Seriously. A great model for any business is to sell something to your customers that somebody else has to pay for. It’s an easy justification – it doesn’t cost the customer anything, but the customer gets to reap the benefits. At DeVry, the customers (students) can take out any number of loans or grants (paid – for the most part – by taxpayers) and take on an education. From a corporate standpoint, it’s a great model. Sound investment. The problem is that it ends up screwing the student and the taxpayer.
I’m all for capitalism; I’m 100% behind what makes economic sense. The issue here is that in a real capitalist system, DeVry (and it’s not just DeVry, there are plenty of others) would not receive these indirect subsidies. Sure – the money isn’t being paid directly to DeVry, but state and federal governments are funding their customer base. Without these subsidies, DeVry would be forced to become a competitive school offering real-world classes (novel idea?) and rigorous programs. They’d have to have admission requirements (other than “student has a pulse” – and sometimes even that’s waived) and real academic standards.
Since DeVry’s customers are its students, there is really no financial gain to refusing admission, raising the bar for passing courses, or increasing academic standards. Ultimately the goal is to railroad students through programs. DeVry is fine catering to the low-end student base that doesn’t have enough aptitude or flexibility to get into traditional programs (that may be inconvenient but are usually less expensive) or even community colleges (that are usually convenient, less expensive, and higher quality). As long as the bill is paid, DeVry is satisfied with anybody who signs on.
But what of the loans? They have to be paid back, right? Well, I’ve now heard from several administrators within DeVry that many students sign up for classes to engage in a “planned default” – ultimately, for graduate students, $18,500 is available for Stafford Loans (the amount for first-year independent undergraduate students is $9,500). Students sign up for the minimum part-time course load, which can be as low as about $3600, then take the rest of the loan as a refund from the school. There’s no intention to pay it back – the intent from the very start is to never pay it back. It’s a few thousand dollars that can be used to buy a car, pay down a credit card, or any other purpose. As I’ve complained about the level of student engagement in the past, I’ve heard this explanation from at least two different administrators. Some students are gaming the program.
What to do? Here’s one solution: make colleges accountable for half (if not more) of the value of the student loan defaults of their students. If a student fails (or outright refuses) to pay back a loan, the colleges should be liable for a significant percentage of this loan. According to Reuters, the default rate for for-profit colleges is about 15%, which is more than twice the rate for public schools (7.2%) and more than three times the rate for private schools (4.6%). Obviously for-profit schools are having a relatively larger impact here than traditional schools, while providing none of the public good (quality educations and research contributions) that these other schools provide.
I’ve been an instructor at DeVry for over five years, and on this blog I’m planning to vent all of my frustrations, identify all of the questionable practices, and offer any suggestions that I can to get as many potential students into a real education instead of wasting tends of thousands of dollars on these less-than-useful “educational” programs.
More to come.
