There are too many scams in higher education

Whether for-profit or not, there’s money to be made

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The original GI Bill’s investments in higher education are often credited with contributing to post-war gains in educational attainment and to the atmosphere of prosperity and upward mobility that was attained in the decades after World War II.

So it’s not so surprising that in 2008, seeking something that a Republican administration and a Democratic Congress could agree on, we created a new GI Bill for the War on Terror era that included big higher education subsidies. And in some cases, notably students who used the money to transition from community college to traditional four-year public institutions, this basically worked as designed. But what Andrew Barr, Laura Kawana, Bruce Sacerdote, William Skimmyhorn, and Michael Stevens find in a shocking new paper is that most beneficiaries actually ended up worse off.

About 40% of the money (and a larger share than that of the students) went to for-profit colleges, and America’s for-profit college sector is really bad. That’s often been discussed in a student loan context, but what the GI Bill study shows is that the value of these degrees is so low that the pure opportunity cost of having been out of the workforce left students worse off. The program “reduced average annual earnings nine years after separation from the Army by $900” — about a 3% reduction. But the impact wasn’t uniform; they find the largest effect “for veterans with lower AFQT scores and those who were less occupationally skilled.”

Basically, the students with the worst academic and labor market prospects spent extra time attending schools that are really bad and ended up worse off as a result.

Unfortunately, it’s not just for-profits

It would be nice to look at this study and just add it to the stack of evidence that for-profit colleges are bad. But I think the real truth is that for-profit colleges are just a subset of a larger problem, which is that while education is very good on average, we’re in a situation where it’s often quite bad on the margin.

In other words, incremental expansions of the system are tapping the goodwill and good vibes associated with the average returns on education and then spending them down on new programs that have little value.

A recent Wall Street Journal exposé took a close look at terminal master’s degrees at Columbia University — very much the opposite of a bottom-feeding for-profit college — and showed that in many cases, they’re talking students into taking on six-figure debt burdens that can’t possibly be recouped on the basis of the market value of these programs.

The Wall Street Journal @WSJ

Columbia and other wealthy universities steer master's students to federal loans that can exceed $250,000. After graduation, many learn the debt is well beyond their means.

on.wsj.com‘Financially Hobbled for Life’: The Elite Master’s Degrees That Don’t Pay OffColumbia and other top universities push master’s programs that fail to generate enough income for graduates to keep up with six-figure federal loans

Anne-Helen Peterson recently wrote about a similar issue at the University of Chicago, which deliberately takes people who they reject from PhD programs and channels them into MA programs. The promise is that your MA work will make you into someone who can get into a PhD program. And while tuition is high, loans are readily available:

Today, tuition for one year of Master's Study at the University of Chicago is $62,640. The cost of living, supplies, and additional quarterly fees during that year force most students to borrow an additional $30,000, if not more. For this story, I spoke to more than two dozen students who’d either attended or declined offers from MAPH or its “sister” program for social science grad prospects, MAPSS. A handful of scholarships (covering no more than half of tuition) are available, but significant loans are the norm. According to the most current data available, the median debt taken out by an MAPH graduate, not including undergraduate debt, is $65,471. The median graduate salary of those who took out loans, two years after graduation: $37,928. 

Now you can ask yourself “who falls for a scam like this?” And I myself have at times wondered why anyone talks themselves into shelling out nearly $70,000 for a journalism graduate degree from Northwestern.

But I know several successful journalists with journalism MAs, and the story is always the same. These are people who didn’t go to the most selective colleges in the world, got a passion for journalism, and heard that a journalism master’s degree can be a way to break in for people who weren’t on the Crimson or the Yale Daily News. And it’s true — this really does work for a relatively small number of people.

And I assume it’s the same with MAPH and MAPSS degrees. People who for whatever reason didn’t go to the most elite undergrad programs tell themselves that’s the reason their PhD applications weren’t accepted, and with a little more spit and polish at Chicago, they’re gonna make it after all. It’s extremely human, and most specifically extremely American to believe that with hard work and determination you can make your dreams come true. And that’s what they’re offering you — a chance to prove yourself. And thanks to the magic of subsidized student loans, nobody is in a position where they literally can’t afford to do it. The only question is do you believe in yourself enough to take a gamble on your own education. Who wouldn’t be tempted to say yes to that?

Degrees of snobbery

Something you learn if you attend a fancy college is that in the world of fancy schools, there is a lot of nuance to these brand names.

Harvard is Harvard. And to a great extent Harvard Law School, Harvard Business School, and Harvard Medical School are also Harvard. But the Kennedy School of Government is not quite Harvard, to the point that when they renamed themselves the Harvard Kennedy School it prompted a fair amount of eye-rolling. And the Harvard Graduate School of Education is definitely not Harvard. It’s a good education school as far as these things go, but the social scientists on the Arts & Sciences faculty don’t respect it or the professors there, and in general, that’s how social scientists at prestigious universities throughout the country feel about education schools.

By the same token, Petersen reports “that in practice, MAPH and MAPSS attendees are often treated as second-class students, and must convince professors to allow them into courses and perform elaborate courting rituals to find one willing to serve as a thesis advisor.”

In other words, the pitch to you is that you’re paying to attend the University of Chicago. But as far as the faculty of the University of Chicago is concerned, you’re part of a somewhat embarrassing initiative that serves as a cash cow for the university. People in the know in the higher education community know what’s up,

You’re basically looking at a scammy form of brand segmentation. Elite universities sell, among other things, the idea of exclusivity. The whole point of MAPH/MAPSS is to be much less exclusive. So if the students in the program were treated really well, the University of Chicago wouldn’t be that exclusive anymore. You need to treat them poorly to maintain the distinct value proposition of the “real” University of Chicago. Then you market the brand to somewhat naive aspiring PhDs who truly believe in the values of academia and don’t believe that the people inside the Ivory Tower would run a scam on them.

The sad failure of “gainful employment”

Back when Barack Obama was president, the Department of Education fought a years-long battle to craft tighter regulations around the student loan program to make sure it wouldn’t be a vehicle for predatory scams.

The name of the game was “the gainful employment rule,” which said that if your program’s average loan to average salary ratio stayed too high for too long, you’d be made ineligible for subsidized student loans. The rule came out in 2015 after a lot of wrangling, and it was a good idea.

But it was also a limited idea. Obama didn’t want to take on the incredible lobbying clout of America’s most prestigious institutions of higher education, so the rule only applied to for-profit colleges.

This improved Obama’s coalitional politics, since Democrats like professors. But it also wound up framing this in an odd way for larger politics. Rather than Obama taking a half step to reign in an out-of-control government subsidy program, he was seen as taking the side of non-profit universities in a fight with for-profit competitors. And though Republicans have a vague dislike of out-of-control government subsidy programs, they have a much more specific dislike of universities and an affection for business owners.

So the GOP fought Obama on gainful employment, and then when Trump became president, Betsy DeVos said the rule was unfairly singling out for-profits. That’s true, and you could have imagined a better universe in which she came up with ways to extend the rule to cover more nonprofit programs and give the traditional universities a taste of their own medicine. But instead, she leveled the playing field by removing Obama’s very modest constraints on the for-profit sector. Now everyone is playing with Other People’s Federally Guaranteed Loan Money.

We can’t have relief without reform

The week after Joe Biden’s election, it seemed possible to me that we’d be entering 2021 with the economy deeply depressed in terms of aggregate demand. Under those circumstances, the idea of using unilateral presidential authority to cancel student debt struck me as a reasonable real-world fiscal stimulus measure, even though it wasn’t very well-targeted.

But things have changed:

• Mitch McConnell agreed to $900 billion in stimulus to try to save two Senate seats in Georgia.

• Then he lost the Senate seats anyway, and the new majority delivered $1.8 trillion in additional stimulus.

• Now we are coping with a somewhat inflationary macroeconomic environment, plus some continued distress mostly for service sector workers who have not yet found re-employment.

Under the circumstances, there remain strong cases for spending on ideas that would reduce supply-side bottlenecks or on targeted relief to people who really need it. But broad debt relief doesn’t have a particular macroeconomic purpose. So you really do have to evaluate it as education policy.

And in education policy terms, it would make a lot of sense to forgive certain broad categories of debt but only if you’re also reforming or eliminating the programs that gave rise to them. There’s no way you can deliver debt relief to the people Columbia ripped off and then just let Columbia keep ripping people off — while the university perhaps quietly whispers that you shouldn’t worry about unsustainable debts because maybe they’ll be forgiven in the future.

Education with real value

What we need is a real overhaul of higher education financing, not one-off giveaways. Especially because I don’t think the moral of the story here is that the whole system is rotten.

Some community colleges are good. But many of them have very poor completion rates. And they’re all working with very meager resources. They should get more money aimed specifically at increasing completion rates. And in the GI Bill study, students who were able to move into traditional four-year public colleges did come out ahead. That’s “college” as we’ve traditionally understood it, and it’s an idea that continues to be worth supporting. In particular, the non-elite public institutions that serve lots of first-generation students really deserve more help.

And the ones that do an unusually good job deserve more acclaim — The Washington Monthly praises the College of the Ozarks, Cooper Union, Hiram College, Ohio Northern University, Goshen College, Elizabeth City State University, Cal State Maritime College, Maryville College, U Maine Farmington, and the Massachusetts Maritime Academy.

These are not schools that are just screening for the kids with the best SAT scores and getting famous — they are taking more typical students and they are delivering them high-value education.

There’s probably a lot more one could say about this on a policy level. But I also think we just kind of need to address it as a society. Many faculty members at prestigious universities are quite outspoken about social and political issues. They also tend to be very smart people who have big analytic toolkits they can apply to various issues. But it seems to me they tend to turn a blind eye not only to dubious business practices at their own institutions, but also to some of the more dire implications of trends toward more and more credentialing.

As I said, I know plenty of people who got journalism MAs and feel that doing so was helpful to them being able to break into journalism. What I don’t know is a lot of people who feel they learned a ton from their journalism MA program. Gainful employment tackles education programs that don’t deliver economic value to their students. But the positive experiences people have described to me about journalism school aren’t really about delivering education — they’re taking advantage of the collapse of career paths that used to run through regional newspapers to do some rent-seeking. The master’s degrees that teachers get in order to qualify for pay bumps specified in collective bargaining agreements are infamously worthless in terms of actually improving teaching. But individual teachers like getting raises, and universities like getting cut in on the action.

Faculty members who don’t personally participate in these bad practices nonetheless benefit from them. Non-profit legal status doesn’t change the fact that in real profits are being made here and paid out to stakeholders. I know a lot of professors feel these days that they are “under attack” from the right and deserve sympathy from the left rather than further criticism. But the fact is they are working in one of the most heavily subsidized industries in America, and lots of the prestigious brands in this area are not living up to their values.