Government Waters Down For-Profit College Regulations

The Department of Education last night (June 1) issued Milquetoast, pusillanimous new regulations for the for-profit colleges, as many such as myself expected. Programs could lose their federal aid (thus be shut down) if over the next four years their graduates fail to meet new benchmarks for loan repayment and ratio of debt to income, according to the New York Times. "But amid intense lobbying by the for-profit college industry and pressure from Republican lawmakers, the department significantly eased the rules from an earlier draft," commented the Times. "We believe that very few programs will be forcibly closed by our standards," said Secretary of Education Arne Duncan, according to the Times. "We want to give people a chance to reform." This, of course, is a joke.

Stock of San Diego's Bridgepoint Education zoomed 11.61% this morning to $26.43. Corinthian Colleges is up 32.8% and Apollo up 11.3%. In a column Feb. 2, I had said that Bridgepoint stock would likely rise significantly, because more than half the shares were short -- that is, more than half of investors were betting it would go down. Any good news would force the shorts to cover, or buy the stock, running it up. Bridgepoint has been rallying in recent days, probably in anticipation of the weak regulations to come out of Washington. In the last month, the number of Bridgepoint shorts has dropped from 10.06 million to 8.86 million; the shorts have already been covering.

Now for the numbers: for-profit colleges represent 10% of students but 44% of loan defaults. In the two-year program, a whopping 84.4% of students at Bridgepoint's Ashford University (which accounts for almost all its students) drop out. A stunning 63% of four-year students drop out. Officially, Bridgepoint gets 85% of its revenue from federal loans and grants, but the percentage is probably closer to 100 when military recruits are considered.

This is a classic example of why the U.S. is incapable of dealing with its deficit. In this case, it's the Republicans, who supposedly oppose deficits, who stepped in to make sure money continues to drain from the Treasury. In other cases, it's the Democrats. One question: how many politicians and bureaucrats in Washington had taken long positions in stocks of the for-profits before this announcement came out?

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Comments

Big Business money buys off the Congress so Big Business can continue scamming.

I am shocked, SHOCKED I TELL YOU!

The GOP has a philosophical belief that private enterprise can do a better job of serving society in many ways than can another governmental program. So it is with these colleges. But the GOP in this case is blind to the fact that they are playing their games with OPM (Other People's Money) and thus are not true private enterprise. I'm not going to go quite as far as SurfPup in claiming bribery, but this is one of those cases when the GOP disappoints true conservatives. At least this whole mess is now out in the open, there is some (if scant) progress toward expecting the schools to actually educate, and all the publicity may make the prospective students more skeptical and less likely to fall for all the BS.

You and I disagree on that point, Visduh. Now that they have gotten away with murder through lobbying and playing up to Republicans, do you really think they will reform their business model? It isn't going to happen. Best, Don Bauder

The GOP has a philosophical belief that private enterprise can do a better job of serving society in many ways than can another governmental program. So it is with these colleges.

Good post-but the problem, as you point out, is OPM.

The solution is very simple, make these "schools" carry their own paper. Not the US Government/taxpayers in the form of student loans.

Lets see how fast they raise tuition when they are not paid for their so called "education" because the grad has no job or has a job but makes no money.

I would force the schools to do this, I would force banks to do the same thing with mortgages/trust deeds. Don't allow financial institutions to bundle, securitize and sell mortgages on the secondary market-make the lender HOLD and service THEIR own loans. That will fix the fraud problems real fast.

If these schools carried their own paper, instead of relying for 85% or more of their revenue from federal government loans and grants, the for-profits would be out of business in a hurry. Best, Don Bauder

Response to SurfPuppy's 7:55 p.m. comment: And big business believes in freedom from government. Except the for-profit colleges make almost all their revenue from the federal government. And provide a lousy education. Best, Don Bauder

There is a story in another section about a class action lawsuit against Thomas Jefferson Law School here in San Diego. Has to do with employment stats and fraud.

My comment on that story is true of probably 75%-90% of all ABA law schools in America, the MAJORITY of the grads (well over 50%) will never work as lawyers, and will never be bale to pay back the $100K-$200K they borrowed to pay for the schooling.

Yes, the suit charges that the former student was misled by claims of ability to get jobs upon graduation. Best, Don Bauder

For-profit colleges are just another form of welfare fraud, albeit legal fraud.

Let's face facts: government student loans are a form of welfare -- just another handout. And when the gov't hands out money, fraud is ever-present.

Another common loan fraud is students getting loans, signing up for classes, dropping the classes, and collecting cash refunds.

And what do we have to show for 40 years of the gov't paying for college? Out of control tuition, room-and-board, and book costs.

Get the gov't out of higher education! Now!

What about all the research money that flows to universities? And the professors who get out of teaching so they can concentrate on bringing in research funds? President Eisenhower, in the farewell address in which he warned of the military-industrial complex, also warned of government money taking over universities. Best, Don Bauder

Don, the worst case scenario consequence of political and academic marginalization of Ike's 1961 Farewell Address is that even UC Professor and LLNL Founding Director Edward Teller was not allowed to develop fusion power production because UC has been making too much money producing hydrogen bombs for humanity.

Thus we still don't have any way to eliminate CO2 production from power plants that keep the Keeling Curve increasingly out of control, so that quality of life for newest and future generations are in increasingly "grave" (Ike's warning word in Farewell address) jeopardy as a consequence.

And to continue to make matters worse, Obama's Secretary of Energy Chu is a Cal Professor who also ran LLNL which finally opened their new National Ignition Facility that has as its highest priority the "maintain the United States’ cache of nuclear weapons" http://spectrum.ieee.org/energy/nuclear/fusion-factory-starts-up

The government student loans may be a form of welfare, and probably for the middle class. But if you borrow heavily to finance some degree, especially a professional degree and then cannot secure admission to the profession (a fancy way of saying you didn't find a job) you still owe the money. The student loan program was a scandal years ago because it was a simple matter of filing a personal BK to get out of debt. The result: the bankruptcy laws were changed, and a debtor can no longer get those erased in BK. I do agree that when the government got involved in loans and grants the cost of education skyrocketed, rising much faster than the cost of living. Backing the government out of higher education would be most difficult and painful.

The student loans and grants, such as Pell grants, have to be reformed. In the case of Pell grants, it appears to be Democrats that want the corrupt status quo. Best, Don Bauder

The student loan program was a scandal years ago because it was a simple matter of filing a personal BK to get out of debt. The result: the bankruptcy laws were changed,

Actually there was no scandal at all, this was a scam perpetrated by Sallie Mae and other lenders in order to defraud the poor by changing BK laws to THEIR advantage.

The default rate for student loans when the BK laws were changed in 1978 was less than one half of 1%, or drastically below the overall BK rate. Please read University of Michigan John Pottow's law review article on this issue;

"The Nondischargeability of Student Loans in Personal Bankruptcy Proceedings: The Search for a Theory" (download the entire law review article)

. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=967379 . . http://web.law.umich.edu/_facultybiopage/facultybiopagenew.asp?ID=143 .

The BK laws were changed several times to defraud the poor and middle class, law written by Sallie Mae and others who loan and service student loans.

Many of the laws surrounding student loans are unconstitutional, such as no statute of limitations and garnishing property without court orders........I am not even going to comment further b/c this is a major fraud,a fraud I was personally with involved in a lawsuit that went all the way to the SCOTUS and involved the DoJ.

Response to Bauder's 10:58 p.m., Jun 2, 2011:

If it wasn't for this "Reply" system (through which one can't preview and revise one's text, it just goes out with any misteaks) Don could have just referred to No. 1, but he now, with this "improved" system of indented replies, which causes re-numbering when a "Reply" is inserted, he can't. Therefore, he has to type in:

"Response to SurfPuppy's 7:55 p.m. comment:"

That adds up to a lot of work for Don (not to mention the rest of us). I continue to doubt the superiority of the "new" Reader format, and hereby continue to object to it in its present form.

Please pass on to the worthy gentlemen and ladies who run the show. And, again, please ask them to fix the problem of the text shifting one character to the left with each new line. I cannot fathom why they can't see the obvious and unnecessary inconvenience this improvement causes.

Respectfully submitted, Twister

PS: It appears, however, that the "inability to edit" problem has been corrected, so "never mind" on that one. I look forward to the other improvements (which might be fixed by adhering to the Chicago Style Manual and outlining tradition by using alternating alpha and numeric characters for subheadings).

The Reader has a top technical team and I am counting on its ability to deal with the problem. Best, Don Bauder

I take my PS back; I can't edit this neither.

I trust in the Team, though, and wish them well.

I note the Nos. have disappeared . . .

As to the subject at hand, the left hand never has any idea what the right hand is doing even when it's clear that it's muddying it. Bozos or sissies, them's yer choices!

You forgot third and fourth choices: liars and thieves. Best, Don Bauder

Don, I know this is impossible to believe, but Senator Feinstein's husband, former chairman of UC Regents Richard Blum (also best bud of former prisoner Michael Milken) and the Board of Regents have been skyrocketing the tuition and fees at UC to drive students into his diploma mills:

"The University of California invests $53 million in two diploma mills controlled by UC Regents chairman Richard C. Blum"

http://www.metroactive.com/features/diploma-mills.html

Interesting that even democratic politicians are trying to destroy public education for everyone but wealthy kids who are sponsored by corrupt special interests.

However, a much sadder fact of life is that America's academics, who were supposed to lead us up the path of evolution, have failed to evolve themselves so it is no wonder that our political chimpanzees are screeching and biting each others butts in the congressional zoo.

Blum is a piece of work, but his antics don't seem to reflect on Feinstein. Best, Don Bauder

Response to AnthonyStJohn 12:30 p.m.: That chain of events is frightening. Best, Don Bauder

Response to SurfPuppy's 12:21 p.m. post: Did the rapid growth of the for-profit universities have anything to do with these legislative changes? Best, Don Bauder

Did the rapid growth of the for-profit universities have anything to do with these legislative changes?

Yes they did. Once the for profit, and many so called non profit, schools were able to get qualified for the student loan money the lenders went gang busters lending out money that could not be dishcraged in BK, and since the lenders had NO RISK, the gov paid back the lenders for all defaults, it became onne of the biggest financial scams in America.

The fact is this scam has been documented for at least the last decade now, and the Big $$$$ just keeps buying off the Congress. These BK laws are not int he system to stop poor people from ripping off the system, it is for the connected few to rip off the poor.

Read Pottow's law review article-he lays it out crystal clear.

Or read Rafael Pardo's law review articles;

. http://www.law.washington.edu/directory/profile.aspx?ID=502 .

. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1121226 .

. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=706761 .

"The information gathered in this study illustrates that debtors who have sought relief from educational debt have done so under conditions evincing financial distress. This portrait starkly contrasts with the image of an opportunistic debtor seeking to avoid repayment of student loans on the eve of a lucrative career, a stereotype stylized by courts on the basis of what they have deemed to have been Congress's intent when it made educational debt conditionally dischargeable"

That says IT ALL RIGHT THERE!

Or read Alan Collinge's books "The Student Loan Scam";

. http://www.amazon.com/Student-Loan-Scam-Oppressive-History/dp/0807042315/ref=sr_1_1?ie=UTF8&s=books&qid=1307427245&sr=1-1 .

The student loan scam is the biggest threat to poor people from the education industrial complex today.

Re: The System

Dear Team:

Maybe I just don't know how to use it (see useit.com) properly, but when someone adds a "Reply" to a post that occurred earlier, I often don't catch it. Finding such responses can be a real chore when the number of posts pile up.

Yes, I admit I am perplexed when I post a response to another post, and it winds up in some incongruous place. Best, Don Bauder

Response to SurfPuppy's 11:16 p.m. post: It seems repugnant that out-and-out boiler rooms are flourishing in higher education, blatantly stealing funds from the federal government, but politicians who boast about their plans to reduce the deficit give them complete support. It's a matter of ideology and lobbying bucks. Best, Don Bauder

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