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Comment by Unbeliever69 | Hacker News Reader

When the discontinuation of federal prison article came up on hacker news I commented, "Now if we could only outlaw for-profit schools!"

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What's wrong with someone educating people and making a profit while doing it?

The issue is that the profit comes before the education. These institutions prey on low-income people who for whatever reason couldn't get into public institutions. When the students graduate they have huge debts, typically larger than those that went to public institutions, but worse their degrees are often worthless. The accreditation for these institutions often come from companies owned by the same corporation. The accreditation means nothing so your credits can't transfer. Do a google search, you'll find article after article about students who went to these schools trying to get a better life and just made their lives worse. They went from poor, to hopelessly poor. Whereas before they were poor with bad job prospects they're now poor with bad job prospects and HUGE debts. They often just stop paying them. It's one of the biggest contributors to our student debt problem.

>The issue is that the profit comes before the education. ...

That sounds like a fully-general argument against provision of any good by a for-profit business: "The issue with private farms is that the profit comes before the food." "The issue with private semiconductors is the profit comes before the computational efficiency."

True, profits do bring the potential for fraud, abuse, etc., but obviously there are at least some situations where that can all be contained. What's special about education per se?

You cite abuses, but are those artifacts of the for-profit part, or the "students generally don't have good information about what a given school will do for their career"? I mean, there are lots of cases of students at "non-profit" public universities who are drowning in debt from a worthless degree.

>What's special about education per se?

In the US? The fact that it gets paid for with loans that aren't dischargeable in bankruptcy.

I meant, what's special in terms of profits skewing incentives.

I would argue it's a combination of the high cost (we aren't talking about people ending up with a few thousand dollars of debt), the fact that it might take years to determine if any given school is actually not terrible, and the fact that "education" itself is given special considerations over many products and services.

The problem with for-profit prisons is the misalignment between what's good for profit and what's good for prisoners. Where the prisoners can't "vote with their wallets" to counter-balance this misalignment.

I don't see a similar issue with for-profit schools. In order to attract students they need to to provide good education and foster a good reputation.

Hmm, is that really true though? If so, ideally, people would choose an institute that teaches them as well as possible for as little as possible money. But that's not at all what people do: they prefer prestigious schools that (hopefully) lead to good job prospects.

Prestige is a funny thing - the fact that a school is hard to get into and expensive may well raise prestige, regardless of educational outcomes.

Don't forget, it's very hard for students and (future) employers/investors/business partners to tell how good an education is. It's quite difficult even for the institutes themselves and any oversight that may exist.

That means incentives aren't as simple as you suggest. Sure, at some very, very long term horizon, better education helps an institute. But that may well be multiple generations away; much too far away to work well in an open market. Especially since there is so much other noise that can be optimized instead.

By constrast, the state's interest in decent education is much more straighforward (not that the politicians making the choices have their incentives straight, but that's another story). In particular, whereas it's clearly in the for-profit institutes interest to milk students no matter how and no matter how unfairly. This is a normal risk in any organisation - but the point is that for-profit organisations aren't magic optimization bullets. These downsides don't need to be a problem, but they do need to be dealt with, and there needs to be some upside to the deal too. What's the upside here?

I think you're clearly right for short-enough courses with clearly demonstrable and measurable outcomes. And I bet you're right in the abstract too, in the sense that "it should be possible to align incentives such that..." - but I'm not sure it holds given the current way education is structured.

Real-world evidence certainly doesn't seem to suggest profit-motive works very well here.

Not to mention that for-profit schools appeal to (some would say prey upon) students from blue collar or lower class families for whom ANY degree seems worth whatever you might pay for it.

If you're from generations of laborers who have never gone to college, then taking out a predatory loan to go to a predatory school that gives you a somewhat useless degree seems like a good idea at first glance.

It doesn't seem like the selectivity/prestige effect applies to people who go to for-profit schools. Since prestige is subjective, for-profit schools can market themselves as prestigious while expanding to provide seats to anyone who can obtain a student loan. The government should not be complicit in this deception, hence the action here.

> I don't see a similar issue with for-profit schools. In order to attract students they need to to provide good education and foster a good reputation.

Or they just need to dupe people who don't know any better.

A lot of the people who end up at these places are poor, don't have friends or relatives with college degrees, didn't get good advice, and simply don't know how to recognize a scam. Now they have six figures of student loan debt they can't get rid of, and a low-prestige degree that many employers won't even consider.

I can't rigorously prove it, but I'm pretty sure the people complaining about for-profit prisons wouldn't change their minds even if there were a system of "staple $N/month to every prisoner and they can go to whatever private prison will have them".

After all, we have basically that system for for-profit schools and ...

All for profit schools are pretty terrible. I am assuming this is true of for profit prisons as well. Having to choose among different terrible choices doesn't seem like a solution.

Typically, it's the potential to choose that leads to improvement, across a wide range of goods. To claim that it's all different for schools, you'd need to demonstrate a general model of the dynamics.

And FWIW, the coding bootcamp I went to (for profit) did more for my career than my non-profit university.

Nothing, if they also accept the downside risk of financing a crap education. The default rates for many private universities are astounding - and the taxpayer helps backstop them from losses via federal student loans.

Exactly, there are a lot of good private universities.

In the USA, private does not mean for-profit. The good private universities are still non-profit.

There's nothing wrong with for-profit schools in theory. It's a socio-economic problem. There's already so much money flowing through the US university system that the vast majority of for-profit schools are predatory institutions targeting lower-class, under-educated people. Their primary business model is to convince students to take out loans to pay for a white-collar education that won't make them any more employable.

The "good private universities" may be "non-profit" in some strict sense, but in the case of the big Ivies (e.g., Harvard, my alma mater), they could be described as a hedge fund with, oh, yes, by the way, a school attached, or, alternatively, as a huge Federally-funded research institution.

The educational part seems to be a facade for the big money/big institution part.

(Bitter much? Sure. ;-)

What good is a "hedge fund" you can't take the money out of? The Ivies have massive endowments, but that money can only be spent on the school.

I went to a school like that. They provided grant-only aid to cover tuition and living expenses for students from most of the US income distribution. I think you will have a harder time finding sob stories about my classmates (at least since the no-loan policies were enacted).

> There's nothing wrong with for-profit schools in theory.

Absolutely.

The problem is our university system as it stands is now really structured for profitability. The system was originally designed to cater to wealthy students and when public universities came to be, they kept the same model, and used tax subsidies to maintain it.

An effective for-profit education system would look nothing like our current university system. But a higher education system that doesn't match our current system isn't useful for students because the majority of them are looking for degrees, not necessarily an education.

Theoretically there's nothing wrong with for-profit schools, but the current educational climate prevent them from working. For now, for-profit education really only has a place in domains that can be taught adequately in less than a year and where the student's outcome can be readily assessed.

> Their primary business model is to convince students to take out loans to pay for a white-collar education that won't make them any more employable.

I think this applies to far more schools than just private for-profits like ITT. There are many recent graduates from non-profit public schools that have mountains of debt and very little job prospects.

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