June 22, 2010 « Broader GAO Study Is Needed »
Should For-profit Colleges and Universities Welcome a GAO Audit?
I believe so.
Don't Stop with Credit Abuses
In addition to examining the abuses of credit awards as proposed by the DoEd’s Inspector General and Congress, where there are abuses in all sectors, I encourage the GAO to conduct a full analysis of productivity, student services and abuses, graduation rates and times, reasons for not graduating, all-in cost per degree, opportunity costs associated with degree delays, default rates and default collection or recovery ratios, and total student and taxpayer costs, direct and hidden, under the three major types of institutions.
Tacit Agenda
Much of the political agenda against the for-profits is being underwritten by a campaign of dirty tricks and innuendo implying that the taxpayer is being ripped off by the for-profits. Harkin's committee hearings are less inspiring than those of Senator Nunn in the 1980's and compete with those of McCarthy. Imagine the mentality of an elected representative who would listen with rapt attention, nodding his head in agreement while an admitted short seller trashes his latest industry target. If a corporation touts its position in the market, it risks fines and even jail time. Why is a short seller permitted to pursue the converse logic, much less be Mr. Harkin's featured speaker.
A GAO analysis will show a picture much different and more complete than that desired by Senator Harkin. One can only specuate as to his motive but it appears to be unrelated to his public statements.
Only when costs are plotted against productivity (credits and degrees per budget dollar plotted against time), will we see public outcry against the public universities for their high costs and low outputs. They are by far the most costly and inefficient system of education available to us. We keep funding them while their productivity continues to slide.
Will we see abuses in the for-profit sector as well? I believe so, especially with respect to enrollment practices in a few institutions.
Needed: Economic Model of Taxpayer Cost
I have conducted analyses of taxpayer costs and productivity on several occasions (see: For-profit Higher Education by Sperling and Tucker) but even my most recent numbers are out of date. While I do not know exactly what a 2010 analysis will tell us, the organic disparities in the level of taxpayer support are so wide that the GAO analysis is certain to show total taxpayer costs to be the lowest for for-profit colleges and universities and highest for the public universities, with independents falling in the middle. (Roughly, the numbers are $10,000 public, $6,500 private, and $0 for-profit per student per year but the $0 for-profit taxpayer cost may now be higher because of recent abuses.) Only a GAO analysis will resolve this issue because other sources are or will be considered biased.
By "total taxpayer costs" I include not only the monies given to public universities via direct funding by legislatures and even congress (as in the case of HBU’s and others). I also include the correctly allocated costs of guaranteed loan defaults, which are clearly higher for schools educating the underclass. I also include various kinds of governmental support available only to publics and privates and indirect costs arising from forgone taxation opportunities. One example of the former category is the direct financial aid some states provide to residents who decide to attend a public or private but not a for-profit school. In the latter category are the billions of dollars in forgone taxation for lands, acquisitions, endowments, certain income tax credits for parents, certain depreciation allowances, sales and use taxes etc. all of which do not apply or do not apply to the same extent to the for-profits. I believe the public will be shocked by the differential contribution of an item as small as the forgone sales and use taxes.
GAO Objectivity Needed
Creating a full and accurate model for determining taxpayer costs, productivity, and the like is a complex endeavor. The first time I did it, it took more than year of part-time research. The GAO, with its talent, substantial resources, and superior access to information should be able to get a draft model together within a few weeks. Most importantly, it will carry the imprimatur of objectivity.
I hope all objective parties will encourage this kind of GAO analysis and I hope we pay attention to what they find. Please consider writing and calling all of your elected officials and re-post this message as widely as possible.
Is it wrong for our public universities to cost more than any other type of educational institution?
Not at all.
It is wrong for:
- The public to be so badly misinformed about the costs and benefits represented by each model, including whom they educate and what value they add to the individual and society.
- Public universities to be so out of touch with their markets.
- Public universities to continue their invisible decline in productivity while serving their faculties better than they serve their students.
- Elected officials and public servants to lie about net student loan costs. One independent study suggests that the Department collects $106 dollars for every $100 of student loan default.
While we need and benefit from all three institutional types, all are in need of reform, albeit for different reasons.
- Robert W Tucker
Reader Comments (1)
Harkin is a thug, and I don't think he has any intention of actually producing legislation, or he would be trying to get a bill passed BEFORE the November elections. Harkin is just posturing to look like a friend of the people. Meanwhile, the careless and slapdash process at the Department of Education has led to ludicrous results: what kind of process stigmatizes Strayer and Capella, of all schools? Strayer BA graduates have an average income of $61K/year, so it seems rather unlikely that only 25% of them are repaying principal. The DoE's data imply that only 2% of Strayer students with consolidated loans are paying down principal, when 55% of those with unconsolidated loans do so. Oh well. The DoE could have had private discussions with the colleges about these numbers and straightened out problems, but instead they trashed two of the highest quality companies in this space. I am sure the stocks will recover, but investor sentiment about the sector is permanently damaged due to the impression that regulation of this space is capricious and incompetent.