Moneybox

A For-Profit College Company Paid Bill Clinton Millions of Dollars. Is That a Scandal?

Can I kick it? Yes, you can! Can I kick it? Yes, you can!

Mike Segar/Reuters

Laureate Education is the world’s largest for-profit college operator, a behemoth that enrolls more than 1 million students, online and on campus, at 87 schools across 28 different countries. And, as the Washington Post recounts in a long feature this week, the company paid former President Bill Clinton some $17.6 million over five years to act as its “honorary chancellor”—a job that mostly involved letting the company refer to him as its “honorary chancellor.” Given the for-profit education sector’s rotten track record here in the United States, this naturally raises some questions, such as: Exactly what kind of an enterprise is Laureate? Is there any sign it was trying to buy favors from Hillary Clinton while she was secretary of state? Is there some hint of a scandal here, or any other reason to be annoyed by this particular thread in the Clintons’ complicated web of financial and philanthropic ties?

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The short answer is that, no, there is no real scandal in this story, but yes, there are some reasons to be irritated—at least if you prefer your future presidents to enter office relatively free of personal financial ties to troublesome industries. (Full disclosure: Slate is a subsidiary of Graham Holdings Co., which also owns Kaplan, a for-profit education company.)

Liberals understandably get a bit squeamish about for-profit colleges. But Laureate has a decent corporate reputation, in part because it does most of its business overseas, where for-profit education is considered reasonably respectable. In the U.S., proprietary colleges boomed by using boiler-room sales tactics to enroll mass numbers of low-income and minority students, who borrowed heavily to finance frequently worthless degrees. Abroad, for-profit schools have played a more positive role in making higher education broadly accessible, especially in developing countries where august old public universities tend to cater more exclusively to the wealthy, and the demand for college classroom seats is growing much faster than supply thanks to the rapidly expanding middle class. In Brazil, as the Economist has reported, for-profits are carefully regulated and account for about three-quarters of the higher-education market. Overall, Laureate earned more than half of its revenue from Latin America last year, compared with the 16 percent that came from the U.S.*

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Laureate hasn’t entirely avoided controversy. It has occasionally been criticized for firing professors and hurting academic standards at the schools it’s acquired; one Brazilian institution it took over fell from No. 41 to No. 132 in a ranking of small colleges. Bloomberg found students in Rio de Janeiro who said they felt tricked by Laureate’s marketing or disappointed by its subpar academic offerings. The company has also had to find creative regulatory workarounds in countries like Turkey and Chile where, theoretically, for-profit colleges are banned. But overall, the company has been pretty well-lauded. “There’s an aura of quality that surrounds the Laureate name and I think it’s partly because they have been successful on a global scale for a while without having regulatory controversies follow them around,” Kevin Kinser, chairman of the educational administration and policy studies department at the State University of New York–Albany, told Inside Higher Ed in 2013. That same year, the International Finance Corp., a part of the World Bank Group, invested $150 million in Laureate to help the company expand its reach.

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And what of its U.S. operations? Laureate’s biggest U.S. brand is Walden University, an online institution that largely provides graduate degrees in fields like nursing, business, and education. It has some of the warts you’d expect of a for-profit school—for instance, it spends a lot on marketing compared with instruction. And in 2015, a group of former masters and doctoral students sued the school, claiming its under-resourced, drawn-out thesis and dissertation process caused them to spend vastly more money than they expected on tuition. The case settled after many of the claims were dismissed in court, but NBC News managed to track down students with similar horror stories. (It also found some who recounted more positive experiences.) On the other hand, Walden’s tuition prices are basically on par with other nonprofit schools, and its students default on their loans at less than half the overall rate for four-year proprietary colleges (which probably has a lot to do with the fact that it caters to grad students). In 2012, a Senate committee report that notoriously thrashed the for-profit industry concluded that Walden’s “performance, measured by student withdrawal and default rates, is perhaps the best of any company examined, and it appears that students are faring well at this predominantly graduate degree-based for-profit college.”

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In the end, it’s not hard to see how Bill Clinton would rationalize getting involved with a school like Laureate. The ex-president subscribes to the Davos-approved notion that corporations can do vast good in the world while simultaneously turning a nice profit, and the school’s global operations theoretically fit that ethos insofar as they democratize higher education in countries where college has traditionally been reserved for elites. The company even organized itself as a public benefit corporation, meaning it officially has priorities other than maximizing returns to shareholders. (That said, its private equity owners, such as KKR & Co. L.P., certainly want a return on their investment.) Suffice to say, the school has absolutely nothing in common with Trump University, which amounted to a bunch of scam real estate seminars. (You know, just in case you were thinking about drawing some sort of moral equivalency).

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But what was Bill Clinton’s precise role? As the Post and others have reported, he essentially seems to have been a paid mascot. Clinton tenure as “honorary chancellor” lasted from 2010 to 2015. During that time, Laureate pasted his face on brochures. It hung his picture in campus hallways. It sent some apparently thrilled students to attend the Clinton Global Initiative conference in New York. For less than the cost of a Super Bowl ad each year, Laureate got to associate itself with one of the world’s most beloved political figures. Not a bad deal.

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Given Laureate’s global footprint, Bill’s gig as a celebrity endorser might make one wonder whether there were conflicts of interest with Hillary Clinton’s State Department. But there’s really no evidence of favor trading. The Trump campaign has made a bogus charge that the State Department funneled $55.5 million in grants to the company through USAID. But in fact, that money went to an independent nonprofit, International Youth Foundation, that had been receiving government backing since 1999, including a $30 million grant negotiated during the Bush administration. Laureate’s CEO happens to be the chairman of IYF’s board of directors, but he isn’t paid, and there’s no sign Clinton put her thumb on the scales.

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So why fret about the connection at all? Because, in the end, the Clintons still personally took millions from one of the biggest players in an ethically warped industry that has been locked in an existential battle with the U.S. government. The Obama administration has been waging a regulatory war on the country’s worst for-profit universities that’s already led to the demise of Corinthian Colleges, and, as of Tuesday, ITT Technical Institute. And while Hillary Clinton has herself promised she will continue to “crack down” on the sector’s bad actors, it’s hard not to worry—at least a bit—that her and Bill’s fondness for Laureate might lead her administration to take a slightly softer approach than Obama’s has. You don’t even have to harp on the corrupting influence of cash; Bill, at least, seems to legitimately have some positive feeling about the for-profit education sector. The whole relationship could also make for some poor political optics—currently, three of Laureate’s campuses, including Walden, are subject to “heightened cash monitoring” by the Department of Education. (Think of it as a light form of regulatory probation.) If they shake off that status under a Clinton White House, it will look a little awkward, at minimum. Bill’s past money-making hustles don’t have to be an outright scandal to be less than ideal.

*Correction, Sept 6, 2016: This article originally misstated that Laureate Education earned $4.3 billion in 2015. It made $4.4 billion in 2014. It also misstated that 17 percent of Laureate’s 2015 revenue came from the United States. Sixteen percent did.

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