The New York Times Joe Nocera (yes, Nocera of the famed Tea Party/jihadist comparison, which he did at least apologize for) has an interesting defense of the for-profit education industry in New York Times Magazine. He writes:
Instead, the industry's transgressions have led many critics to conclude that the only way to "fix" for-profit education is to get rid of it entirely….
All of this obscures what really ought to be the most important fact about the industry: the country can't afford to put it out of business. On the contrary, America needs it – and needs it to succeed – desperately.
He notes that for-profit education fills important holes in our existing higher education infrastructure by offering skill-based training for lower-income students and providing course schedules that work for aspiring student with full-time jobs.
For those worried that for-profit colleges are abusing the federal loan system, he offers a couple of suggestions for reforms:
Robert Silberman, the chairman and chief executive of Strayer Education, widely regarded as one of the better for-profit companies, suggests replacing the plethora of regulations with two simple changes. First, he says, the government should force the for-profits to share in the losses when a student defaults. And second, the government should set up a national eligibility test to screen out students who lack the skills to attend college. Would there still be defaults? Of course. But plenty of students at nonprofit universities default, too. Silberman's solution would help ensure that both the government and for-profit companies are taking smarter risks on the students they enroll and educate.
I object to the idea of the government setting up a "national eligibility test" – why should a group of bureaucrats decide if you have the right to pay to get yourself an education? On a utilitarian level, it seems unlikely they'd be able to come up with tests that fairly assess if someone has the skills for the wide variety of careers that for-profit education institutions trains students for. After all, you don't need to be a genius or do well on standard "tests" to gain skills that will make you an asset in a given profession.
But beyond whether the government could come up with effective tests, they shouldn't try. It's simply not an appropriate role of government to attempt to limit individuals opportunities in that way.
The problem that this testing scheme is supposed to address would already be mitigated by Silberman's first solution: having the education institutions (as well as the students) bear the costs of losses due to default.
I'd take it a step farther. I don't think it makes sense for taxpayers to be involved in providing education loans at all. Yes, people talk about positive externalities to education, but let's face it, most of the benefits of getting a degree are enjoyed by those who get the degree. There's no reason why, absent taxpayer involvement, education companies and even low-income students couldn't find a way to make the math work.
After I recently wrote my own defense of for-profit education, I got numerous comments from people who feel they've been wronged by a for-profit education provider. And I very much appreciate their frustration. Certainly, education institutions (regardless of whether it's for-profit or not) have the potential to commit fraud and should be held accountable for it.
Yet the good news is that in a market, those bad businesses will go out of business. Students who feel that they didn't get their money's worth will tell their friends, complain on websites, and will deter others from using that education provider. If there are enough of those disgruntled students, that education business will pay a price. There will always be bad businesses and services, but the market (when free of government interference) can take care of that.
And when a for-profit education company does go out of business, that shouldn't be taken as evidence that there's something inherently wrong with the concept. That's the market doing it's very important job.
Let's face it, many of today's taxpayer-financed public schools should really be shut down for failing to provide a basic level of service. Too bad they won't shut down, because politicians will continue to bail them out and force kids to enroll no matter how bad they are. That's the true scandal.