Higher Ed Fraud or Caveat Emptor

For-profit colleges did not get much love during the Obama administration. Students who took out huge loans to attend schools like Corinthian College or Minnesota School of Business had their loans forgiven. Under the watch of Betsy DeVos, the department of education has been much less forgiving.

The NYT quotes one woman who took out huge loans to go to an art school.

“It’s just dream-crushing,” said Meaghan Bauer, who owes $45,000 for her time at the New England Institute of Art. The for-profit school, in Brookline, Mass., closed last year and was sued on fraud charges by the state attorney general in July.

This woman took out huge loans to go to an arts school and is shocked because she doesn’t have a job. Really?

Are students who get MFAs at schools like NYU or Rutgers and don’t find work, entitled to loan forgiveness, too? Why are there different rules for for-profit colleges and non-profit, but still cost a lot of money colleges?

How about all those PhDs who don’t have jobs? Can they sue, too?

I cool with that, as long as everyone benefits.

15 thoughts on “Higher Ed Fraud or Caveat Emptor

  1. It would be easy to shift to a more rational system, in which students more than five years out of school could receive discharges in bankruptcy (that would deal with the newly-minted med school graduate scam) and loans were made by the private sector, with whatever degree of federal risk sharing was necessary to induce lenders to lend at bearable rates. Then the private lenders would police the educational institutions, and refuse to lend for financially imprudent ventures like $45,000 art degrees. If rich people, or for that matter the taxpayers, want to allocate money for scholarships for poets and artists, that would also be fine.


  2. I would probably do the bankruptcy thing a little differently, and have some clawback if the graduate did very well between year 6 and year 12 (to capture the plastic surgery resident and the Supreme Court clerks) but yes, some way to require the lender to take a haircut if they have lent money for a studio art degree or a degree that ends in ”Studies”.


  3. Well, there were objective criteria that the Obama administration used to decide which schools to sanction, such as committing fraud regarding the quality and quantity of job placements after graduation. There is a flimsier case for going after PhD programs or non-profit schools on these grounds.


    1. I don’t know about Ph.D. programs, but there have been some (non-profit) law schools with some very shady practices regarding employment statistics. (Basically, some have hired graduates who could not otherwise find jobs to do research, thereby boosting the number of graduates employed in “J.D. required” jobs 9 months after graduation.) Fraud?


      1. https://www.politico.com/magazine/story/2018/05/04/trump-michael-cohen-lawyer-cooley-law-school-218318

        “Cooley may be, by some measurements, the worst law school in America.”

        “The school accepts almost anyone who can pay the $51,000 annual tuition bill—more than 85 percent of its applicants were admitted last year. Fewer than half of its graduates manage to pass a bar exam on their first try; among all law school graduates in the country, about 75 percent pass on their first attempt.”

        “About 35 percent of Cooley’s recent graduates identify themselves as members of minority groups.”


      2. Well, the law school graduates who never pass the bar are not lawyers! Just heavily indebted laypeople. But my point was just that, contra Jay, at least among law schools, the part of academia I know best, there are plenty of shady practices, which some would consider fraudulent, among non-profit institutions.


  4. Four hundred thousand dollar signing bonus for Supreme Court clerks. If this comes some years after law school, I want clawback!!


  5. Well, a new (founded 2010) nonprofit law school has made the news this year with an impressive pass rate: http://www.southcoasttoday.com/news/20181012/umass-law-rises-to-third-in-massachusetts-bar-pass-rate.

    Also mentioned here: https://www.bizjournals.com/boston/news/2018/10/16/law-school-grads-reach-a-new-low-on-mass-bar-exam.html
    One of the bright spots locally was the University of Massachusetts School of Law at UMass Dartmouth. Nearly 82 percent of UMass Law graduates passed the state bar in July. The institution, the state’s only public law school, was founded in 2010. Three years ago, barely a third of its graduates passed the bar. (Because the school has a relatively small number of students, its passage rate is more prone to large swings year-to-year.)

    I remember when the school began, there were many doubters. Yet it is a good thing to have a (comparatively) reasonably priced public option that offers a solid program to students.

    And, I know several students with art degrees who are gainfully employed as artists or designers. They are graphic artists, fashion designers and industrial designers. They were all gifted artists that attended well-regarded design schools.

    As to employment, if someone starts their own design company, or works as a freelancer, does that count as “employed”? Or if someone only applies to a narrow range of jobs, is that the school’s fault?

    Isn’t this something the accreditors should be responsible for?


  6. I generally agree that the value the schools provide, rather than their profit/non-profit status should be the guide to whether taxpayers subsidize the student loans and enforce the draconian terms of student loan debt. I’ve always been troubled by transfers of public funds that try to operate in a “free” market. Too often (and the for-profit college expansion and exploitation, which has been curtailed by the regulations) was a pretty good example. Put vulnerable people in the position of signing over money to other actors in the market, put the burden of the bad outcome on the vulnerable people, and then eliminate regulations design to protect them, and you get bad outcomes. There’s an asymmetry of knowledge, power, expertise and the weight of the outcomes gets born by the individual, not the company with the marketing team and the lawyers.


  7. But, I don’t see any reason to base law or regulations on the 28 supreme court clerks who might get substantial payoffs from law firms. They make a pretty small segment of indigent debtors.

    I do think that spreading some of the risk to banks is a good plan, if they are reaping profits. But, I also think the educational institutions have to bear some of the burden of default. If they are accepting students and encouraging them to take loans for education that the school isn’t providing (or the student is incapable of acquiring), those are risks that the school is better positioned to assess than the student.


  8. And, as I say every time we talk about student debt, I do think one of the problems with student loans is that the ability to borrow money for the cost of living, if you are enrolled in a school, induces bad decision making on the part of students. Combine that with rhetoric about following your dreams, and you get people who take out 300K in loans to get a degree from an arts school, having fun, and putting off the point where they have to commit to real life.

    That makes me favor the tuition waivers/free tuition options that some cities are floating for public/community colleges (even though people complain that they won’t help truly needy students as much. If enrolling in a class pays the rent, in addition to whatever educational value the class provides, I feel like more people will chose educational options they can’t really benefit from.


  9. One thing to keep in mind with forgiveness of loans is that many for profit schools have types of accreditation that make it difficult or impossible for another school to provide transfer credits. So students who don’t get a degree are really in a bad predicament.


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