why stop at cutting financial aid for for-profit colleges? why not cut financial aid to non-profits?

The NY Times has a forum on a new regulation that would reduce financial aid to for-profit entities that have low student loan repayment rates:

Under a rule announced June 1, the Department of Education will cut off federal financial aid for any for-profit program if its graduates have a lot of student loan debt and low repayment rates. This effort to require the programs to yield “gainful employment” has angered private colleges as well as some education advocates who say minority students will be disproportionately harmed if the programs lose their eligibility for federal aid.

There’s a lot of higher education that won’t get you a job – arts, philosophy, and do so forth. Unless an institution is engaged in fraud, there’s little reason to pick specifically on for-profit institutions. We should really be asking tough questions about higher education finances in general. Maybe we should have rules barring financial aid for degrees that have horrible job prospects (see here). My goal isn’t to discourage able and committed people from college. Instead, I would like to see some sort of cost-benefit analysis added to the way that we charge people for education.

Bonus round by sociologist Gaye Tuchman.

Written by fabiorojas

June 9, 2011 at 12:22 am

Posted in economics, education, fabio

13 Responses

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  1. […] Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.Powered by Greet BoxI profoundly disagree with this: […]


  2. I have to respectfully take issue with the claim that “a lot of higher education won’t get you a job–arts…”. The recent SNAAP survey results show (from a 2010 pilot, and full disclosure: I’m one of the survey designers and lead analysts) that a full 92% of arts program/school graduates who want to work are currently working. And an extremely high % of these graduates are satisfied with their education, their preparation for the workforce, and their specific institution. (See an Inside Higher Ed report of some results, with bonus interview with Steven Tepper here: From the thousands of open-ended survey answers I’ve looked at (over our three pilots), I can tell you these graduates would passionately disagree that the value of their education lies in their salary upon graduation, or even their debt load. They say again and again that they are happy and self-actualized, and the money they make simply isn’t as important. That said, I personally think the student loan situation is out of fucking control (and I will be paying mine off until I’m 52 years old), and we need to rethink how Americans pay for college.


    Jenn Lena

    June 9, 2011 at 2:53 pm

  3. I see you’re stirring the pot again Fabio.

    I think there’s a big difference between the predatory practices of many of these for-profit schools, which seem to exist only to get federal financial aid, and nonprofit institutions that typically offer a variety of financial aid packages and whose primary purpose is still education. Before you start regulating financial aid, I think you really have to consider the differences between how for-profits and nonprofits are typically recruiting students to get financial aid. In the case of many for-profits, the practices of financial aid offices seem specifically designed to maximize the amount of federal aid a student can get, even if it means prolonging a student’s time spent in the institution. I don’t think you’ll see the same sort of predatory practices in most nonprofits.

    Tying financial aid to job prospects seems like a horrible idea because it assumes a linear pathway from degree to job. That may be true for some degrees – e.g., many vocational degrees – but others are more often used as spring boards to graduate programs. Also, it puts way too much value on job attainment and deemphasizes the knowledge value of education. If we decide to make job/economic attainment the main metric for measuring an education’s value, then eventually we’ll come to the conclusion that our knowledge production is only valuable inasmuch as it leads to job attainment outcomes, which is a road I don’t think we academics would like to take.


    brayden king

    June 9, 2011 at 4:21 pm

  4. Because default rates at for-profits are now approaching 1/3 of loans, while default rates at (more expensive) not-for-profits remain under 10% on average? I guess I could see applying the gainful employment rules to any school that exceeded a certain default rate threshold for a certain number of years, but almost all of those are going to be for-profits. The thing is the people with the useless degrees from not-for-profits are from wealthy enough backgrounds that they don’t end up with the loan debt problem, and thus–to a great extent–it’s not so much the federal government’s business.



    June 9, 2011 at 4:59 pm

  5. “Useless degrees”, Mikaila? C’mon.


    Jenn Lena

    June 9, 2011 at 5:13 pm

  6. There’s a lot of higher education that won’t get you a job – arts, philosophy, and do so forth. … Maybe we should have rules barring financial aid for degrees that have horrible job prospects

    There’s a parallel discussion over at Crooked Timber at the moment. One of the points made there (by John Quiggin and Chris Bertram and others) is that people in the sciences and social sciences are mistaken if they think that they’re immune from the logic of skills-based education or market-ready graduates or whatnot. What’s tended to happen instead is that disciplinary degrees in general lose out in this sort of situation as students choose more or less vocational degrees in Sports Management, Heritage Tourism, Marketing, or what have you. In Our Underachieving Colleges Derek Bok notes that “Given a choice, students have deserted the traditional disciplines in droves. Today 60 percent of all college seniors are majoring in a vocational program. Whereas substantial majorities once chose a liberal arts concentration, only about one-third do so now.” Fabio and his fellow-travelers might want to take care that they are not feeding the Relevant Skills Crocodile legs-first, in the hope that they will be eaten last.

    And as Jenn remarks, all of this is said without prejudice to other, substantive arguments about what a university education should be for, or critiques of how paying for it is presently organized.



    June 9, 2011 at 5:43 pm

  7. Let’s bracket the issue of “useless degrees” as defined by institution and/or major and recognize that the bulk of the problem is dropping out short of getting a degree. Regardless of how much pecuniary or non-pecuniary value there is in having a University of Phoenix BA in basket-weaving, surely we can agree that it is not a good idea to have dropped out of the University of Phoenix after having stayed long enough to accrue debt but not long enough to get the BA.
    As far as I recall the vast majority of students at for-profits drop-out. Drop-out rates are disturbingly high at pretty much all institutions once you get beyond elite (non-profit) private schools, but the for-profits are dramatically worse than state schools or the non-profits. Last time I checked, selective privates have a drop-out rate of 5 or 10%, moderately selective big state schools (like UCLA) have about a 30% dropout rate, and nonselective state schools are in the range of 50%. However even the branch campuses of state schools aren’t as bad as for-profits.



    June 9, 2011 at 6:29 pm

  8. There’s a nice little piece today in The New Republic blog about the long-term differences in job market outcomes between the highly educated and less educated. It’s relevant in that it makes the case that education seems to be getting a bad rap lately because the return-to-investment on measurable outcomes seems to be declining, but those measures may not be the best ways to capture the economic benefits that come from getting a college degree. The biggest difference between the college educated and the less educated is that the former have a much higher ceiling for ultimate attainment:

    Low-education jobs have much higher turnover rates than high-education jobs, and people tend to progress from the former to the latter. There are a lot more law firm partners out there who used to be bartenders than bartenders who used to be law firm partners.

    That said, I agree with Kieran and Jenn that we don’t want to reduce college education to vocational training. I continue to think that it’s a good idea to get a liberal arts education, regardless of your eventual career ambitions.


    brayden king

    June 9, 2011 at 6:37 pm

  9. >The biggest difference between the college educated and the
    >less educated is that the former have a much higher ceiling
    >for ultimate attainment:

    This isn’t especially comforting if you’re thinking about it in terms of:

    a) the margin rather than the average
    b) you think about it in terms of expected value for the matriculant rather than the graduate

    The two are related in lots of ways, most notably that the marginal college student is very likely to drop out (especially at a for-profit, but even at a nonselective state school). This absolutely kills the expected value since for most outcomes “some college” is closer to “HS grad” than to “BA or higher” except that “some college” implies a fair chunk of debt early in the life course.



    June 9, 2011 at 7:17 pm

  10. Coughs.
    “In 2009, UCLA became the most selective public university in the United States when it admitted a record low 21.7% of applicants, edging out the University of California, Berkeley and the University of Virginia. “


    David Hoopes

    June 9, 2011 at 9:25 pm

  11. My spouse’s nephew ran up a $60,000 debt with a for-profit pilot school. The nephew can NEVER get a job as a pilot because he is a high school drop out and airlines only hire people with college degrees to be pilots. But the school took the federal loan money anyway. My spouse’s brother co-signed the loan. Then the nephew and my brother-in-law’s wife both lost their jobs and now the whole family is at risk of going down from this loan.

    I looked at the web sites for several pilot schools. They seem like predatory come-ons to me.



    June 9, 2011 at 9:32 pm

  12. OW: Yikes, that sounds horrible. I’m really sorry for your nephew and his family. This is the major problem with for-profits, I think. Not all of them, but many of them have very deceptive practices in convincing students to take on ever-increasing amounts of student loan debt. I’d rather focus on curbing those practices than begin regulating federal aid based on type of degree.


    brayden king

    June 9, 2011 at 9:49 pm

  13. When it comes to financial aid for college there are primarily two sources: privately funded financial aid and federally funded financial aid. When applying for or receiving either you need to make sure that you are fully aware of all the fine print involved. Most people find that the expenses of college are much too great to afford without assistance of some sort. If you are a parent chances are that you will some day face the need to pay college tuition along with the worry of how on earth you will manage to accomplish that goal.-

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    Shanelle Labier

    March 27, 2013 at 1:07 am

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