Advocates of school-voucher programs often wax eloquent about the benefits of the free market, explaining how in an open market, private for-profit schools will compete to provide the best education at the lowest cost. Some even argue against regulation of such schools, believing that market forces should be sufficient to drive out those that perform badly.
As it happens, we’ve been running a rather large experiment involving just that kind of arrangement. In 2009, 1.8 million students were enrolled in for-profit colleges around the country, up from just 365,000 just a few years ago. Most of those students are armed with what amounts to a government-funded voucher, in the form of federal student loans or Pell grants. Last year alone, students at for-profit colleges received more than $4 billion in Pell Grants and more than $20 billion in federal loans.
The Government Accountability Office has been investigating how well that money is being used. It sent undercover applicants to 15 for-profit colleges in six states and the District of Columbia, and found that “all 15 made deceptive or otherwise questionable statements” to its investigators. Thirteen of the 15 “gave our applicants deceptive or otherwise questionable information about graduation rates, guaranteed applicants jobs upon graduation, or exaggerated likely earnings.” Four colleges recommended that students perpetrate outright fraud in applying for federal aid.
GAO investigators also looked into the value that students were getting from for-profit colleges. What they found wasn’t any prettier:
“Programs at the for-profit colleges GAO tested cost substantially more for associate’s degrees and certificates than comparable degrees and certificates at public colleges nearby. A student interested in a massage therapy certificate costing $14,000 at a for-profit college was told that the program was a good value. However the same certificate from a local community college cost $520.”
One small beauty college told an undercover applicant that barbers can earn $150,000 to $250,000 a year. Another told an undercover applicant that “student loans were not like car loans because ‘no one will come after you if you don’t pay.’” As the GAO noted, “in reality, students who cannot pay their loans face fees, may damage their credit, have difficulty taking out future loans, and in most cases, bankruptcy law prohibits a student borrower from discharging a student loan.”
In fact, as the GAO found in a report a year ago, students at proprietary colleges are far more likely to default on their federal loans, costing the federal treasury billions and putting students who were trying to better themselves in a much deeper financial hole.
Clearly, these schools aren’t producing the free-market educational nirvana that voucher enthusiasts envision. In fact, rather than compete in terms of quality or value, the schools have decided that the best way to build their business and put seats into chairs is through very aggressive marketing.
In another part of their investigation, GAO undercover students went on the Web to fill out forms suggesting that they might be interested in exploring certain degree programs. The response was eye-opening:
“Within minutes of filling out forms, three prospective students received numerous phone calls from colleges. One fictitious prospective student received a phone call about enrollment within 5 minutes of registering and another 5 phone calls within the hour. Another prospective student received 2 phone calls separated only by seconds within the first 5 minutes of registering and another 3 phone calls within the hour. Within a month of using the Web sites, one student interested in business management received 182 phone calls and another student also interested in business management received 179 phone calls.”
So yes, by all means, let’s abolish “government schools,” give parents vouchers and let the free market work its wonders on behalf of America’s children. What could go wrong?