“Good for Wall Street – Bad for Students”

A cursory investigation of the for-profit higher education industry reveals striking parallels between the economics of the for-profit colleges and universities and the Wall Street financial meltdown of 2008. The matter cries out for immediate attention for the breadth and speed of the extraction of public funds and their transfer into private hands is proceeding faster than could have been imagined five years ago.

That is why it was heartening to see one of America's largest unions, the Service Employees International Union (SEIU), sponsor an event entitled, "Good for Wall Street – Bad for Students," a panel discussion and national webcast on the dangers of for-profit colleges – especially the 105 schools owned and operated by Pittsburgh-based Education Management Corporation (EDMC).

The event was organized by SEIU and I was fortunate enough to be invited to attend by organizer, Kevin O'Donnell from SEIU Communications. The webinar took place February 2, 2012 on-line between 12 noon and 2 PM (EST), and the group of panelists assembled for the webinar included a vast array of knowledgeable participants. The panelists were seated at the Fairmount Hotel, in downtown Pittsburgh.

According to O'Donnell:

"This was the first webinar on for-profit colleges sponsored by a worker's union. But in a broader sense, the webinar was part of the labor movement's traditional function of advocating for justice for all working families, not just members. SEIU is increasingly recuperating this tradition which is best exemplified historically by unions pushing for the eight hour workday, social security and the minimum wage. It often gets overlooked but unions have historically had an impact far beyond their membership. Consumer education for both members and the public is the top priority. But we have also been talking with Senator Harkin and some policy groups about how we can work together to prevent abuses in this sector." [Private email.]

Present at the webinar were Kevin Kinser, associate professor in the Department of Educational Administration and Policy Studies, SUNY-Albany; Barmak Nassirian, associate executive director, American Association of Collegiate Registrars and Admissions (Nassirian was interviewed extensively in the "Frontline" documentary produced by PBS); officer José Cruz, vice president for Higher Education Policy and Practice and The Education Trust; Osamudia R. James, associate professor of law, University of Miami School of Law; Kathleen Bittel, former EDMC recruiter and career services employee; Jeremy Dehn, former EDMC instructor; Suzanne Lawrence, former EDMC recruiter; and Mike DiGiacomo, a former student at EDMC's New England Institute of Art. Although the forum was a webinar online, not unlike a seminar on the ground, the participants could have been testifying for a grand jury, law enforcement or before a Congressional inquiry; this was how informative, distressing and outright shocking the testimony of the participants actually was.

Defining Terms and Setting the Groundwork
The webinar began with moderator Kinser opening up the session with a clear definition of what exactly the difference was among public higher education institutions, non-profit higher education institutions and for-profit higher education institutions. This definition of terms was exceedingly important and provided an excellent opportunity to begin the discussion of the various themes that comprise any critical understanding of the for-profit higher education sector.

For-profit colleges and universities are part and parcel of the booming and increasingly accelerating private ownership of the educational means of production in the United States and abroad. As panelist Nassirian was quick to point out, the for-profit colleges and universities have managed to wrangle 12 percent of all college students in the United States. Cruz pointed out that this number includes one out of every four students of color in all colleges and universities, arguably making institutional racism a part of the for-profit industry's well-targeted business plan. Shockingly, Nassirian noted that these colleges and universities also receive 25 percent of all federal aid for colleges and universities, and they are responsible for a the lions share of student loan defaults – a whopping 50 percent of all college and university defaults.

Some History of the For-Profits
The panelists commenced with a bit of history for the audience, which was necessary in order to provide a critical understanding of the complex issue of for-profit colleges and their meteoric rise. Nassirian gave an overview of the GI Bill coming on the heels of World War II and how this was really the first time the federal government provided American citizens an opportunity to attend and participate in a higher education. Known and passed into law as The Servicemen's Readjustment Act of 1944, the new law provided college (or high school or vocational education) for returning World War II veterans as well as one year of unemployment compensation). The bill was passed to avoid the problems that had occurred with the "Bonus March" that had occurred in 1932 and to also provide a stimulus for the depression economy.

The GI Bill was stupendously successful providing 7.8 million World War II veterans benefits under the GI Bill and 2.2 million of them participated in higher education and/or training programs. During the 1950s, the number of college students doubled. Getting a college education was no longer the providence of the elite and the rich.

As the experiment wound its way through the 1950s with a great deal of fanfare and success, access was expanded through the Civil Rights Act of 1965, most notably The Higher Education Act of 1965 (the HEA). The HEA was specific legislation attached to the Civil Rights Act that was codified into United States law on November 8, 1965, as part of President Lyndon Johnson's Great Society domestic agenda. (For more on this law and Johnson, see here, here and here.)

Although not the subject of the webinar, it is important for a thorough understanding of the current material economic and political conditions underlying the growth of for-profit colleges and universities to point out that the GI Bill was superseded by the Veterans Adjustment Act of 1952. This new bill offered benefits to veterans of the Korean War that served for more than 90 days and had received an "other than dishonorable discharge"; but it did something more: unlike the predecessor GI Bill, the substantial difference between the 1944 GI Bill and the 1952 Act was that it altered the distribution of federal funds for tuition use at higher education institutions.

Under the original GI Bill federal monies had been sent directly to the institutions of higher education. Now, with the new Veterans Adjustment Act of 1952, federal monies would no longer be paid directly to the various institutions of higher education, but instead, veterans would directly receive a fixed monthly stipend. They would then use this to pay for their individual tuition, fees, books and living expenses. The decision to end direct tuition payments or to stop the direct distribution of federal funds to the myriad institutions of higher education came after a 1950 House select committee hearing that uncovered incidents of fraud by many educational institutions through overcharging of tuition rates. Some 258 unnamed educational institutions were mentioned in Appendix D of a 1950 Veterans Administration report to the Senate Committee on Labor and Public Welfare in what would be the first such incident of for-profit higher institutional fraud to plague the government, which would then set the stage for the present subsidized profit-extraction schemes by Wall Street. More investigations of the for-profit educational enterprise would occur in 1973, in the 1990s and now, once again, under the Obama administration and senate subcommittees.

Nassirian went on to note that in the late 1980s, after close to a decade of Reaganomics or neoliberalism, massive deregulation of governmental policies were put into motion that were to affect favorable consolidation and growth in the for-profit educational industry. This led to the development of what we now see as large "higher educational or vocational chains" owned outright through corporate ownership. Wall Street was now becoming a huge player in the burgeoning industry. For-profit diploma mills issuing four-year degrees rose steadily as a result.

It was not until the "selection" of George W. Bush that for-profit, corporate, educational stocks really took off to the pleasure of Wall Street. Under the tutelage of Ron Paige, education secretary under Bush, regulations governing the for-profit educational industry were further eliminated in the interest of profit-taking purposes on behalf of corporate shareholders, CEO's and Wall Street. Predatory recruitment practices by the for-profits that had been singled out for tight regulation earlier were now allowed to proceed with reckless abandonment. During this time, three million new students enrolled in higher education institutions and 10 percent of all of them were enrolled by the for-profit colleges and universities. The market was beginning to take shape and the profits had never flowed so quickly and so easily. Wall Street, sensing that it was profitable to financialize through privatization the educational sector in America, looked to the for-profit colleges and universities as a location to invest surplus capital to avoid stagnation and achieve capital maximization. What is now a $30-billion-dollar business began to take form and fully blossomed with results that would prove to be devastating for students and taxpayers.

Recruitment at the For-Profit Colleges
As the webinar moved from a brief history to the actual inner workings of the private ownership of the means of higher education production, various themes began to emerge. The first was the issue of recruitment.

Kathleen Bittel, former EDMC recruiter and career services employee, spoke first. As a former recruiter for the largest of the for-profits, her testimony at the webinar was compelling. Bittel spoke of the various "sales pitches" that she was taught to employ. Getting "asses in the classes," Bittel stated, was the primary goal of the for-profit college or university recruiter. Techniques and tactics deployed resembled the high-pressure sales tactics utilized by the matchstick men who sold subprime mortgages to unwitting Americans, especially to people of color, the same targeted audience for the subprime colleges and universities.

One favorite tactic used by EDMC recruiters, and actually taught and sanctioned by the corporation, was what Bittel called "overcoming death." The way this ruthless and cunning recruitment tactic was used was the following: Bittel said that when a student would mention to a recruiter that he or she had just had a death in the family, say a grandmother, the recruiter was to respond, "Wouldn't grandma want you to go to school? Wouldn't she be looking down right now and saying, 'get an education'?"

Nassirian was quick to point out that when a person goes to a used car lot they expect to have a "commercial encounter." In essence, you expect that the used car salesperson will be ruthless, cunning and otherwise attempt to get you to part with your money. But, he went on to mention, when a student approaches an educational sales pitch they have a reasonable expectation that there will be a modicum of trust – that the relationship between the colleges and universities would be a "use value relationship" – after all this is not about the purchase of a used car, but about access to education. Yet, as Nassirian noted, for-profit colleges and universities have turned educational encounters into little more than "exchange value relationships" where recruiting students into the program is the only salient issue. For "asses in the classes," much like with the subprime mortgage and Bush's "ownership society," translate into heady profits for Wall Street and the small circle of major stockholders and CEO's who profit from the exchange relationship.

James called participant's attention to the TV advertisements that these for-profit colleges and universities use in an attempt to recruit people of color. She noted that the ads employed by the for-profit corporations were purposefully racialized; they mimicked working class and minority dress and speech. And they relied on material conditions of the new Jim Crow to herd students into the institutions. By doing so, she argued, the companies use race and class to target the subprime population they so notoriously say they serve, providing a compelling and direct corollary to the subprime mortgage fiasco that stripped minority citizens of their assets, life savings and homes and is still hurdling them into foreclosure.

Academic Instruction at the For-Profits
Once the issue of military-style recruitment was fleshed out, the panel pivoted to the actual "educational products" the for-profit corporations sold.

Dehn, a former instructor at EDMC, began by addressing the instructional component. First of all, he was quick to highlight that none of the faculty at the schools were tenured. This is, of course, due to the fact they have no collective bargaining, no union to represent them. A full-time professor or teacher, Dehn testified, teaches 20 classes, many with class sizes of 45 students or more. Working conditions are arduous and stressful.

Teachers teach for a "term" (there are no semesters, the for-profits changed the language to reflect their corporate business plan), which is 11 weeks and the instructor receives $2,000 for the term. This compared to just five classes a teacher would teach in a state college. Kinser commented that many of the "adjuncts" utilized by the for-profits never had classes in how to teach or work with students and were to supposed to have a "real world" quality, meaning that many were simply technicians in their fields. Many of the adjunct laborers employed at the for-profits were professionals simply "moonlighting" with no commitment to either the institution or to helping the students enrolled in them. It is important to note that because these schools are directly subsidized by receiving 90 percent of their revenue from federal funds and loans, teachers' salaries were consequently subsidized, in part, by student loan debt.

As to student-teacher interaction, Dehn indicated that he could not possibly have given full attention to students or read the body of student work due to time considerations. Teachers, he noted, were mere "message board monitors" or low-paid "moderators," not real teachers. He said that as a teacher he was forced to prioritize what was most important in the interest of the corporation and that reading student work or giving feedback on each and every paper was simply not a priority nor was it possible. The result is that students hardly had the benefit of an education – giving credence to the claim that the entire relationship represented a commodified "exchange value', hardly a human "use value'. Again, not unlike the subprime mortgage fraud where consumers were sold overvalued and overpriced homes, students at for-profit colleges and universities are being sold a toxic educational product with little value other than the "title," which in this case would be the diploma, if one were ever able to pay for it.

Dehn also spoke to the "corporate culture," which forms the ideological basis for the schools. The corporate emphasis was strictly on "attendance'. This made sense from a profit perspective: for while the recruiter might have to get the "asses in the classes," the "instructor could be said to have to keep "the meat in the seat." For if students dropped out too soon, the federal funds dried up and this meant less profits for Wall Street.

For-profit college and university teachers were much like jailers: they did the bed count for the warden, in this case, the for-profit CEO's.

Dehn went on to describe the curriculum as a "canned curriculum" where there is no meaningful teacher input. Standardizing curriculum is important, for keeping costs down is another grave concern of the corporations. Kinser called attention to the fact that there was no opportunity for academic development at these for-profit schools. Dehn concurred, noting that when he went to teacher in-services they had little to do with instruction and concentrated chiefly on avoiding copyright law, how to avoid lawsuits and, of course, how to keep students tethered to their seats for enrollment data purposes.

Finally, Dehn spoke of classes filled with a broad range of students, from those who were clueless, meaning they didn't even know why they were enrolled, to students who were semi-literate and could not possibly navigate through the "classes." The whole sordid affair took on the appearance of containment and resonated like a den of iniquity – a neo-Darwinian model of human suppression and control.

Tuition at the For-Profits
When it came to discussion about the high cost of tuition for the for-profit colleges and universities, officer Cruz was quick to weigh in, noting that non-profit colleges and universities in the United States spent 35 times more monies on instruction than did for-profit schools, even though the cost of tuition is notoriously high. At for-profits, costs for a four-year degree can range from about $35,000 to upward of $80,000. Nassirian correctly pointed out that the for-profits really receive a "federal voucher" in the form of direct subsidies to students that they then vacuum up through tactics like robo-signing. Think Wall Street subprime housing mortgage once again, but instead of selling the American dream of home ownership, the for-profits are using a typical American scheme to defraud taxpayers and students. According to Nassirian, "Capitalism fails the market test."

Markets are messy, which is why the for-profits hate them; direct guaranteed subsidies made up of taxpayer funds and transferred electronically faster than the speed of light from the government to Wall Street are quick, easy and immediately translatable into profits, which is what Wall Street covets.

As to the graduation rates, panelists spoke of how the graduation rates were actually manipulated at the institutions in a variety of ways by many teachers who were baptized in corporate culture and trained to understand and identify with corporate needs. One way the institutions control graduation rates and attendance at the for-profits is to remove any reasonable "cooling-off period" and allot only a two-week time frame for "dropping" a class. This two-week window begins from the first class to and including the second class. Mike DiGiacomo, former student at EDMC's New England Institute of Art, who himself now owes $80,000 in student loans, testified that he took one class and wished to drop it directly thereafter only to find he had missed the "window of opportunity" to do so. He was charged in full for the class and continued to be listed as enrolled. These tactics are designed to assure the student is listed as registered for the class and avoids "dropout" status, which blemishes the ability of the for-profit to get their hands on federal dollars.

While non-profit colleges and universities, along with public institutions, see graduation rates of 60 percent or more, the for-profit sector graduates as little as 20 percent of their recruits. For Nassirian, heavy-handed sales pitches that reel students in like fish on a hook coupled with the realization on behalf of many students that they have been duped, is responsible for dropout rates as high as 80 percent as many students inevitably squirm to get out from under the massive debt and perfidious subterfuge that has locked them down in these rapacious institutions.

The resemblance to homeowners that cannot make payment on the subprime mortgages that the banks and nefarious mortgage houses sold to them cannot go unnoticed. While minority and working students mark up alarming dropout rates at the for-profits and are left saddled with debt, minority and working-class homeowners experience accelerated incidences of forfeitures and home losses for mortgages that they could not afford on homes that have lost huge chunks of value.

Career Prospects and Job Placement at the For-Profits
When the discussion centered on student job placement, Bittel's testimony was invaluable. She spoke about how the for-profit colleges and universities manipulate data on job placements. Fictitious placement rates are the norm, she stated. In reality, Bittel testified, no one really knew how many students ever were lucky enough to get employment in his or her field of "study." What she did say was that EDMC, specifically, told students they would be placed in jobs in their fields and would count a graduate in "video game design" to be "placed" if they got a job at Toys "R" Us as a clerk or an inventory worker. Dehn was reminded of a student with a film and video degree from a for-profit who was counted as being placed when they got an ushers job at a movie theater. This student, noted Jeremy, now owes $90,000 in student loans.

Osamudia James made a very telling point when she argued that for-profits teach "know-how" skills not "know-why" skills. This is an important distinction for it goes, once again, to the core of the for-profit claims that they provide an education. In fact, they don't, but instead, provide a little more than an inferior commodity and a crippling dependence on the thinking of others and, thus, not only dummy down their curriculum to exclude critical thinking and citizenship education, but in doing so and by targeting working-class people of color, they steal educational opportunities that would allow people of color to understand their legacy of oppression, which is necessary to embark on a path of liberation. This is all part of the new Jim Crow. For James, a "know-why" education would require critical thinking about personal, social and economic life. This is hardly what for-profit colleges or the corporations that own them desire. In the for-profit model of education, people of color and working class origin are expected to go to school to learn how to make a living at a low-wage; they are not educated to learn how to live. James argued that the for-profit educational scheme, even if we accept its bogus claims that it readies people for employment, is clothed in racial and class discrimination and is designed to, as she stated, "spend less, teach less and expect less," all with deleterious effects on our citizenry.

Click through for full article text.


Leave a Reply

1 Comment on "“Good for Wall Street – Bad for Students”"

Notify of
Sort by:   newest | oldest | most voted

A conflict of interest is defined in wikipedia occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other. Seems like a fit here, doesn’t it?