For-Profit Colleges, Fraud, and Non-Profit Colleges
Note: I have previous posted about how poorly colleges prepare graduates for the realities of getting a job and succeeding in a career ("Colleges Admit Inadequate Career Preparation" December 29, 2021).
For-Profit College Fraud
During the Obama years, Corinthian Colleges and many other For-Profit Colleges were closed down for various misrepresentations, many of which centered on deceptive recruiting and false promises "about their job prospects and likely salaries, and about their eligibility for specific jobs." Fraud is wrong.
Some Consequences
California's Attorney General led the way, winning a $1.1 Billion (default) decision. Besides destroying many jobs (depending on various sources, about 16,000 teachers and staff), it plunged Corinthian Colleges into bankruptcy.
Then in June 2015, the United States Department of Education made findings that entitled former Corinthian students to debt relief. What was the total student loan forgiveness? Although different figures have been reported, initially in March 2015 "the Consumer Financial Protection Bureau and the Department of Education announced that they were forgiving almost $500 million of these private student loans...." Those forgiven loans represent half a billion dollars in evaporated assets.
Students' Degrees Derailed
It is unknown how many thousand students had their college career (and degrees) cut short by governmental action. (Reported estimates at that time varied between 16,000 and 70,000.) Basically, they had to start over. The government had no plan for those students -- even if satisfied with their education at Corinthian -- to recover from their "mistake" of attending these colleges.
Distraction from Traditional College's Failings
The further consequence is that while "for-profit" colleges were smeared as fraudulent, it distracted many from the failings of traditional non-profit colleges.
- It distracted attention away from the serious non-graduation rates at many colleges (almost 40% don't finish a degree in SIX years!).
- It distracted attention away from the student debt explosion (currently $1.6 Trillion) fueled primarily by attending traditional "non-profit" colleges and universities.
Are Non-Profit Colleges Honest?
Are non-profit public and private colleges "honest" about careers?
Nearly ALL avoid making promises about job prospects. So they're not being "dishonest." Yet, they provide poor career preparation. (You have to give credit for those colleges that admit they're not very helpful.) None are prosecuted for that omission, or failure.
Non-profit public and private colleges side-step any representation or promises of careers. They simply acknowledge that an accredited degree is "required" for many professional careers. It may be "necessary" for some, yet not sufficient by itself for getting hired or for career success. That's neither a guarantee; nor even an honest assessment of your likelihood of being hired. Buyer beware.
Overselling College's "Value"
Is "over-selling" a college degree -- like a "guaranteed career" -- fraudulent? Yes, it is.
Many colleges tout the "value of a College Degree" by citing "average" salaries; or "average unemployment" by education level, such as Northeastern University. But within those average statistics, there are vast differences between jobs and industries. The "Value Propaganda" never discloses the best and worst cases.
The San Francisco Federal Reserve's article is typical. Here is the kernel of their argument, quoted:
"The average college graduate paying annual tuition of about $20,000 can recoup the costs of schooling by age 40. After that, the difference between earnings continues such that the average college graduate earns over $800,000 more than the average high school graduate by retirement age."
Let's examine their statement.
- The "average college graduate"? What degree did they get? Do you think all degrees pay equally well? Are there are NO differences by institution, geography, gender, or race?
- ... annual tuition of about $20,000. What, no living expenses? Add several thousand per year.
- ... can "recoup the costs" of schooling by age 40. It doesn't say you're done paying the loans, but that you've only earned back the costs! Wow, the plantation has moved upscale; now it's called a college loan! And that's only for "average" tuition levels, not the highest.
- ... by retirement age Which age do they mean? Social Security's definition? Why not state that age?
Ignored Assumptions
- Unstated assumption #1: They are silent about "under-employment" -- which is fairly common with many college grads. (See below)
- Unstated assumption #2: They are silent about full-time work vs. elective "breaks in employment" (e.g.: time out for children or family).
- They supposedly excluded people with more than a four-year degree. That excludes many "Professional" areas; thereby excluding higher educational costs (and potentially higher salaries) from throwing off the "recouping the costs." If a student wants to pursue such a career, their statement doesn't cover it.
Let's examine their "limitations" and "weasel words" (buried further down the article).
- They assume the degree takes "four years." Only about 45% of graduates manage that. The U.S. Department of Education's College Scorecard allows eight years to graduate!
- "... Annual tuition is the same all four years." Really? Do you believe that? Living expenses also vary widely.
- "A potential shortcoming of the results in Figure 1 is that they combine the earnings outcomes for all college graduates, regardless of when [what year] they earned a degree." So it's less reliable for recent years.
- "We calculate the cost of college as four years of tuition plus the earnings missed from choosing not to enter the workforce." No living expenses? Incredible!
- "Of course, some of the variation in earnings between those with and without a college degree could reflect other differences." Meaning: a degree might NOT be causing the earnings difference!
- "Although some colleges cost more, there is no definitive evidence that they produce far superior results for all students (Dale and Krueger 2011)." A blow to expensive colleges!
- "Although other individual factors* might affect the net value of a college education, earning a degree clearly remains a good investment for most young people." (*Meaning: NOT related to a degree!)
I hope I've demonstrated that the S.F. Fed's article is riddled with misleading and unrealistic assumptions. Nobody spending a few minutes of research (my links provided) could accept their "conclusion" as reliable, meaningful, or realistic. Buyer beware.
The bigger question is why The Fed is selling college as a "absolute good" with such flawed assumptions? Obviously, the Fed sees the institution of college worthy of promoting by all means -- even intellectual dishonesty. The Fed has created a blanket political endorsement.
A More Honest and Realistic Approach?
Most people don't typically earn a "generic" degree. (Only 11.1% of graduates earn a "4-year" degree in "liberal arts and sciences," and many of those have minors or concentrations.) Most college graduates specialize in a specific discipline, a major or minor, professional degrees, or a certificate track. I like the idea of an investment's payback. It's a basic Cost-Benefit analysis. So why didn't The Fed's report focus on the degree areas with the best and worst paybacks?
Under-employed Graduates
Typically, colleges do NOT publicize "Under-employment" among their graduates. The overall average Underemployment is 42.5% (Statista 2022). Criminal Justice leads the pack (74.3%) followed by Performing Arts (67.6%), Ag (60.3) and Leisure and Hospitality (59.8% -- obviously due to Covid-19 shutdowns). Predictably, the lowest under-employment is in nursing (12.1%) followed by various categories of Education and Engineering.
But under-employment doesn't just happen with Four-Year degrees. The Atlantic's Exposé on underemployment in the country's top law schools is a great example. Fraud-by-omission is wrong!
Colleges are not persecuted for dishing out "unemployable" degrees with dubious market value. In that case, these colleges are given a "pass" since the students "chose" degrees that were "interesting" to them. Currently, colleges are not required to represent the "job-market value" of degrees. Buyer beware.
High School's Omissions
The "real fraud" is how college education is "sold" in public schools before students enroll in college. High schools routinely sell college as some sort of life goal, and a virtual "guarantee" for getting a great job and earnings. They also use the selective "Value of a College Degree" examples (like the Fed's, above).
They ignore underemployment, or automation job-loss. They are typically silent on college degree non-completion rates. They downplay and ignore high-paying non-degree career alternatives.
High Schools are the pipeline for the colleges; and the colleges are "insulated" from any claims of fraud. Schools "sell sell college" to unsophisticated children who know neither (1) the true college costs, nor (2) the potential salaries, nor (3) the likelihood of benefiting from a degree. Fraud-by-omission is wrong.
Conclusion
I didn't just demolish the Fed's Value of College "study" for fun. (Okay, it was fun; and way too easy.) The most important point is ditching the "ANY-degree-is-okay" mentality. College should be approached as a more targeted method toward viable Careers; PLUS obtaining skills with proven market value that are "transportable" to other well-paying career alternatives.
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Call to Action
First, your child needs to have realistic career ideas. Then determine if college is required.
College is an expensive way to find out they:
Didn't need the degree
Couldn't finish the degree (with lots of debt; or less retirement for you -- or both)
Can't find a job in their major (wasted degree?)
Hate the career resulting from the degree
Can't succeed because they lack skills or aptitudes not teachable by "classes."
Each of the above "stages" has probabilities, not guarantees! Many high school graduates fail in one of those five critical areas.
Do you want to gamble years of paying their college tuition for a poor career bet?
Outsmart College and the Contribution Project will provide the answers! Stay tuned for the next post.
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If you are interested in REAL career prep for your child, contact me NOW! (Click on "About Me")
