LESSONS FROM THE FALL: CONSUMER PROTECTION AND THE FOR-PROFIT HIGHER EDUCATION INDUSTRY: AN ANALYSIS OF THE PROPOSED “PROTECTING STUDENTS FROM WORTHLESS DEGREES ACT” AND ITS ECONOMIC IMPACT

On February 24, 2009 before a Joint Session of Congress, President Barack Obama stated:
“. . . [D]ropping out of high school is no longer an option. It’s not just quitting on yourself; it’s quitting on your country, and this country needs and values the talents of every American. That’s why we will support—we will provide the support necessary for all you Americans to complete college and meet a new goal. By 2020, America will once again have the highest proportion of college graduates in the world. That is a goal we can meet.”1

This is undoubtedly a noble goal, one that will ensure this nation’s continued prosperity. But the President failed to articulate who would be providing those college degrees. To put it bluntly, America’s non-profit public and private colleges and universities are simply not doing enough to make the President’s goal a reality.2 In fact, the Office of Postsecondary Education (a division of the Department of Education) has stated explicitly that “[t]he president’s goal cannot be achieved without a healthy and productive higher education for-profit sector.”3 This failure on the part of non-profit institutions is not new, and for decades the for-profit higher education market has been growing exponentially. The President wishes the United States to have the highest proportion of college graduates in the world. But what will those graduates’ degrees be worth? The fact of the matter is that, for lack of a better metaphor, many degrees from for profit colleges and universities are not worth the paper they are printed on. What is more, students (both at non-profit and for-profit institutions) are racking up a larger and larger debt load to get their hands on a college degree. 4 The problem is that, as it stands today, there is insufficient regulation and oversight for for-profit colleges and universities. Many of these institutions have found loopholes 5 to the system.

On August 1, 2012, Senate Bill 112 S. 3474, a bill entitled “Protecting Students from Worthless Degrees Act,” was introduced. The relevant background into for-profits colleges and universities and the regulatory scheme under which they operate will be addressed and particular attention will be paid in comparing for-profit colleges and universities with their non-profit counter parts. This paper will primarily address two-year associates and four-year bachelor degree programs. For brevity’s sake, this not will not address graduate programs in either the for- or non-profit setting.

Part I will look at the current student debt situation for both non-profit and for-profit colleges and universities. This will lay the framework for understanding the severity and seriousness of the current student debt bubble.
Part II will briefly discuss the history of for-profit colleges and universities to understand how these schools grew to the enormous commercial enterprises that they are today. This section will also address the failure of non-profit colleges and universities to adequately adapt to the changing needs of students. Part III will explain the current regulatory scheme surrounding for-profit institutions. Part IV will introduce and discuss the proposed legislation entitled “Protecting Students From Worthless Degrees Act” and explain why this legislation would represent a much needed strengthening of regulation of the industry.
(Noted Footnotes are over the character limit.)