Bruce Bialosky

America’s accumulated college-loan debt will surpass $1 trillion this year; what is our leadership doing about it? The Obama Administration took over the student loan market and expanded Pell Grants, but hasn’t accomplished anything to address the root cause of the crisis: exploding college fees and related costs. The only thing they’ve done is criticize innovators and entrepreneurs.

The Senate Committee on Health, Education, Labor, and Pensions (HELP), chaired by Senator Tom Harkin (D-Iowa), issued a new report calling into question the costs and performance of For-Profit universities. There are actually hundreds of these schools, perhaps the most well-known being University of Phoenix and Devry University. The report provides some damning statistics about For-Profits which should concern us all, since a large amount of free federal money (Pell Grants) is handed out to their students. Their cost of recruiting is much higher than private and public universities (the Establishment), and their four-year graduation rate 31 percent compared to 52 percent for Establishment schools.

When I read the report and its analysis, my only thought was “Wow! Is the committee staff really this dense?” Here are a few points:

1. Wouldn’t you expect the graduation rates to be lower at For-Profits? After all, how many of the best students in the country are going to University of Phoenix rather than Yale, Stanford, UCLA, or Texas? It’s obvious that they’re not attracting top-tier students, so it makes sense that their dropout rate would be higher.

2. The fact that more money is spent on recruitment also makes sense. Every high school in America has guidance counselors who direct students to Establishment colleges. Have you ever heard of a high school counselor telling a student that he should be going to Devry? The report leads one to believe that Establishment schools average a little over one staff person who does recruiting. Obviously, the people who compiled that statistic never had a kid go to college. That is just foolish.

3. The report also talks about the cost per student, but the numbers used don’t reflect the huge costs underwritten by states for public schools, or the cost to the federal treasury for tax deductions taken for “charitable” donations to Establishment schools. The comparison of costs is absolutely and totally slanted.

This is the fourth “study” done by this committee on For-Profit colleges in the last two years. And how many have been done on Establishment schools? Zero. One might come to the conclusion that someone has a vendetta against For-Profit schools. Since the Committee Chair is Senator Harkin, the finger must be pointed at him.

When I discussed the issue with Elizabeth Donovan, Deputy Press Secretary for HELP, she indicated that there had indeed been hearings on the Establishment schools and at my request kindly sent me copies of the witness statements. It struck me as strange that all of the testimony came from representatives of public schools, even though private schools (except Hillsdale College) receive substantial federal money.

I asked Ms. Donovan why representatives of private schools were not included, but she was unwilling to answer. I then asked whether there would be any similar studies released on Establishment schools. Again, she was unwilling to reply. But on September 13, 2012, the committee held a two-hour hearing on the soaring costs of Establishment schools. They concluded that costs are escalating because states are cutting their higher education budgets, and that schools are holding committee meetings and discussions in an effort to control costs. The reaction of the Senate committee was basically – that’s cool.

To its credit, the Republican minority, headed by Senator Enzi (R-Wyoming), issued a statement denouncing the For-Profit study. While acknowledging challenges in these particular schools, they asked the big question: why is so much effort being spent on For-Profit colleges, which represents 10% of the education industry, while Establishment schools, which represent 90%, are being ignored? It’s like focusing on your child’s performance in P.E. when they are failing math, English, and social studies. The minority enumerated the many reasons why the full report had been manipulated to make the industry look bad. And it questioned why Senator Harkin is unwilling to address the main issue – Establishment schools piling huge amounts of debt onto the public without a shred of accountability.

We deserve some real answers. Young adults are told that if they want to succeed, they must graduate from college. Today, parents are breaking themselves financially and their children are piling up ridiculous levels of debt. Increasingly, students are graduating with little hope of finding a job lucrative enough to pay off their debt, or with a degree that is useless for obtaining a position. And yet nobody asks why schools are issuing degrees in silly majors or why so many schools promote majors for which there is little demand for the graduates. More important, why are costs soaring way above the inflation rate, and why are the rapidly-increasing numbers of administrators getting paid so much? How about the falsehood of “not-for-profit” schools whose “one-class-a-week” professors earn salaries as high as $300,000 and college presidents earn $500,000 and up? There is nothing “not for profit” for these schools except their misleading titles.

Richard Cordray, Elizabeth Warren’s stand-in at the Consumer Financial Protection Bureau, broached the subject of why student loans are excluded from bankruptcy and suggested a rule change. I suspect that President Obama may in his second term run with this proposal, which means that a large portion of another $1 trillion – as well as any debt incurred in the future – will be dumped on the shoulders of American taxpayers. The Administration bemoans the debt level, but does nothing to correct the root causes. Obama’s ally in the Senate spends his time fiddling with 10% of the schools while Rome is burning.

Then again, is anyone really surprised?


Bruce Bialosky

Bruce Bialosky is the founder of the Republican Jewish Coalition of California and a former Presidential appointee. You can contact Bruce at bruce@bialosky.biz