Sharp critique of for-profit ed companies
The for-profit higher education industry came under withering attack Wednesday from a man who understands better than most how to make money: Steven Eisman, the Wall Street trader who starred in Michael Lewis’s book, “The Big Short,” as the man who predicted the country’s financial crash and invested in a way to take advantage of the crisis.
Eisman gave a speech Wednesday at the Ira Sohn Investment Research Conference, an exclusive gathering of financial analysts, in which he called the industry “socially destructive and morally bankrupt.”
InsideHigherEducation.com reported on the speech, and has the written version of the speech here.
"Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the sub-prime mortgage industry," said Eisman, of FrontPoint Financial Services Fund. "I was wrong. The for-profit education industry has proven equal to the task."
Eisman detailed the sector’s enormous profitability and what he called its questionable quality. He said that in the past decade “the for-profit education industry has grown 5-10 times the historical rate of traditional post secondary education.”
“As of 2009, the industry had almost 10 percent of the enrolled students but claimed nearly 25 percent of the $89 billion of Federal Title IV student loans and grant disbursements. At the current pace of growth, for-profit schools will draw 40 percent of all Title IV aid in 10 years.
“How has this been allowed to happen?
“The simple answer is that they’ve hired every lobbyist in Washington D.C. There has been a revolving door between the people who work or lobby for this industry and the halls of government.”
He analyzes five for-profit education companies, including The Washington Post, which owns Kaplan, a for-profit education company.
Though some of it is technical, the speech is interesting reading.
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| May 27, 2010; 3:06 PM ET
Categories: Higher Education | Tags: for-profit education, for-profit higher education, steven eisman and for-profit education, steven eisman speech, the big short
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