Obama Backs the Worst Colleges While Destroying For-Profit Schools

The federal government happily subsidizes inferior state colleges that graduate few if any of their students. That includes Chicago State University, which has a 12.8 percent six-year graduation rate.

The Obama administration has rewritten federal student loan rules in a way that encourages colleges to raise tuition and effectively subsidizes the worst colleges the most. The Federal Reserve Bank of New York found that each additional dollar in government financial aid results in a tuition hike of about 65 cents.

The federal government also subsidizes expensive, low-quality third-tier law schools whose graduates are often unemployed. It does so even though many of their graduates will never pay back their student loans because of their low graduating salaries, and the huge amount of money law students are allowed to borrow from the government.

While the government is indulgent towards wasteful state colleges, it has a very different, hostile attitude towards for-profit colleges. It will sometimes financially destroy them even without any proof of wrongdoing. The Washington Post editorial board gives the latest example of the Obama administration doing this, its destruction of ITT Technical Institutes:

Never mind that the higher education plans of tens of thousands of students will be disrupted. Or that 8,000 people will lose their jobs. Or that American taxpayers could be on the hook for hundreds of millions of dollars in forgiven student loans. What is apparently of most importance to the Obama administration is its ideological opposition to for-profit colleges and universities. That’s a harsh conclusion, but it is otherwise hard to explain why the Education Department has unabashedly used administrative muscle to destroy another company in the beleaguered industry.

ITT Technical Institutes, one of the nation’s largest for-profit educational chains, on Tuesday abruptly announced that after 50 years in business it was shutting down more than 100 campuses in 38 states. The announcement, displacing an estimated 40,000 students, follows last month’s decision by the Education Department barring the school from enrolling new students using federal student aid and upping its surety requirements. The department said it was acting to protect students and taxpayers, noting the school had been threatened with a loss of accreditation and that it was facing a number of ongoing investigations by both state and federal authorities.

What is so troubling about the department’s aggressive move — which experts presciently called a death sentence — is that not a single allegation of wrongdoing has been proven against the school. Maybe the government is right about ITT’s weaknesses, but its unilateral action without any semblance of due process is simply wrong. “Inappropriate and unconstitutional,” said ITT officials.

Such unfairness sadly is a hallmark of the Obama administration policy toward higher education’s for-profit sector. It has singled out the industry for stringent employment and student loan rules and stepped up enforcement with stiff sanctions that, as The Post’s Danielle Douglas-Gabriel reported, have some companies on the brink of ruin.

As the Cato Institute’s Neal McCluskey notes, ITT Tech produced better graduating salaries for its students than nearby public alternatives. But no one is suggesting that those lousy public colleges be shut down.

Hans Bader

Hans Bader

Hans Bader is a senior attorney at the Competitive Enterprise Institute.

3 thoughts on “Obama Backs the Worst Colleges While Destroying For-Profit Schools

  1. I take it that the measures were instituted for the public reason that the administration was protecting the interests of the current and prospective student body of ITT. Identifying which competing public institutions are worse than ITT but were not treated the same would be interesting. Why were those students not worth protecting?

  2. Apply the same standards to everyone. Many for profits and colleges in general are less than focused on student outcomes, and some of these actions are going to drive better behaviors.

    That said, the easiest way to improve student outcomes is be more selective in admissions. Not a lot of any schools (public or private, non profit or for profit) have figured out how to effectively serve the lowest quartile of academic ability students. The tough question is whether those students should be denied things like student loans they won’t repay because they’re a bad investment as a group. Similar to discussions on end of life care for elderly. There’s no right answer here, but it’s important to recognize the root cause issue.

  3. “Maybe the government is right about ITT’s weaknesses, but its unilateral action without any semblance of due process is simply wrong.”

    This isn’t the first time that Obama’s Department of Education has disregarded due process. Their “Dear Colleague” letter from April 2011 diminished due process for students accused of sexual assault:
    – changing standard of evidence from “clear & convincing” to “preponderance”
    – prohibiting cross-examination
    – enabling double-jeopardy by granting appeal rights to the accuser

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