What's Left After Higher Education Is Dismantled

We're soon going to be left with no viable option for providing quality higher education to the masses

For-profit schools have been taking on a greater share of U.S. students, while private non-profit schools have not. Credit: John Greim/Getty

The two big higher-education stories this month couldn't be more different. On one hand, you have financier Stephen A. Schwarzman donating $150 million to Yale to build a state-of-the-art campus center. On the other, you have Corinthian Colleges declaring bankruptcy under a flood of allegations of fraud and abuse, leaving 77,000 students demanding student debt relief for the "subprime education" they received.

But they tell a similar story: There's no set of institutions capable of or interested in providing quality, affordable higher education for a large population outside public schools. We must remember this as state legislatures continue to dismantle, defund and privatize public higher education, because as that project succeeds no one else will step into the void and provide the education that will disappear.

Let's start with the Yale story: $150 million is a lot of money, and even if it is earmarked for a giant vanity project, it does mean that other funds can be freed up for educating students. But how much will Yale increase its enrollment numbers as a result of this money?

We can make a good guess: zero. Yale's freshman enrollment this past year was 1,360 students. That's virtually the same as in 2003. Like many elite private schools, Yale is basically a hedge fund with a university attached for tax status and marketing purposes, and it's quick to brag about its outsized endowment returns over that time period. However, all that new cash hasn't brought any new students. And it would have been a great time to expand, as public tuition began increasing, and more students overall went to college. 

It's not clear that Americans' tax dollars need to be subsidizing the conspicuous consumption Schwarzman is engaged in here. But there's a more pernicious edge to his donation. As with state-of-the-art gyms, stadiums and other elite facilities, this kind of spending is likely to set off an arms race with other private and public flagship schools. Those places will have to charge higher tuition overall in order to provide these services – services that will be expected by the rich potential students that these institutions will compete for.

Now, Yale is an extreme example of private higher education. But overall private non-profit schools have been increasing their absolute numbers of students over the past 20 years, while their percentage of total students educated has stayed flat. What has been expanding rapidly and picking up a greater and greater share of college students? The for-profit school industry. 

For-profit schools have gone from educating 2 percent of total U.S. students to nearly 10 percent – an increase of more than 1.5 million students – in just two decades. This was planned; the George W. Bush administration in particular reduced and relaxed regulations that allowed many for-profit schools to more easily access government funding in the form of federal student loans for their students.

The nature of these schools has changed as well. Before, the institutions were mostly small operations; now they're massive corporations engineered to make as much money as possible, running with an insane 20 percent profit margin. And they're expensive – far more so than public schools. But almost all of this money is borrowed by students from the government, or comes in the form of government grants. The government pays for these for-profits to exist, but shovels 20 percent of that money to the schools' wealthy corporate owners in the process.

That might not be a bad deal if for-profit schools were something other than a cesspool. But the high-profile bankruptcy of Corinthian Colleges earlier this month amid a wave of fraud investigations shows that the expansion of for-profit schools has hit its limit. At one point enrolling 77,000 students in 100 campuses, Corinthian was one of the largest and most prominent for-profit higher education companies.

Last year, the Department of Education started investigating whether Corinthian was using false job placement data to recruit students and faking student grade data to hide performance problems. This led to more investigations, which resulted in the school collapsing. There's now an important movement from former students demanding debt relief, making the accurate case that the government didn't do its job to police these markets.

State-level investigations into these for-profit schools have been going on for many years, but only this past year did federal investigators get serious. The Consumer Financial Protection Bureau is investigating ITT Educational Services, arguing that the school pushed students toward expensive loans they knew would default in order to boost profits. This has sent its stock price, once highly valued, plummeting.

This shouldn't surprise us. For-profit schools are turning out like Enron, or mortgage-backed securities designed to explode. They are yet another marvel of the financial world that turned out to be a fraudulent Ponzi scheme. The business model is less about providing a good service by investing in students, and more about making as much money as possible by loading up on bad debt – for students, in this case – and making sure they've cashed out by the time the whole thing collapses.

There have been a lot of great investigations into the weakening public university system. The system of in-state tuition is drying up, and disinvestment is leading to a dystopia of inequality in which community and state colleges are starved, and flagships serve up vacation resorts for the rich who can afford to attend. According to the Center on Budget and Policy Priorities, since 2009 average public tuition has gone up 29 percent, while the average state is spending 20 percent less per student. This is a problem, because public colleges and universities educate around 70 percent of all students.

But both these stories tell us what is likely to happen as the public university system weakens: nothing. No one will step in to fill this crucial role of providing quality, mass higher education. In the first case, resources will go to bidding wars over whose name will go on a fancy building – vanity projects perfect for this age of inequality that will do nothing to provide education. In the second case, resources are extracted out to shareholders and executives in imploding Ponzi schemes, leaving behind nothing but students with poor educations saddled up to their eyeballs in debt.

Mass higher education – starting with the land-grant schools in the Nineteenth Century, and continuing through the GI Bill and the mid-century expansion – has always been a public project. And we need to embrace it. 

This is why the recent proposals to expand and solidify public free higher education are essential. President Obama and Hillary Clinton have both proposed two years of free community college; Bernie Sanders has gone further by introducing a bill that would use a tax on Wall Street trading to provide free higher education for all. (Since the financial sector gave us the housing devastation that destroyed so many state budgets, that seems only fair.) All of these plans are pointing in the right direction: If we want something done, we'll have to do it ourselves.