Yet Even More on For-Profit Schools: Jedi Knights Go Over to the Dark Side

There is an interesting article in The American Prospect entitled Why Are Progressives Fighting Student-Loan Reform? One need not wait long for the answer. The author, Mike Elk, was so riled up that he came to the point immediately in the subtitle: “How the for-profit college industry co-opted liberal activists.”



The author provides a reminder of why this activity is of interest and concern.

“Students enrolled in for-profit schools represent just 10 percent of all postsecondary students in the United States but account for 44 percent of all student-loan defaults. The industry has grown substantially in the past decade, as federal financial aid to for-profit schools' students ballooned from $4.6 billion a year in 2001 to $26.5 billion a year in 2009, according to analysis done by The Chronicle of Higher Education. Federal dollars totaled 87 percent of revenue at 14 for-profit schools in 2009, including the largest, the University of Phoenix. These schools are often unaccredited and, in the words of Secretary of Education Arne Duncan, ‘are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use’."

“For-profit schools have little incentive to care whether their students land well-paying jobs; if graduates can’t pay back their loans, taxpayers will, because the federal government guarantees the loans. Recently, the Department of Education proposed a new regulation called the "gainful employment rule" to limit government liability for such defaults in the future. The new rule would cut off federal aid to for-profit programs that extend unaffordable loans to students.”

In June, Steve Eisman, made famous as a short seller in the best-seller, The Big Short, testified to a senate committee about the predatory tactics used by the for-profit industry. He would be shorting their stocks because government regulation would surely rein in these companies and cause profits to decrease. On that same day, a representative of a for-profit school, DeVry University also testified.


Several normally progressive people attacked Eisman’s testimony on the grounds that he stood to turn a profit if the new regulation went into effect. It did not bother them that the representative of DeVry would profit if it did not go into effect. Those on attack included Lanny Davis, a mouth for hire, Melanie Sloan, Director of Citizens for Responsibility and Ethics in Washington (CREW), and Tom Mazzie, MoveOn’s former Washington director.


One can conclude that the objections to Eisman’s testimony were either horrendously naive, or they had been purchased by lobbyists. The author left little doubt as to his opinion.

“Yet Davis, Sloan, and Matzzie have all declined to publicly reveal their connections to the for-profit school industry, raising questions about the integrity of their criticism.”

“Davis, a longtime corporate lobbyist, has been hired by the Coalition for Education Success, a trade association of for-profit colleges that is part of a major lobbying blitz against the new rules. He did not mention the relationship in his column.”

“Matzzie, meanwhile, is vice president of the lobbying firm LawMedia Group. LawMedia represents the Student Access, Student Choice Coalition, which is funded by several for-profit schools. Matzzie also runs an organization called Accountable America, which he says accepted funding from John Sperling, the chair of the Apollo Group, which owns the University of Phoenix. Matzzie did not disclose these conflicts of interest when he denounced Eisman for testifying against for-profit schools' predatory loans.”

“Is Sperling, a major funder of progressive organizations, also behind CREW's intervention in the issue? Sloan wouldn't say, and CREW, a transparency organization, does not release the identities of its funders. But Sperling was one of the early backers of the Democracy Alliance, a coalition of donors that steers money to progressive causes, and Democracy Alliance played a vital role in funding CREW as it expanded after its founding in 2003. Democracy Alliance also declined to comment on whether Sperling is a current participant or whether the consortium currently funds CREW.”

The Department of Education announced that it would delay implementation until next year. That is not a promising development. There is a lot at stake here. Eisman estimated that these for-profit schools will contribute as much as $275 billion in defaulted student debt to the deficit over the next ten years.


This is a good article. You should check it out if you are interested in this subject.