# The college bubble

Essay on the recruiting tactics of for-profit "universities":

If there is any truth to this people need to spend some serious time in jail.
Most importantly high ranking officers in these corporations , punishing someone who is a salesman for these colleges won't help yet making the corporate elite fear of going to jail will produce an industry wide change.

#### IlyaKEightSix

Essay on the recruiting tactics of for-profit "universities":

#### atreides

Very interesting discussion so far. I would like to chime in with a few thoughts . I apologize beforehand as some of my thoughts might seem disjoint from the discussion thread.

I am attending this certain state university that is trying to cut costs by all means because they are now receiving a fraction of what did a few years ago from the state. The are taking these steps;

• Cutting entire departments such as journalism, pre-historic studies, latin american studies, etc
• Laying off most or all senior/junior lecturers and having PhD students teach those classes. Keep in mind that a good amount of these lecturers taught mostly undergrad/ lower level courses. These lecturer bring in little or no monies from industry for research, etc.
• They are trying to figure out the financial worth of each professor to the university, and act on that information accordingly.
• Increase tuition by at least 5% whilst the uni President, a few uni officials and the football and basketball team coaches have million $$paychecks. (Tuition has increased about 7% annually for the past few years due to the invention of innovative schemes like Differential Tuition and of course the State Legislature giving the uni free rein on tuition increases) • Increase enrollment by an additional 5% a year for the next few years. You would think this will help peg tuition increase to inflation (2-3%) or at least keep it constant (This uni already has one of the largest student bodies in the US) This is a major research Uni. My view of most research professors is that their one true goal is to do research and publish papers. Teaching is a secondary thing they have to do every once in a while to keep their jobs. I know I have learnt so much more taking classes from adjuncts and lecturers than these "research profs". So what is the financial worth of a professor to the university bottom line? My uni is basically looking at how much money the professor brings in from industry and national foundations, because the uni gets a cut from these monies. I think this singular measure is wrong and quite frankly sad. Apparently, these non profit state unis are now being run as for profit enterprises. Shouldn't a professor worth be judged by how much knowledge they impart on their students ?? (this is very qualitative and difficult to measure). At least for Engineering / CS profs, I think a better measure would be how many of their student are making a 6 figure incomes a few years after graduation or how many came up with a start-up ideas/companies that were later sold for millions of$$ or materialized into something bigger. I guess, these numbers would probably be even more difficult or close to impossible to measure, and no one would like to be judged by them.

This major research uni with a billion $$endowment can only boast of about 2 start-ups a year for the past couple of years from research spin-offs. Compare these with numbers from MIT, Stanford, etc and you'll see how bad these numbers are. I took a look at the MIT 100K challenge..very impressive indeed. Shouldn't all strong engineering / CS schools that's worth their salt or give out degrees that's worth the paper they're printed on have something similar?? #### bigbadwolf This is a major research Uni. My view of most research professors is that their one true goal is to do research and publish papers. Teaching is a secondary thing they have to do every once in a while to keep their jobs. I know I have learnt so much more taking classes from adjuncts and lecturers than these "research profs". Publish papers that win them tenure, increase their profile in their speciality, and lead to promotion. In addition, for the university it is of importance that the "research" be funded -- i.e., the scope and direction of investigation is set by outside agencies willing to write the cheques. And of course both profs and admins are looking at various metrics: number of papers, citations, department and university rankings. A number game all the way. In the sense of chasing paying corporate customers and in the sense of valorising research and quantifying everything, research universities are increasingly adjuncts of corporate America. No value judgement here, just facts. In addition to their "research," upto half the time of a research prof can go in writing grant proposals and other such bureaucratic details. So what is the financial worth of a professor to the university bottom line? My uni is basically looking at how much money the professor brings in from industry and national foundations, because the uni gets a cut from these monies. I think this singular measure is wrong and quite frankly sad. Apparently, these non profit state unis are now being run as for profit enterprises. They are run with money in mind. The presidents of these august institutions have the same outlook and value system as CEOs of corporations (albeit their paychecks are not quite in the same stratospheric range). Eveerything has been valorised, monetised: the worth of a prof, the income stream a student brings in, the cost/benfit analysis of a new library or lab. The difference between these and the U of Phoenix is that the former still has departments in history and literature, while the latter cannot conduct research (and probably doesn't want to). Also differences in quality. Yet one can discern a slow convergence in the "business model." The meretricious MFEs and law degrees conferred by known universities compare to the junk offerings by the likes of U of Phoenix, Capella, Kaplan, etc. Shouldn't a professor worth be judged by how much knowledge they impart on their students ?? (this is very qualitative and difficult to measure). At least for Engineering / CS profs, I think a better measure would be how many of their student are making a 6 figure incomes a few years after graduation or how many came up with a start-up ideas/companies that were later sold for millions of$$ or materialized into something bigger. I guess, these numbers would probably be even more difficult or close to impossible to measure, and no one would like to be judged by them.

Surely you're using the same capitalist criteria that you earlier chide the universities for using in other areas(?).

A pertinent blog post, beautifully written.

#### DominiConnor

Cutting entire departments such as journalism, pre-historic studies, latin american studies, etc
Hard to see that as bad. Journalism is a profession that is vastly over supplied, pre-historic studies is an OK subject, but as I recall the USA is really quite near hundreds of millions of people who know quite a lot about Latin America, so if you need someone who knows about it, you just need to ask.

Increase tuition by at least 5% whilst the uni President, a few uni officials and the football and basketball team coaches have million  paychecks.
I appreciate that America has the about the highest illiteracy rate in the developed world. did you even bother to read my earlier post ?
American education is pretty much what Americans want it to be.
Absolutely nowhere in the world, under no political or social system, culture or faith do the public have such control over education as in America.
Americans put their own hands in their pockets and subsidise sports in universities so a midscale university in America will spend more on sports than every British university put together.
They are sublimely indifferent to the racism, endemic drug abuse and violence that is spawned by putting sports into universities even though it is well documented.
Not one single major problem with US universities is a problem that has not been solved in most other developed countries.

If you turned up at the Ecole Polytechnique, ETH, QMC, Imperial, Cambridge or Edinburgh and said "you have to do daffy arts subjects" rather than the real one, you'd be in physical danger.

I wish I could copy and paste this essay in its entirety.

During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They weren’t. But since this wouldn’t be America if you couldn’t monetize your children’s futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as they’re known in the industry, SLABS).

SLABS were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at$2.67 trillion. The number of SLABS traded on the market grew from $200,000 in 1991 to near$250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop. SLABS are still considered safe investments—the kind financial advisors market to pension funds and the elderly.

This is but a brief taste. It deserves to be read as a whole.

#### Andy Nguyen

The documentary is almost a year old. There has been a lot going on since then.

In the document, it mentioned "gainful employment" as a proposal that is hotly contested by the lobbyists. That's essential a requirement that will get most of these for-profit programs out of business. I don't know if this passed the money test at all.
Looks like "money talks" again: the proposed "gainful employment" rule was watered down.
http://chronicle.com/article/For-Profit-Colleges-Win-Major/127744/

For-profit colleges, which have spent millions fighting the Education Department's proposed"gainful employment" regulations, have won some major concessions in the final rule, due out today.
Under the rule, vocational programs whose students have the highest debt burdens and lowest loan-repayment rates will become ineligible to receive federal student aid.
The changes, which give colleges more time and ways to meet the rule's benchmarks, are expected to significantly reduce the number of programs that would be penalized by the department.
Secretary of Education Arne Duncan said the extension was designed to give programs "every opportunity to reform themselves."
"This was not about gotcha," he told reporters in a conference call after the stock markets closed Wednesday. "This gives folks at the margins time to get their act together, but at the end of the day, does not let them off the hook."
But for-profit colleges continued to question the department's authority to issue the rule and accused the administration of imposing cost controls on colleges.
It's "basically a back-door way of price fixing," said Harris N. Miller, president of the Association of Private Sector Colleges and Universities.
Supporters of the original rule, meanwhile, were disappointed that it was softened.
"We think the department should have stuck to their guns," said David Halperin, director of the advocacy group Campus Progress, "but it's a step in the right direction."

#### GoalSeeker

just read this in economist.. thought ill share
http://www.economist.com/blogs/lexi...ion?fsrc=scn/fb/wl/bl/isitreallythenextbubble

Education is a bubble in a classic sense. To call something a bubble, it must be overpriced and there must be an intense belief in it. Housing was a classic bubble, as were tech stocks in the ’90s, because they were both very overvalued, but there was an incredibly widespread belief that almost could not be questioned — you had to own a house in 2005, and you had to be in an equity-market index fund in 1999.
Probably the only candidate left for a bubble — at least in the developed world (maybe emerging markets are a bubble) — is education. It’s basically extremely overpriced. People are not getting their money’s worth, objectively, when you do the math. And at the same time it is something that is incredibly intensively believed; there’s this sort of psycho-social component to people taking on these enormous debts when they go to college simply because that’s what everybody’s doing.
It is, to my mind, in some ways worse than the housing bubble. There are a few things that make it worse. One is that

#### Jim

Has anybody actually watched the entire documentary by the National Inflation Association???

I actually spent an hour or so of my life watching the film. It was really provocative up to middle of the film. But towards the end, it just became an advertisement for gold and sliver mining companies.

Gerard Adams, the "President" of the National Inflation Association, is nothing more than a fear monger that works for people that want to pump and dump penny stocks. It's ridiculous. And I'm not the type of person that likes to discredit the merits of an argument simply because of its source. But Gerard Adams is a complete crackpot that needs to be shot down. You could tell he doesn't know what he's talking about when you see his appearance on Fox http://video.foxbusiness.com/v/4416855/nia-president-beware-of-massive-food-inflation

This is what the learned Norton Grubb says:

The problem is that there are no other routes to better occupations and higher salaries anymore, except for those who have odd skills (athletes, rock stars, starlets willing to reveal all) - which most of us don't have. Education has not stopped delivering its expected returns, not in terms of income or (un)employment. It has stopped delivering on the promise of a middle-class job = professions and managerial occupations, for which a BA was sufficient inthe 60s, and for which an MA is now necessary. So this leads to education inflation = middle-class kids seeking MA degrees and professional degrees, where a BA might have sufficed a generation ago. I don't see any decline in the willingness of parents to sacrifice for their kids.

First, education is not delivering its expected returns -- or at least the returns that youngsters and their parents thought would be there. This is why there's been a spate of articles in the popular press examining the worth of college education. The ROI has become steadily worse over the decades, as salaries of college grads (the R part of the ROI) have stagnated, if not fallen, and certain degrees have become almost worthless in terms of earning potential (e.g., humanities and social science degrees) vis-a-vis just holding a high school diploma. Meanwhile, I (investment part) of the ROI has steadily gone up in real terms.

Secondly he may be right to say a master's is now necessary -- but omits to mention it may not be sufficient. Big difference. A graduate degree is less a passport to high earnings and real career today than a mere hunting licence.

Bill Gross: "College is Worthless"

A mind is a precious thing to waste, so why are millions of America’s students wasting theirs by going to college? All of us who have been there know an undergraduate education is primarily a four year vacation interrupted by periodic bouts of cramming or Google plagiarizing, but at least it used to serve a purpose. It weeded out underachievers and proved at a minimum that you could pass an SAT test. For those who made it to the good schools, it proved that your parents had enough money to either bribe administrators or hire SAT tutors to increase your score by 500 points. And a degree represented that the graduate could “party hearty” for long stretches of time and establish social networking skills that would prove invaluable later on at office cocktail parties or interactively via Facebook. College was great as long as the jobs were there.

Conclusion to ponder: American citizens and its universities have experienced an ivy-laden ivory tower for the past half century. Students, however, can no longer assume that a four year degree will be the golden ticket to a good job in a global economy that cares little for their social networking skills and more about what their labor is worth on the global marketplace.

It is becoming obvious that the 2012 election will be fought on a battlefield of job creation. A 9.1% official unemployment rate, and a number nearly double that when discouraged and part-time workers are included in the rolls, portend an angry and disillusioned electorate, which will include millions of jobless college graduates ill-trained to compete in the global marketplace. Over the past 10 years under both Democratic and Republican administrations, only 1.8 million jobs have been created while the available labor force has grown by over 15 million. It is clear, however, that neither party has an awareness of the why or the wherefores of how to put America back to work again. Few economic advisors from either party ever mention structural long-term disconnects in employment – a recognition that cyclical influences will no longer dominate the U.S. labor market. Manufacturing and goods exports have ceded enormous ground to China and other developing labor markets, as America’s reliance on services and high tech innovation has exposed gaping holes in an historically successful model.

The past several decades have witnessed an erosion of our manufacturing base in exchange for a reliance on wealth creation via financial assets. Now, as that road approaches a dead-end cul-de-sac via interest rates that can go no lower, we are left untrained, underinvested and overindebted relative to our global competitors. The precipitating cause of our structural employment break is both internal neglect and external competition. Blame us. Blame them. There’s plenty of blame to go around.

Good video here.

By the way, I think I just saw some footage of a Baruch graduation ceremony about 30 minutes into the video.

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