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Posted at 3:06 PM ET, 05/27/2010

Sharp critique of for-profit ed companies

By Valerie Strauss

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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By Valerie Strauss  | 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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Comments

And guess what these for-profit companies have their sights set on next?

Is there any mystery about why hedge funders, big banks, and billionaire-run foundations are pushing an agenda of

- more charters and more "choice"
- replacing teachers with robots
- more testing and evaluation of teachers based on the results
- shutting down "failing" neighborhood schools
- nonstop anti-union propaganda?

Need one be cynical to perceive all their charitable "contributions" for these things as investments to win themselves a slice of the K-12 education pie?

Posted by: dz159 | May 27, 2010 10:20 PM | Report abuse

As dz159 wrote:

"Is there any mystery about why hedge funders, big banks, and billionaire-run foundations are pushing an agenda..." of supporting for-profit ed companies and focusing on the negative.

These people are smart(and have more business savvy than most educators). They have heard and read the anti-public school rhetoric in the media...even the White House. They know how to brand a product to maximixe their returns.

I call it the "Prostituting of America's Public Schools" (although I don't generally use such a polite term, but when I have used that term, my comments were blocked).

If these for-profit schools are as successful as their proponents want all of us to believe, then why aren't public schools adopting their instructional strategies? Could it be that the politicians whose pockets these folks line are preventing the public schools from making the changes we all know need to be made?


Posted by: ilcn | May 28, 2010 8:49 AM | Report abuse

This is really sobering. Although he addresses Title IV post-secondary schools, it's a short step to expand into the K-12 market. It's very clear how the map has already been plotted.

A close friend with many years of teaching writing at the university level taught English for a couple of months for a degree mill in the Hampton Roads area. They were very focused on keeping enrollment up, to the point where he got in trouble for not giving high grades to students who basically did nothing. The attitude was "I'm here, give me a good grade so I can get a job." The few students who honestly wanted to improve themselves were being cheated. Everything about the place was academically unprofessional and geared towards packing the rooms with bodies. He quit in disgust after a few weeks and now works in the private sector (non-education) making much more money than he ever could have made in academia.

Posted by: aed3 | May 28, 2010 11:42 AM | Report abuse

I have a friend who was a recruiter for a major online university. He needed to bring in a large # of leads (name, phone and email) every week and was told to go to grocery stores in NE/SE DC and PG County. He knew that many of the people he met would never complete any degree, but his task was turn in hundreds of phone numbers/names a week regardless of a person's aptitude, academic background, or credit score. It was all about meeting the quota and forwarding phone numbers to pass to the call center. He was paid by the # of leads generated on those sign-up cards.

Posted by: palmyra | May 28, 2010 12:13 PM | Report abuse

Valerie Strauss--

I've heard that WaPo derives most of its profit from Kaplan, not the paper. I salute you for your bravery in -- however marginally -- bringing attention to WaPo's relationship with Kaplan.

Courage.

Posted by: nbahn | May 28, 2010 2:27 PM | Report abuse

It was likely BP's putting profit before safety and quality that has produced the blunder in the Gulf. Let's hope that for- profit education, financed by taxpayers dollars, remembers the reasons for education in the first place; and are genunine in the analysis of results. Unfortunately, the benefits of education are long term in nature and there is more of an immediacy of the need for ptofits.

Posted by: CalP | May 28, 2010 4:29 PM | Report abuse

We are well aware of the corruption and hw extensive it is. We are also well aware of the use of the non profit corporate status to hide the for-profit nature of this outrageous business.

we will expose all those involved in good time but suffice it to say Michelle Rhee and the charter school sham will be the first to go.

Posted by: JohnAdams1 | May 28, 2010 6:16 PM | Report abuse

Foretelling of the future for voucher programs? That is, tax payer sponsored gouging in the name of 'choice'.

Posted by: shhhhh | May 28, 2010 9:08 PM | Report abuse

From Philly on Microsoft's "School of the Future":
When the High School of the Future opened amid the rolling green grass of Fairmount Park four years ago, many parents eagerly sought a place there for their children.

On its first day, Sept. 7, 2006, former school district superintendent Paul Vallas and former Mayor John Street rang bells outside the school in Parkside to start the new year.

It was an expansive, space-age-looking facility - dubbed the "Microsoft School" because the company helped design it - where every student was issued laptops and textbooks weren't required.

Now, Ivy Dixon, whose daughter Soleil is among the first group of seniors to graduate after spending four years there, said she and her daughter feel cheated.

"There are too many learners at the school whose college options are limited due to the lack of solid foundations in core subject matters delivered by the majority of inexperienced educators," Dixon told the School Reform Commission yesterday.

http://www.philly.com/philly/education/94996764.html

Posted by: edlharris | May 29, 2010 12:09 AM | Report abuse

Got to address the same concerns with the traditional colleges -- all they want is money, too..see the article at the link below from today's NY Times --

http://www.nytimes.com/2010/05/29/your-money/student-loans/29money.html?hpw

Posted by: knoxelcomcastnet | May 29, 2010 5:46 AM | Report abuse

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