In June the Obama administration rolled out, in connection with Department of Education Secretary Arne Duncan, a new set of rules that for-profit colleges must abide by in order to retain federally subsidized loan dollars for prospective students. These rules, while not as stringent as some had hoped for, do impose a tighter control on how for-profit colleges operate. In addition, the schools have 3 years to come in-line with the new regulations before the federal dollars will be pulled. According to Secretary Duncan, "We want to give people a chance to reform...this was not about 'gotcha'." This is all despite a historic lobbying campaign by for-profit colleges in watering down new regulations, or doing away with them entirely. It seems to have worked somewhat, critics say, since these for-profit colleges essentially have free reign to continue has they have before that 3-year deadline.

     These new federal guidelines and regulations are in response to a number of study results that show that students at for-profit colleges default on their student loans at a significantly higher rate than students at traditional higher education institutes. Students at for-profits also tend to pay significantly higher rates than do students at public universities, despite the fact that for-profit colleges tend to spend significantly less on instruction. A friend of mine that teaches distance learning for a for-profit college related to me that her online course, in one section, may have as many as sixty students. She never sees them, rarely communicates directly 1:1, and is paid the same regardless of her numbers. These for-profit colleges, University of Phoenix and Kaplan University to name a few, depend on distance learning courses and online degrees for the bulk of their revenues and typically make massive profits each quarter in the process. According to Huffington Post, Director of the National Economic Institute, Gene Sperling, compared for-profit colleges to banks during the sub-prime loan crisis. "The for-profit education sector business model invokes much of the same characteristics of what happened with subprime housing and securitization, namely that the schools can capture all of the upside of increased volume while shifting all of the downside risk somewhere else." In this case, the risk was foisted on for-profit students and graduates that had little in the way of support or job-prospects after graduation.

     Related to this is the news that John G. Sperling (no relation to Gene), founder and executive chair of the University of Phoenix, has sold 1.8 million shares of the company's stock for a total of $56 million. This comes even as many for-profit share prices have soared after the federal ruling. However, other higher education corporate CEO's have also cashed out ahead of schedule, including the CEO of Washington Post Inc, which controls Kaplan University; University of Phoenix's largest competitor.

     It seems to me that many of these guys understand they're operating in a bubble, and that the for-profit higher ed. bubble will burst either before the federal deadline to meet new requirements, or when that deadline arrives. Greater public awareness of for-profit's shady practices are being offset by the convenience of online degrees, despite inflated prices. What I don't understand is why the government refuses to impose regulations so far in the future when these colleges, that are not constricted by infrastructure other than online programs, are more than capable of changing their practices fluidly and quickly (as they've shown in the last several years). They do not need 3 years to make "reforms", but it does give them plenty of time to take advantage of thousands of new students and graduates. The other thing I don't understand is why the public is not more distrustful of these companies if it's already been shown that they are corrupt, do not help people get better jobs, and show such inflated prices at such a high rate of default. Yet their numbers continue to increase and their stock prices continue to rise. Ultimately it is up to American people to consumer wisely, and if they're not going to do that there's little that the government can do to protect us from ourselves.