American Enterprise Institute for Public Policy Research: Obama's College Confusion President attacks schools that can fulfill his higher-ed goals

By Frederick M. Hess  |  The Daily

President Obama is passionately committed to improving higher education, but seems mightily confused about how he plans to do so.

Putting a fine point on his dilemma, just last week Obama's Justice Department filed a multibillion-dollar fraud suit against the Education Management Corp., the nation's second-largest for-profit college company, charging that it was not eligible for the $11 billion in state and federal aid. For the first time ever, the federal government sued a company based on claims that it violated federal law by paying recruiters based on students enrolled.

On one hand, the president has told Congress, "Every American will need to get more than a high school diploma." This calls for getting more students into post-secondary education.

On the other hand, there's the EMC lawsuit, the Department of Education's push for "gainful employment" regulation that threatens to stifle for-profit institutions whose graduates don't earn enough, and the administration's public relations offensive against for-profit providers. All of these moves seemingly have targeted those colleges and programs that have fueled the growth in undergraduate enrollment during the past decade.

Between 2000 and 2009, for-profit institutions increased enrollment by 300 percent, while public colleges and universities grew by 27 percent. For-profits have rapidly grown capacity and customized services for nontraditional students, even as public colleges and universities have shown little appetite for revamping established routines.

Reflecting the president's confused stance, Obama ally and Senate education committee chairman Tom Harkin has blasted for-profit growth, charging, "The vast majority of for-profit schools have prioritized growth over education … So it should not surprise us that educating students is taking a backseat to just getting more bodies in the door."

Secretary of Education Arne Duncan has voiced concerns that too many students are enrolling in for-profit colleges or taking loans to pursue degrees they won't finish.

Duncan's stance gives these colleges good reason to start getting much pickier about whom they serve. This is why some operators are starting to express more interest in turning away students who look like bad risks--you know, like applicants with spotty work histories, or those from communities with lousy labor markets.

One reason the for-profits don't post great statistics is that they serve a nontraditional population, made up disproportionately of students lacking the academic credentials sought by four-year institutions. For instance, black and Hispanic students make up 28 percent of undergraduates nationally, but represent nearly half of students in the for-profit sector. Fifty-four percent of students in for-profit two-year colleges are classified as "high-risk," compared to 36 percent in traditional community colleges.

Nonetheless, despite Harkin's claims, for-profits on the whole appear to be serving needy students relatively well. U.S. Department of Education data show that graduates of private-sector college programs that last two years or less report a 50 percent increase in annual incomes, from about $14,700 before enrollment to $22,500 after graduation.

Perhaps students should just go to public community college instead, avoiding the need for for-profits. Unfortunately, where for-profits are growing like kudzu, community colleges are turning away students. In California, for instance, the community college system turned away 140,000 potential students this year.

Why would financially pressed community colleges turn away students, given that more students bring more dollars? After all, the Department of Justice fears that for-profits are pursuing students too aggressively. However, while community colleges are often thought to be cheap, they're only cheap for the students--not taxpayers. California's community colleges cost students $1,080 per year, but they also cost the state another $5,000 in subsidies. When those state subsidies aren't forthcoming, community colleges slam the doors on would-be students.

It's the for-profits that have a selfish, practical incentive to find ways to add students, even those with families, obligations and unpredictable schedules. Of course, this aggressive competition can result in unseemly, unsavory or outright fraudulent behavior--but you'd think a president championing post-secondary access would be a lot less willing to toss out the baby along with the bathwater.

Obama's current stance amounts to an unfortunate assault on the only institutions eager to help fulfill his grand ambitions. If you've ever tried to drive a car with one foot on the gas and one foot on the brake, you have an idea of the problem with the president's higher education agenda.

Frederick M. Hess is a resident scholar and director of Education Policy Studies at AEI.