THE ICEBERG

I've said plenty here over the years about online education, and plummeting enrollments at for-profit (and almost entirely online-based) universities suggest that the pool of potential student/customers is starting to see through the scam. Having an online Bachelor's degree is worse than having no college degree at all on the job market, with the added bonus of saddling you with a six-figure student loan debt for all of that non-education.

One of the largest players in the industry / racket, Corinthian Colleges, officially went belly-up on Sunday. This is not a surprise; the company has been staggering along as the Sick Man of online education for years as the investigations and financial issues mounted. Frankly it's a small miracle that they lasted as long as they did. The LA Times story on the closure notes that this strands CC's currently 78,000 students and potentially makes them eligible for Federal student loan forgiveness. And my strongest reaction to this story was the realization that, holy crap, this dying mess of an institution (in an industry in overall decline) with ten solid years of horrible publicity still has 78,000 students somehow. Who in the hell are these people?

My guess is that any "real" students in that number are either people who need a degree to qualify for a higher salary level (as in civil service) and don't really care about quality, or people whose employer/etc pays for the courses and thus "Fuck it, it's free" is the dominant mindset. For the most part, though, as the California Attorney General stated:

The state’s lawsuit claims that Corinthian—which charges more than $40,000 for tuition and related fees—targets single parents who are close to the poverty level, a demographic that its internal documents describe as “composed of ‘isolated,’ ‘impatient,’ individuals with ‘low self-esteem,’ who have ‘few people in their lives who care about them’ and who are ‘stuck’ and ‘unable to see and plan well for future,’ through aggressive and persistent internet and telemarketing campaigns and through television ads on daytime shows like Jerry Springer and Maury Povich.’ ”

In other words, online degrees are marketed to the same segment of the population as payday loans and cash advances, with the most obvious difference being that a payday lender won't let you go $150,000 in the hole. Of course, the school (or "school") isn't the one fronting the cash, and that gets to the heart of what the entire business model of for-profit education is all about. It is nothing more than a conduit for shifting government money to a private business and risk and responsibility to private individuals. That's why the admissions criteria are limited to an exclusive class of potential students consisting of anyone capable of qualifying for a Federal student loan or grant. It's not difficult to see that any individual who doesn't understand that a degree from "Everest University Online" is not worth the $40,000/year Corinthian charges is, in the immortal words of Nigel Tufnel, not exactly university material.

Most of these students would be better served at a community or technical college, institutions designed to offer cheap, flexibly scheduled classes to working adults and younger people for whom traditional 4-year colleges don't make sense. Online schools are simply parasites, attaching themselves to an industry and a population of students that don't need them. That the primary expense for these companies is advertising – University of Phoenix spent nearly three quarters of a billion dollars on advertising last year – underscores how much more similar to retail and service industry firms they are than to any educational institution.

This is the tip of an iceberg, a bubble poised to burst. We will be seeing more of this in the near future, not only among online schlock merchants but also among smaller brick-and-mortar colleges. With the skyrocketing cost of college tuition and the vast numbers of marginal students being enticed to sign contracts they don't fully understand, it would take a great deal of willful blindness to fail to see the similarities to the housing market of the last decade.

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25 Responses to “THE ICEBERG”

  1. HoosierPoli Says:

    This is one of many, MANY cases where the best solution would be for the government to step in and crush these parasites. But that is as likely as a breakup of the big banks, so all I can do is shake my head with pity for the veteran I met who was doing his BA through the University of Phoenix.

  2. J. Dryden Says:

    You had me right until the final sentence. I'm going to posit, in response, that basing your business plan on "a great deal of willful blindness" is not the worst way to make a buck in this country. Fads come and go, and you do have to be able to jump from one Trojan horse to the next–Florida time shares giving way to junk bonds, Mood rings to pet rocks–but the desperate poor and the terrified (and economically imperiled) middle-class are always a good mark for something to stand between them and the hopelessness that is, in the end, the only sensible reading of their circumstances. (Well, that and armed violence against the 1%, but that's never happening, alas.)

    The chumps who went for the "buy a house, you can totally afford the low-low monthly payments that are absolutely, positively guaranteed to never go up (notaguarantee)" are still around, and they're not much smarter than they were, because the misery and terror and desperation haven't gone anywhere.

    "Hope" is the last great vulnerability of the American consumer–we have nothing else to lose. The people who funded and ran these for-profit scams may, indeed, close up shop, but if they're still able to spend that much on advertising now, imagine how much they're still making, and are socking away for their next start-up, by which they'll fleece the very same suckers.

  3. HoosierPoli Says:

    One more thing to add: education is not a bubble like housing, because you can resell a house but not a degree. Wheras the housing crisis meant a lot of people just put the keys in the mailbox and walked away, the education bubble is going to be a massive drag on the real economy for DECADES because people can't get rid of the debt or the 'asset'. People with a BA from Kaplan are going to WISH they could have spent that money on a Tampa condo in 2007.

  4. Well mostly Says:

    Some years ago the same LA Times had a piece about the enormous Motecito estate purchased by the founder of Phoenix U. Say what you will about university administrators but they are not landing in that prime little 1% play land. It takes real money to do that, not some bloated salary package but a high market value on shares of stock in a for-profit corporation.
    You have the financial and cultural model of online for-profit schools dead-on. The line on this goes back to President Reagan and his ilk. What a perfect scam all the way through the model. Too sickening for words.
    Which 'school' is next? When will the sanctimonious congressional hearings begin? And which State attorney general will be first to file cases on these rats? Stay tuned: news at eleven.

  5. c u n d gulag Says:

    78,000?

    78,000!

    Usually, it takes some TV preacher to shake that much money out of so many rubes.

  6. Sally's Dad Says:

    To J. Dryden's point; I have an acquaintance who was formally the VP of Marketing at Countrywide, who is now 'teaching' at UoP. I suppose one could argue that if you want to learn how to run a scam, who better to learn from?

  7. Brutus Says:

    I recently saw Fareed Zakaria, author of In Defense of Liberal Education, extolling the virtue of MOOCs, with which I have no experience. (I remain profoundly skeptical of distance learning.) Are online colleges more than just a bunch of MOOCs cobbled together into a bogus degree — but with high tuition? I don’t know and might appreciate an answer (or even an opinion). I’d also be curious how, exactly, the author of this blog believes the industry (higher ed.) is in overall decline. Enrollments and endowments would suggest otherwise, but actual education achievement would more than likely confirm that statement. It’s more than a throwaway remark.

  8. Jeneria Says:

    I though Ed's piece a few weeks ago about the three things that are really ruining higher education (accepting too many students, having to provide amenities for those students ranging from tutoring centers to climbing walls, and the hiring of administrators to oversee the new programs to help the under prepared) was fantastic.

    Part of that applies here. Online schools get to charge a premium for convenience and accelerated degrees, they don't have to provide resources to help the under prepared (bootstrap mentality), and they don't have to pay their faculty much because the faculty are "rewarded" with the luxury of teaching from home.

    My husband was an admin at a Phoenix ground campus and he still teaches online for them. The stories I could tell you. . .

  9. Mike Says:

    You're tempting me to short the Apollo Education Group

  10. Xulon Says:

    At the Income Tax office I work at, we got a temp worker a couple of years back who had an MBA from an online school. Besides having tens of thousands in school debt which she will not make up in income, she was not that knowledgeable and experience was not teaching her much as the season wore on. Once, we got to the end of the day and she asked what to do with her computer. "Go ahead and turn it off." we told her. She said "okay" and looked around. Finally, she pointed at the box and said "Do I push this button here?" Online Masters degree.

  11. moderateindy Says:

    Speaking of brick and mortar schools, some friends of mine went down to the alma mater recently, down in Ed's neck of the woods, Western Il Univ. It was spring break for the kids so the bars and restaurants were fairly quiet. This gave them time to speak to the local business men and a prof. The Pres of the university has been making a concerted effort at targeting low income urban kids. Being African American, I imagine his effort is sincere, and he wants to give inner city kids a chance. But I also wonder if there is an element of the Phoenix strategy at work as well. Seeing the kids as an easy source of gov't cash. He even lowered the admission standards to help in the recruiting. The problem being that he's targeting a demographic that isn't always prepared to do college work, and along with the personal financial burdens they face have a fairly high drop out rate. I'm concerned that there isn't an infrastructure in place to support kids that come from school systems in Chicago, and St Louis that aren't exactly stellar. I wonder if he sees the kids as a cash cow with guaranteed gov't money.
    His goal was to increase enrollment, unfortunately, in the long run if you have fewer students sticking around to become upper classmen you end up with a smaller student body.
    I don't care for the aspect of lowering admission standards, I think it hurts the reputation of the school. But I actually like the idea of recruiting inner city kids. I think that it is mutually beneficial to those kids, and the student body at large to get the exposure to each other. Personally, my first two years about half the guys I hung out with were black, because those were the guys that lived on my dorm floor. I found that experience invaluable, particularly having less than a dozen African Americans in my high school class of over 1000, and lets face it those kids were all middle class as well. So meeting guys from places like Chicago's Robert Taylor homes gave me a different perspective, and after hearing their stories, a hell of a lot more empathy for urban kids in general.

  12. Giant Monster Gamera Says:

    In 2004, I was told by my employer that I had to either have a degree or I'd lose my job in the next wave of cutbacks. They paid 90% of the cost of both of my degrees at UoP. While there are obvious slackers, the vast majority of people in the programs put in the work.

    Not every working adult can find the time or money to attend a traditional university. The derision directed at those of us that had to go that route is tiresome.

  13. quixote Says:

    Giant Monster, I'm pretty sure the derision isn't directed to students with no choices who do what they can. I suspect students working the system are part of the target, but far and away the biggest one is all the people unethically — even criminally — funneling money off the system.

  14. Jestbill Says:

    HAHha!

    You get a job by kissing butt or by knowing someone (and kissing butt.)
    You "qualify" for the job by having a certificate of merit.

    Neither of those two things need be connected to any ability or (other) knowledge.

    I was not born to cynicism but have had it forcibly ground into my mind.

  15. Coises Says:

    Having an online Bachelor's degree is worse than having no college degree at all on the job market

    Why would that be?

    Because people can't learn by reading and studying, but only from the magic of physical proximity to a teacher in a classroom?

    Because daily association with the community of dedicated, knowledge-thirsty students inspires one to work harder than any self-motivated person at home ever would?

    Because online universities have meaningless standards, whereas to graduate from a brick-and-mortar college you really have to know your stuff?

    Or, maybe, because the job market doesn't look at a degree to judge knowledge or skills, but for evidence that one is a member of The Club?

    I suspect the last of those, and I think that's a bigger problem than the online universities themselves. They're just exploiting the underlying derangement… in a capitalist system, someone will always show up to do that.

  16. grondo Says:

    J. Dryden: I was fascinated to read your comment, in that you vacillate between mild sympathy for the victims of these places, and sneering contempt for them as "suckers".

    Seems to me that American Society has been about the business of producing frightened, insecure workers as a matter of policy for the last 30+ years. It should then be no wonder that these workers would be isolated, easily duped, and unable to plan for their future. Given how easily Elites have hoovered up their wages and benefits, and then sent their jobs overseas, that they would feel driven by visions of being permanently left behind into such "colleges" is no surprise.

    While I'm sure you are 100% self-made, no one has ever given you a hand up, and you would never find yourself in a position of vulnerability to the forces that have relegated so many of your fellow citizens to such desperation, perhaps the very fact that you read this blog suggests you are at least aware of those forces and how much damage they've done over the decades.

    A little more humble understanding and a little less superior snark might be in order.

  17. Giant Monster Gamera Says:

    Frankly, there is a fair amount of elitism from those that have graduated the traditional way. Due to life circumstances, I was unable to attend a traditional university and it was only because my employer picked up 90% of the cost that I was able to get a Bachelor's degree before I was 40 and a Master's when I was 44. I was given a choice – either go into the program and lose your job.

    When people ask, I'm embarrassed to say where I got my degree, because it's usually met with comments about not having worked as hard as they did or having slacked off by attending many of the classes online. I'm unable to get a job with another company because my resume is going to end up at the bottom of the pile when they see "University of Phoenix" listed.

    If the institution is accreddited and you did the work, It shouldn't matter where you've gotten your degree from. That you've gone tens of thousands of dollars in debt to obtain a coveted ivy league degree shouldn't elevate you over someone that came from a less blessed background.

  18. nyncboy Says:

    "You can't dust for vomit"

  19. Katydid Says:

    @moderateindy; a few years back (before the online schools were ubiuitous), one of my supervisees was out of the inner city. The company at that time had a pretty good education reimbursement program, and she enrolled in the same college I had just graduated from. She was a hard, hard worker, and she'd been an A student in her inner-city high school, but it was obvious how underprepared she was once she got to the college. It took our entire team working with her to help her pass the semester. It's not always the fault of the students that their education is so lacking.

  20. Mo Says:

    The Asshole Factory

  21. Safety Man! Says:

    In fairness to online learning, I recently took an online class (Environmental Chemistry) from UMUC, and it was frankly hard as hell. Online learning doesn't really translate well to math or science courses imo, but I digress. My point is, the course was consistent with "real" college courses I took back at UGA (and if Ed taught there, it has to be good). I suspect that there are online degree programs out there somewhere that aren't a total scam.

  22. moderateindy Says:

    @Katydid
    That's exactly my point. It is a great idea to try to target urban kids, but less so if you don't have an infrastructure set up to help. If these kids were able to qualify to get into college, then they did the work at the high school to get the grades to qualify. But if the education itself was crappy, it's not their fault. Had there been classes that were rigorous enough that the kids were prepared for college, I have no doubt that the same kids that excelled in crappy classes, would have excelled in the better classes. But coming from a lesser academic environment, and landing in college where you have to compete with kids that had chances at a better education just seems cruel. Nearly all the black guys I hung out with were gone by junior year, and it wasn't because they were lazy or stupid. It was mostly a combination of economics, and being unprepared for the coursework because the schools that they went to were not up to par.

  23. HoosierPoli Says:

    SafteyMan!

    The important point is that there ARE distance-learning opportunities that can impart real skills. These are overwhelmingly run by pre-existing educational institutions as an expansion of a pre-existing educational infrastructure. These for-profit vultures dropping in out of nowhere are the issue.

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  25. Happy Feminist Says:

    Don't overlook the GI Bill. The profit colleges really pursue the military.