, is the proper beneficiary of a debt waiver in this case? No such favors will be done for Nathan Hornes or other former Corinthian students, though they have effectively been led into a debt trap with an expert package of misrepresentations, emotional manipulation, and possibly fraud.

From Bad Apples to a Better System, or Everest Avenged

As is always the case with corporate scandals, Corinthian is now being described as a “bad apple” among for-profits, not evidence of a rotten orchard. The fact is that for-profits like Corinthian exemplify all the contradictions of the free-market model that reformers present as the only solution to the current crisis in higher education: not only are these schools 90% dependent on taxpayer money, but tenure doesn’t exist, there are no faculty unions, most courses are offered online with low overhead costs, and students are treated as “customers.”

It’s also worth remembering that at “public” universities, it is now nearly impossible for working class or even middle class students to graduate without debt. This sad state of affairs — so the common version of the story goes — is the consequence of economic hard-times, which require belt tightening and budget cuts. And so it has come to pass that strapped community colleges are now turning away would-be enrollees who wind up in the embrace of for-profits that proceed to squeeze every penny they can from them and the public purse as well. (All the while, of course, this same tale provides for-profits with a cover: they are offering a public service to a marginalized and needy population no one else will touch.)

The standard narrative that, in the face of shrinking tax revenues, public universities must relentlessly raise tuition rates turns out, however, to be full of holes. As political theorist Robert Meister points out, this version of the story ignores the complicity of university leaders in the process. Many of them were never passive victims of privatization; instead, they saw tuition, not taxpayer funding, as the superior and preferred form of revenue growth.

Beginning in the 1990s, universities, public and private, began working ever more closely with Wall Street, which meant using tuition payments not just as direct revenue but also as collateral for debt-financing. Consider the venerable but beleaguered University of California system: a 2012 report out of its Berkeley branch, “Swapping Our Futures,” shows that the whole system was losing $750,000 each month on interest-rate swaps — a financial product that promised lower borrowing costs, but ended up draining the U.C. system of already-scarce resources.

In the last decade, its swap agreements have cost it over $55 million and could, in the end, add up to a loss of $200 million. Financiers, as the university’s creditors, are promised ever-increasing tuition as the collateral on loans, forcing public schools to aggressively recruit ever more out-of-state students, who pay higher tuitions, and to raise the in-state tuition relentlessly as well, simply to meet debt burdens and keep credit ratings high.

Instead of being the social and economic leveler many believe it to be, American higher education in the twenty-first century too often compounds the problem of inequality through debt-servitude. Referring to student debt, which has by now reached $1.2 trillion, Meister suggests, “Add up the lifetime debt service that former students will pay on $1 trillion, over and above the principal they borrow, and you could run a very good public university system for what we are paying capital markets to fund an ever-worsening one.”

You Are Not a Loan

The big problem of how we finance education won’t be solved overnight. But one group is attempting to provide both immediate aid to students like Nathan Hornes and a vision for rethinking debt as a systemic issue. On September 17th, the Rolling Jubilee, an offshoot of Occupy Wall Street, announced the abolition of a portfolio of debt worth nearly $4 million originating from for-profit Everest College. This granted nearly 3,000 former students no-strings-attached debt relief.

The authors of this article have both been part of this effort. To date, the Rolling Jubilee has abolished nearly $20 million dollars of medical and educational debt by taking advantage of a little-known trade secret: debt is often sold to debt collectors for mere pennies on the dollar. A medical bill that was originally $1,000 might sell to a debt collector for 4% of its sticker price, or $40. This allowed the Rolling Jubilee project to make a multi-million dollar impact with a budget of approximately $700,000 raised in large part through small individual donations.

The point of the Rolling Jubilee is simple enough: we believe people shouldn’t have to go into debt for basic needs. For the last four decades, easy access to credit has masked stagnating wages and crumbling social services, forcing many Americans to debt-finance necessities like college, health care, and housing, while the creditor class has reaped enormous rewards. But while we mean the Jubilee’s acts to be significant, we know it is not a sustainable solution to the problem at hand. There is no way to buy and abolish all the odious debt sloshing around our economy, nor would we want to. Given the way our economy is structured, people would start slipping into the red again the minute their debts were wiped out.

The Rolling Jubilee instead raises a question: If a ragtag group of activists can find a way to provide immediate relief to even a few thousand defrauded students, why can’t the government?

The Consumer Financial Protection Bureau’s lawsuit against Corinthian Colleges, Inc. is a good first step, but it only applies to specific private loans originating after 2011, and it will likely take years to play out. Until it’s resolved, students are still technically on the hook and many will be harassed by unscrupulous debt collectors attempting to extract money from them while they still can. In the meantime, the Department of Education (DOE) — which has far greater purview than the CFPB — is effectively acting as a debt collector for a predatory lender, instead of using its discretionary power to help students. Why didn’t the DOE simply let Corinthian go bankrupt, as often happens to private institutions, and so let the students’ debts become dischargeable?

Such debt discharge is well within the DOE’s statutory powers. When a school under its jurisdiction has broken state laws or committed fraud it is, in fact, mandated to offer debt discharge to students. Yet in Corinthian’s opaque, unaccountable unwinding process, the Department of Education appears to be focused on keeping as many of these predatory “schools” open as possible.

No less troubling, the DOE actually stands to profit off Corinthian’s debt payments, as it does from all federally secured educational loans, regardless of the school they are associated with. Senator Elizabeth Warren has already sounded the alarm about the department’s conflict of interest when it comes to student debt, citing an estimate that the government stands to rake in up to $51 billion dollars in a single year on student loans. As Warren points out, it’s “obscene” for the government to treat education as a profit center.

Can there be any doubt that funds reaped from the repayment of federally backed loans by Corinthian students are especially ill-gotten gains? Nathan Hornes and his fellow students should be the beneficiaries of debt relief, not further dispossession.

Unless people agitate, no reprieve will be offered. Instead there may be slaps on the wrist for a few for-profit “bad apples,” with policymakers presenting possible small reductions in interest rates or income-based payments for student borrowers as major breakthroughs.

We need to think bigger. There is an old banking adage: if you owe the bank $1,000, the bank owns you; if you owe the bank $1 million, you own the bank. Individually, student debt is an incapacitating burden. But as Nathan and others are discovering, as a premise for collective action, it can offer a new kind of leverage. Debt collectives, effectively debtors’ unions, may be the next stage of anti-austerity organizing. Collective action offers many possibilities for building power against creditors through collective bargaining, including the power to threaten a debt strike. Where for-profits prey on people’s vulnerability, isolation, and shame, debt collectives would nurture feelings of strength, solidarity, and outrage.

Those who profit from education fear such a transformation, and understandably so. “We ask students to make payments while in school to help them develop the discipline and practice of repaying their federal and other loan obligations,” a Corinthian Colleges spokesman said in response to the news of CFPB’s lawsuit.

It’s absurd: a single mother working two jobs and attending online classes to better her life is discipline personified, even if she can’t always pay her loans on time. The executives and investors living large off her financial aid are the ones who need to be taught a lesson. Perhaps we should collectively demand that as part of their punishment these predators take a course in self-discipline taught by their former students.


* Note that we have expressed considerable reservations about Rolling Jubilee’s campaign, including that the act of buying discounted debt feeds the predatory debt collection industry and also creates tax risks for those whose debt has been purchased. However, we regard this post as a move in a better direction, since the members of Rolling Jubilee are making the underlying problem more visible, which is a necessary precursor to coming up with better remedies

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  1. just bill

    The situation you describe is the clearest case of fraud I can imagine. Where is the legion of class action lawyers uniting all these student debtors, university by bogus university?

    Every time I watch some shyster college commercial showing a happy idiot with her laptop open on the table at Starbucks I fly into a rage. Starbucks runs the filthiest restaurant in my entire town. One could study in more comfort in a public toilet stall.

    Is there no scam people won’t fall for? Apparently not.

  2. Higher and compounded interest

    Ahhh, for-profit colleges – another wonderful means to create more debt. What area of life can next be debt-ified? What other “asset” can we convert to debt?

    Remember, debt leads to growth – as we force ourselves to grow by any means to pay it off. Debt also makes you more dependent on your job – as we become tied to our jobs to pay it off. Debt also greatly enriches the lenders.

    We all win.

    1. trish

      and aside from the huge debt issue and bilking and squeezing extorting the poorest for profit, the whole privatization issue for schools in myriad odious ways from elementary on up is ultimately undermining the education for all in our society but the elite.

      1. Compounded higher

        No area in education – lower or higher – is safe from marketization. I met several people online last spring who eagerly await the profit-ization of lower schools. They love the idea of making profit from schools.

        When they read some of the problems that result, they slinked away without comment.

        I don’t think that most profitize-the-schools boosters are naive, like those. Some have simply sniffed too much of the foul air and merely need a whiff of oxygen. The big boys probably know but don’t care.

  3. Katniss Everdeen

    Is there no such thing as ACCREDITATION for “schools” any more? Or is that one of those demon “regulations” that keeps the “economy” from “unleashing” it’s full “potential?”

    Time was that schools were obsessed with maintaining their “credentials.” That was back when the US had a world-class education system. When did all that go away?

    This sounds like an open and shut RiCO/organized crime case in which the federal government is complicit. Time to start confiscating some “assets” and chopping off a few heads, starting with that most worthless of grifters, Arne Duncan.

    1. John Zelnicker

      And Michelle Rhee.

      Also, I think there are accrediting organizations for these schools, but they are captured regulators.

      1. Massinissa

        Michelle got out when the going got good and she saw that her movement was going to start losing popularity. Arne duncan doesnt seem to be as smart.

      2. greg allegri

        Do a bit of homework before responding – it may interest you to know that the same accreditors that cover say, the Ivy League, also accredit many for-profit colleges.

        1. John Zelnicker

          Ok, so I did some homework. The University of Phoenix is accredited by the Higher Learning Commission – North Central Association and is on notice, a sanction that the school is heading toward non-compliance. See:

          The HLC is one of six regional accrediting agencies recognized by the US Department of Education and apparently they are doing their job by threatening to withdraw accreditation from the University of Phoenix if they don’t change their current course of action.

    2. Piled higher and

      The Higher Learning Commission, which regulates regional accrediting bodies, has been persistently very critical of the for-profit colleges. However, this summer the head of the HLC resigned – it’s not clear if her resignation was voluntary. The new head may have a different approach to the for-profits.

      Stay tuned.

      1. Hildy

        Update –

        Barbara Gellman-Danley is the new President of the Higher Learning Commission, appointed July 7, 2014. She wrote,

        “I embrace the accreditor’s role in quality assurance and the emerging focus on outcomes-based assessment” … “This includes a respect for the peer review process and the important issues raised by the public and our congressional leaders on accreditation.”

        No specific mention of her stance on the for-profits.

    3. jrs

      Accreditation hasn’t for a long time if ever really assured that it is a quality education even in the most basic sense, they’re really not about the quality of the education at all. Yea, one can quibble about whether the Ivy League on one end and the community college on the other provides a “quality education” but I’m not making a subtle point or some nuanced cultural critique. Those schools pretty much ALWAYS have some standards for logical course construction and prerequisites etc. and for profit schools often don’t.

  4. John Zelnicker

    “corporations legally beholden to maximize profit for their shareholders”
    Will someone please tell me where in the US Code or any state’s laws and regulations it is legally mandated that corporations maximize shareholder profit before all other considerations. I see this kind of statement in almost every article or post that discusses corporations and I believe it to be false, nothing more than successful propaganda promoted by the neoliberal elite. I have a degree in economics and finance and we were never taught any such legal mandate, although maybe such a law has been passed in the intervening 40 years. I am now a tax professional and it is not in the Internal Revenue Code, AFAIK.

      1. John Zelnicker

        Exactly! Far too many “experts” have bought that lie and think there is a legal requirement. It just ain’t so.

    1. Not sleepy

      If Bill is behind it, it must be kosher — or does his wife tell him what to do?

      And Kaplan must be a great school.

  5. Trent

    Used to work for EDMC in the only position a liberal arts degree in history will get you………… center. They aggressively called potential “students” and tried very very very hard to get them in contact with the school and pressure them to come in a take a look at the school and hear about the program. Usually once this tour was over they would then pressure the student to attend the school. While working at the company it was obvious what was going to happen, after they had milked this market for all of the profits they could get out of the government the model would collapse. Which it currently seems to be doing. The employees were generally not bad people, just trying to earn a living. The company will file for bankruptcy in the near future i’m sure, the employees will lose their jobs, the executives will get golden parachutes. AMERIKA FUK YEAH!

  6. trish

    ‘Imagine corporations that intentionally target low-income single mothers…that claim to sell tickets to the American dream [and] imagine that the fine print on these tickets, once purchased, reveals them to be little more than debt contracts, profitable to the corporation’s investors, but disastrous for [these poor often black struggling single mothers]…’

    And imagine that this is perfectly legal.

    AND then imagine that these criminals are given tens of billions of dollars of citizens’/taxpayers’ money to run this grossly immoral scam because, well, they have lots of aiding and abetting friends in our government. unfortunately not so hard to imagine anymore.

    I remember in the aftermath of the subprime mortgage crisis (way back when I was in retrospect remarkably ignorant about what was going on in our country) wondering why it was presumed OK , why it was legal, to bilk the poor and ignorant people with insufficient income via (for example) variable subprime mortgages with low teaser rates.

    Many blamed them for “not reading the fine print,” etc. But why is should it be OK and legal to make quick money (essentially criminally) preying on these people???

    1. Not Michael Jensen

      I imagine all these single mothers, Hispanics, etc with their diplomas and loans from these for-profit schools will be very happy. I can imagine them smiling at the economy, at their for-profit alma mater, and their lender.

      Great way to build a bunch of boosters for capitalism. Hey, maybe they’ll be the first to call for changes!

  7. diptherio

    So why can’t people buy their own debt for four cents on the dollar? Perhaps we could have a law that says before your loan is sold to a collection agency, you have to be given the opportunity to buy it yourself at whatever the going discount is.

    People should also be offered prime-rate loans directly from the Fed to fund the purchase of their own bad debt.

    Why not?

    1. Denis Drew

      It’s in the “why didn’t I think of that” category. Don’t know if it would help your credit rating if you then reported the loan paid to credit agencies (paid yourself) — that’s with the coming rules changes n mind that will remove bad marks for debts that are finally paid off (don’t know if that will cover part settlement either). Rules will change back quickly of course. But — a big but — you wont have to spend years ducking nasty phone calls or payroll garnishments or law suits if you have attachable assets.

      Why didn’t I think of that? :-)

      1. Denis Drew

        Bad news and good news. Bad news: About 90 percent of unpaid student loans are owed to the U.S. government — not subject being bought off cheap. Huffington Post (6th para from bottom)

        Good news: Government student loan debt can be sliced very thin by something called Income Based Repayment.

        Using the online calculator I input one person, $20,000 income, $40,000 student debt — and it came back with this:
        Based upon the information you provided, it is likely that you may qualify for Income-Based Repayment (IBR), and your estimated monthly payment amount would be $31.19. Your monthly payment amount may vary from year to year as a result of changes to your family size or income.

        I understand that after 25 years your loan is canceled — but in today’s law the IRS will consider the unpaid part income for that year. Hopefully we will have a more humane country in 25 years.

    2. Pokey

      People should be permitted to redeem the debt for, say 150% of the price paid.
      Negotiating the purchase of the debt would never get the lowest price.

  8. bmeisen

    Thanks Yves and TomDispatch. The authors make a powerful case, and frankly it isn’t hard to do – higher education in America is plainly unjust. It should be virtually free, as university education in many other first-world democracies is. But ask a Mudville College freshman why she and her parents are willing to pay 50k/yr for her BA in English and she’s likely to answer, “Because it’s a good investment in my future.” Like millions of her American peers, she’s drunk the kool-aid.

    If you want to agree with the liberal argument for tuition, that arguably modest investments in education now generate higher wages and thereby returns later, then you must ignore important aspects of reality, for example that about half of all university students, the females, are biologically and socially (according to widely-held conventions) compelled to entertain scenarios that exclude gainful employment for substantial periods of time. In fact women should receive substantial discounts under degree pricing regimes, but again the “personal choice” zombie gropes out from the shadows: having children is a personal choice, argue liberals, just like getting a university degree.

    The liberal argument for tuition, taken to its logical end, would produce all-male student bodies drawn exclusively from the ruling elite. Accordingly “education” would be irrelevant, a circumstance with which the rich have been able to live with for centuries – smart people are uncomfortable. Institutions of higher education would be primarily venues for networking used by the elite to consolidate their hold on power.

    1. Hobbes

      As a university English professor at a major state university, I take exception to your anecdote. For-profit universities don’t target the traditional liberal arts crowd — they offer majors tailored to the so-called business sector. As for Mudville, if it is a private university on the order of Syracuse or Reed, its students go there for a variety of reasons — peers from high school, family members went, couldn’t get into the state R I school (R I means Pd.D. granting university, like U Michigan, UCLA, Indiana Bloomington, etc). State universities are still an exceptional value — my students pay about $5 grand a year, and we’re an R II (M.A. granting state university). But we’re bursting at the seams and can’t accommodate all the students who would like to come. Phoenix and Corinthian students are more likely to be the cohort that washed out of community college a long time ago and who fall for the aggressive PR promises these places make. Oh, by the way: my English students do quite nicely in business and educational settings, thank you. They write very well, they can digest large quantities of material and engage in critical analysis, and they are creative problem-solvers. Just sayin’.

      1. bmeisen

        Thanks for your reply. “Mudville” is representative of traditional liberal arts colleges, the institutions at the foundation of what is “the college experience” in the USA. 50k is my estimation of the price that middle class American families can expect to pay to provide an authentic version of “the college experience” for one year to one of their children. Lower prices are possible, much lower prices at state institutions that serve predominantly commuter populations. English is a representative major – as worthy (or unworthy) as any other “product” in this “market”. My main point is that the injustice in higher education in the US is a function of how students and other stake holders perceive education: is it a public good or a private choice? Who benefits from education? The individual or the community? Who pays the cost of education? How should the cost burden be distributed? The liberal argument for tuition conflicts with elite arguments (as many non-intellectual obstacles to advancement as possible please) and the communitarian (cost should be effectively no obstacle).

        In your list of reasons why students choose a given institution, you don’t include subject or quality. I guess you weren’t offering an exhaustive list but still it’s notable that considerations about where it is best to study what field and where a given field is best taught rarely come up when Americans are initiating “the college experience”. It’s where your friends are going, where your parents went, where the football team is doing well.

  9. DrakenKorinne

    Many of us have had enough – debtors’ revolt – default-en-masse is the answer. There’s no way to fix this captured, rigged system that has been reengineered to screw over an entire generation of people, feed off the disadvantaged and people in tough times, etc., so disable it. REPUDIATE it, and rebuild from there.

    I have joined the intentional default-en-masse / student debt repudiation movement, and encourage everyone to join us. Once we hit a critical mass, that’s it – as an economist and former banking person, I can tell you, the system itself is much more fragile than you’d think, and would not be able to absorb this shock.

    Debtors’ Revolt / Default-En-Masse – join us! Bring this predatory monster down. Don’t give in to a rigged system of debt peonage, designed – or, better, re-rigged – to benefit only the ownership/rentier class.

    And yes, we are all well aware of the “consequences” of student debt default, and have been living with them for several years now. We’re fine, we get by. The economy offers no opportunity anymore anyway.

    And just to add, I believe that it is unethical to continue feeding this “beast that swallows its young” (look up the song/anthem, it’s great). I now base all of my economic decisions on my ethics, and just because I “owe” debt to predators and a predatory system that changed the rules to rig itself against me and you, doesn’t mean I have any obligation any more to pay it back. They wrecked and screwed up the system, took advantage of us – let them starve.

    We can no longer change the system through “political action”, etc., for the system itself is captured and rigged. We just need to completely crash it, take the temporary pain, and rebuild from there, under fair, perhaps Rawlsian principles. And check out the subreddit /r/studentloandefaulters, set up by another like-minded person.

  10. ciwood

    Is it any wonder that we have lost all confidence in all institutions. Congress should protect the helpless against scams like this but instead, Congress is accepting bribes from these schools in the form of election donations and other forms of payback. I always warned my son to choose very carefully the things he was willing to die for and live with the rest. When enough people have had enough and they are willing to die for the injustice, America is doomed. That time is is coming closer.

  11. John Mc

    “Many students who enroll in such colleges don’t realize that there is a difference between for-profit, public, and private non-profit institutions of higher learning. All three are concerned with generating revenue, but only the for-profit model exists primarily to enrich its owners”

    True. But while I see where the author is taking this, and readily agree that the for-profit business is a sham, I would like to see more hammering of the public sphere (or what I call for-profit wannabees). The combination of decreased funding for public higher education, increasing percentage in adjunct teaching dependency, and the rise of the administrative class in academia is just a long term model for privatization. Of course, the public institutions do have history, endowments, and the backing of the public in many cases. However, what is not frequently discussed is how they have been co-opted.

    For example, the commodification of expensive textbooks, scholars’ labor (Grants, Articles, and the Potemkin village of self-rule time suck under the thumb of administrative dictates), and hyper-focus on distracting big time athletics already demonstrates how public universities are really for profit agents working within a corrupt public label.

    Owners are enriched in each of these groupings. The point is to identify them and name names (imnho).

  12. Sam Adams

    Student loans have not reached a hopeless critical mass. Once they do, the politicians and the political systems are in serious trouble. When this coming generation has no faith in its future, even with an education the anger will be uncontrollable and destructive.

  13. impermanence

    Debt is is simply the mechanism by which you steal other people’s labor value [especially in a system where bank-money is created out of nothing]. How could you possible create a better scam than this, one that keeps giving and giving and giving and the people do not even realize that they are being fleeced?

    This is what happens when people combine their talents. Socially, people are thieves, always have been, always will be.

    1. John Mc

      Trite and not very useful insights here about people are thieves…. this is derived from theory that is far away from yourself than a specific insight. You should have stuck to other people’s labor value —- it has more foundation,

  14. Jim

    “Imagine corporations that intentionally target low income single mothers as ideal customers.”

    “Imagine that these same companies claim to sell tickets to the American dream.”

    Once these organizations, private non-profit, public and private for-profit are through with the emotional exploitation of the legitimate desire for upward mobility as well as through with placing as many as possible in a permanent debt peonage situation then we supposedly step in with a call for debt collectives “as the possible next stage of anti-austerity organizing.”

    This is a clever idea. But is it adequate?

    Can an organizing strategy based on a definition of its participants as debtors( rather than of individuals who explicitly want and need upward mobility) actually nurture the feelings of strength, solidarity and outrage that the authors say would flow from such a strategy?

    Would it create the necessary leverage to prod the emerging oligarchic/police state to shift priorities? Maybe I just can’t visualize how this would be played out strategically and tactically?

    One thing seems for sure– our focus needs to shift from mere exhortation to a description of what public acts to perform that can recruit enough people to bring a particular political goal within social reach..

  15. Joe Calabrese

    Why no mention of Minn Rep John Kline Chair of the Education Committee and his quid pro quo donations from the “University” of Phoenix?

  16. Jesse

    Yves, did you see the Paul Campos piece on Infilaw, which runs 3-4 for-profit law schools? Many of the numbers presented were eye-popping, even for the for-profit education induatry. It’s mandatory reading for anyone following this issue.

  17. jrs

    I mostly tend to see for profit colleges as scapegoats for the economic system. I think the only legimate and entirely unique complaint about for-profit schools is about the quality of the education often being much lower than the private and public alternatives.

    Other than that: people are promised jobs that don’t exist. That’s fraud. But the same thing goes on in not- for-profit colleges, there’s whole websites of PhDs who were convinced there would be jobs in their field if only they went the distance, and are exploited for years as interns instead. This is not a society that WANTS to give young people an honest analysis of job prospects. This society needs to pretend that everyone could be middle class (if only everyone had gone to a legit college etc.). Those are load-bearing lies! They support this society. In fact even if a college provides a good education which is in my view fulfilling it’s primary responsibility, if everyone had PhDs, PhDs would be cleaning bathrooms!

    Then wondering why the students didn’t go to more legitimate schools. Was it because they were sucked in by advertisements and salespeople? It very well could be. But also have most legitimate schools done anything to make schooling easier to fit into a full time work schedule? Most have not. But those single mothers need to work (they have little choice in this society – could we at least get a 4 year minimum income for everyone?) and they need to take care of their families. And then they wonder why there are students who go to schools that DO CATER to the need to fit schooling around full time work which is something most for-profit schools DO (even when the quality of the education is low etc.). Well duh. Do legitimate schools have any intention of filling that niche? Are they even trying to really meet the needs of working class and poor people who want to better themselves but are often run ragged to survive? Or do they just like mostly maintaining an unspoken class system?

  18. Kunst

    Elite-think: A college education is worth a lot of money, a million dollars (maybe) of higher lifetime earnings. Why should students get that for “free”? They may not have money now, but we can get a share of those future earnings. As long as we don’t take it all, there’s still incentive to go to college. Of course, we get our money regardless and up-front. Even though it’s debt, you can’t get out of it, so we’re pretty sure to get most of it, with interest. And that’s regardless of how things turn out for you. Didn’t graduate, for whatever reason? We still get paid. Suffer a life-limiting medical event that prevents you from earning that extra million? Too bad, we still get paid. Die prematurely? We have your parents and grandparents on the hook; they can pay for educating your dead ass. All the risk is on you and yours, and we have another way to multiply our money, darn near risk free. And when the colleges jack up tuition to increase their share of that million, we get to lend more. What’s not to like?

  19. Phil

    I have some experience with this sector. There are a few for-profits form which one can obtain a good skill set, but it almost always costs more than competing non-profit schools. That said, *most* of the for-profit education sector has cleverly found a way to milk the American taxpayer via Federal tuition grants. What has always bothered me about this is that so many of the for-profits are *obviously* flimflam organizations.

    Apollo, (UoP’s corporate parent) is Google’s largest advertiser (as of a few years ago). Another thing that irks me is that some of the for-profits are so obviously little more than fraudulent rip-offs, yet their senior executives are not prosecuted for criminal fraud. It’s a scandal. That so many of the for-profit colleges were able to grow to billion dollar organizations right under the nose of the DOE, Federal scholarship programs, and so-called “accreditation committees is telling.

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