The Next Move

By the Obama administration against the private sector. In an NRO article and a lengthy post at the Corner, Stephen Spruiell explains the Obama administration's attacks on for-profit colleges.

[F]or-profit schools are the latest front in the Obama administration’s campaign to control as much of the higher-ed industry as possible. As with other industries, regulating the risk out of the for-profit sector also means shrinking the available choices: New rules under discussion at the Department of Education would link a for-profit school’s eligibility for federal funds to its graduates’ debt loads as a percentage of the average starting salaries in their chosen fields, an arbitrary measure that the schools say would restrict their course offerings to just a few programs. Other measures being considered would link eligibility to a 70 percent program-completion rate and a 70 percent in-field-placement rate after graduation — standards the administration would never dream of requiring of traditional universities. (Imagine the Department of Education telling Big State U that 70 percent of its “peace studies” grads must be placed “in field” or it will lose federal funding for the program.)

The lesson, as always, is that government subsidies are never no-strings-attached affairs. Once an activity is fully subsidized, it is one Bob Shireman away from being fully controlled.

And at The Corner,

Let me just clarify something that might not come through in my piece: I have a problem with the way these schools are built to profit from government higher-ed subsidies. But I also have a problem with the way in which the Department of Education is cracking down on them. As usual, the government is attacking a problem it created with the worst possible solution. In the process, it is threatening to kill the value that the for-profit sector has actually brought to the table.

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[W]e reached the point years ago at which the traditional colleges and universities could no longer accomodate the demand — that's where for-profit schools stepped into the picture. And, because we have increased higher-ed subsidies so dramatically, both traditional and for-profit schools have increased tuition to capture their share of the rents. Tuition inflation routinely outpaces other measures of inflation. Tuitions at for-profit schools are particularly high.

Rather than curb the subsidies — a move that by itself would reduce the cost of postsecondary education — Obama's DOE would prefer to use a price control, and boy, have they come up with a doozy...With few exceptions, it would apply only to the for-profit schools, and the most likely outcome would not be the across-the-board tuition reductions the administration wants, but the elimination of programs that are popular with students and meet market needs.

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Will a wave of student defaults be the next shoe to drop in the ongoing financial crisis? I think the odds are better than even. But if it happens, let's not pretend the for-profits made this mess. This is another government-created disaster-in-the-making, resulting from policies that started out with good intentions and ended on a road to hell.