The Washington Post’s lengthy account of how the Washington Post made a huge, successful, and increasingly troubled bet on higher education isn’t as hard-hitting as it might have been (a common weakness of self-exposes, I’m guessing), but it provides a clear, well-documented business narrative that nicely encompasses the last decade of federal policy toward the for-profit sector. And that’s how I think the Kaplan story is best understood: as an account of systematic, bipartisan policy failure by federal policymakers in Congress and multiple presidential administrations.
For a long time there have been only two things standing between bad actors and the vast billions of public dollars provide by the federal government through student financial aid. The first thing is the strong value system that governs traditional public and private non-profit colleges, as expressed through the voluntary accreditation system.
Accreditation has always been a light-touch (albeit time consuming) process for already accredited institutions, with dire consequences for students at poorly-run colleges. But for the most part it’s been good enough to prevent mainstream institutions from running amok, mostly because they’re not inclined to run amok in the first place. The president of a liberal arts college isn’t going to set up a boiler room full of shady recruiters, because that’s embarrassing and déclassé and doesn’t help you become president of a better liberal arts college. As a friend of mine once put it, “until recently the main risk in higher education was incompetence, not criminality.”
The liberal-arts college president is also not building a boiler room because of the second thing: Until recently, colleges were place-bound and expensive to scale. Even national chains like Strayer and Phoenix with standardized, low-cost facility and faculty models still had to rent space and fill them with actual people. So if a bad actor bought a small accredited college in Iowa, the problem was limited to a small number of students in Iowa.
The Internet changed all of that. Suddenly, as long as you were accredited somewhere you could be in business everywhere. Meanwhile, traditional colleges were in the midst of their insane multi-decade campaign to make higher education unaffordable, requiring big increases in federal financial aid. Firms like the Washington Post Company saw an opportunity to expand rapidly and profitably and took it.
The smart thing would have been for the federal government to recognize the enhanced risks of the new reality and regulate federal aid programs accordingly. Instead, aided by “an assistant secretary for postsecondary education who had been a lobbyist for the biggest for-profit education company”—isn’t that a phrase that sums up the 2000s in a nutshell—and aggressive lobbying, Congress did exactly the opposite. Restrictions on paying college recruiters based on the number of students enrolled were eased, the cap on the percentage of revenues coming from federal sources was raised, and Internet-only colleges were given open access to the financial-aid system as long they were accredited by someone, somewhere. Meanwhile, the biggest for-profits went public, vastly increasing their access to the capital needed to recruit new students and creating commensurate pressures to constantly grow enrollment and revenue.
The results were predictable. The Post bears total ethical responsibility for the lapses of Kaplan U., from the “who cares whether you pay your loans back” pitches to the manuals instructing recruiters to exploit “FUD”—fear, uncertainty, and doubt—among servicemen and women whose federal military education benefits, incredibly, counted (thanks to more lobbying) among the minimum 10 percent of revenues colleges were required to obtain from sources other than the federal government. Kaplan has a lot of interesting ideas when it comes to online higher education and I hope it finds a way to make them work without exploiting students or the taxpayer. But it can’t escape culpability for its sins and excess.
That said, there’s a reason that the government doesn’t rely exclusively on the ethical compasses of gigantic for-profit corporations when setting policy. Dump a huge pile of hundred dollar bills in front of the Washington Monument, hire a few ill-trained security guards to stand around it during the day but not the night, and it’s no surprise what happens next. Even good people and good organizations can be caught by temptation and exigency. As the Obama administration works to finalize its new regulations of the for-profit industry amid the same kind of profit-fueled lobbying blitz that caused this mess in the first place, it should keep that in mind.