Much has been made of the recent “academic scandal” at the University of North Carolina-Chapel Hill. In which classes in the African studies department did not require weekly attendance and in some cases only a single paper was the basis for the student’s final grade. The notion that these classes never physically met was so odious to University Administration that it justified hiring outside counsel to investigate. UNC spent over $3 million dollars on this inquiry—using a former Federal Prosecutor now in private practice who billed the school $990 an hour.
An insider described the “fake classes” as a place where students “didn’t go to class . . . didn’t have to take notes, or have to stay awake . . . [and] didn’t have to meet with professors.” Buying a three million dollar sword to fall on may help some academics sleep better, or assuage the cartel like NCAA; but it fails to address a rapidly growing problem in higher education. Universities public or private, prestigious or appearing on commercials during Judge Judy, already embrace classes that don’t require attendance—the virtual ones.
If class attendance is part in parcel with academic integrity, as the UNC scandal purports, than how can schools defend their increasing reliance on online courses? Johnny Manziel, Texas A&M’s star quarterback, bragged with barely a mention in the press that his entire schedule was online, saying that he needed to only visit campus once a month. However, Johnny Manziel is the least of the taxpayer’s worries. He wasn’t financing his education with federally backed, non-dischargeable loans. He was on scholarship at a reputable university, not to mention that the revenue he generated for Texas A&M drastically exceeds the fair market value of any degree the school could ever give him.
The American public university system is largely responsible for social mobility and a middle class that is the envy of the world. Yet public universities are drawn like moths to the blue light of the easy money online courses represent. To be sure, these schools are grappling with revenue shortfalls beyond their control. Ultimately, universities operating under the assumption that discussion board posts, and online forums are equivalent to interpersonal communication in a real classroom are just destroying the human capital of their state.
It’s the for-profit online “schools” that will eventually destroy us all. They will shatter the federal student loan system, the system that makes social mobility via a brick and mortar university possible. The Department of Education publishes the default rates for taxpayer subsidized student loans in a manner searchable by school. You would be hard pressed to find a financial institution or individual investor that would tolerate a perpetual default rate of greater than 20%. But you need look no further than the Department of Education.
The University of Phoenix, Devry University, and Colorado Technical University: all online for-profit schools have three-year, essentially short-term, student loan default rates of at or above 20%. No longer-term data is available. Florida State University, a random and only moderately selective public university has a more typical default rate of about 5%. For some broader financial perspective, mortgages at the height of the sub-prime collapse (2008) were only defaulting at a rate of 4.5%. And as some have pointed out, at least a mortgage is collateralized with real property.
Meanwhile, the University of Phoenix has the gall to stiff taxpayers with the bill for 20% of its customers/students, while it spends $154 million dollars buying the naming rights to the Arizona Cardinals NFL stadium. If the Cardinals pick up Johnny Manziel, he’ll certainly feel welcome. As Paul Campos poignantly described for-profit colleges in a similar context, “[they] are a capitalist dream of private profits [upfront tuition via loans] and socialized losses [the treasury eats the default].”
Legislators should use the administrative state to intervene and end this madness. Unfortunately, many in Congress, like the Cardinals stadium—are bought and paid for, via campaign contributions from online for-profit schools. The University of Phoenix’s tuition is $14,550, startling when compared to the cost of a brick and mortar state university like UNC-Chapel Hill whose undergraduate in-state tuition and fees are just $8,374. Those numbers are put into sharp relief when you consider that today’s modern universities are practically self-governing nation-states.
Most have their own police force, healthcare facilities, giant physical infrastructure, massive telecommunications network, athletics, sexual assault prevention, binge drinking prevention, and even entire cafeteria’s dedicated to serving only students with peanut allergies. At this point you may think: University of Phoenix is a giant diploma mill, trading federally backed loan dollars for nearly worthless degrees. Shockingly, you underestimate its boot camp like attrition. There are more people who finish Navy Seal training than graduate on time from the University of Phoenix. Only 19% of University of Phoenix undergraduates graduate on time—far worse than ultra rigorous MIT or notorious party school Arizona State.
Less than a quarter of those beautiful birds rising from the ashes, will take flight on time. Where they land is a bigger question, but the bill lands with the U.S. treasury. By the way, University of Phoenix alone has an enrollment of 307,871—making it by far the largest college in America. For comparison, it has nearly 100,000 more enrollees than the number of students attending all of North Carolina’s public universities combined.
There is a circumscribed place for online education. No one wants to deny the working single-mother the opportunity to climb one more rung up the economic ladder, and provide a better life for her kids—that is the American dream. If online courses are the only alternative than they should be offered at a cost that makes them a rational investment. President Obama’s proposal for free community college could accomplish that, in the long run entirely socializing community college may be more cost effective than allowing unfettered borrowing with high default rates.
The Department of Education’s willingness to lend large sums of money for online college has injected moral hazard into higher education. There is a marketing arms race among these charlatan institutions with the goal of finding enough warm bodies to borrow money before the system breaks, or Congress wises up and shuts off the loan faucet.
The DOE and Congress continue to be feckless, while sub-prime for-profit institutions sell college degrees to the naïve and idealistic, like a $40,000 Mary-Kay starter kit.
Ultimately, it may fall to the unelected branch of government to put a stop to the predation. The Courts, however, approach the problem with the most limited regulatory toolbox. Elizabeth Warren makes a good point about needing to lower student loan interest rates; unfortunately, interest rates reflect the risk of the loan. Shuttering the online snake-oil salesmen seems like a great way to eliminate risk in the system. The irony will be if we save the loan program in time for starry-eyed students to attend our prestigious state universities via the keyboard and the glowing screen, instead of the grassy quad and wooden desk. Maybe they will be taught [online] by Dr. Shaquille O’ Neal. In the end, just when you think things can’t get any worse, as usual, look to Florida—as they begin to mainstream online kindergarten.