This article is part of the United States of Debt, our third Slate Academy. Join Slate’s Helaine Olen as she explores the reality of owing money in America. To learn more about this project, visit slate.com/Debt.
For-profit colleges might seem like a creature of the present day. But today’s for-profits, which profit heavily from federal student loan programs and are responsible for many student loan defaults, have precursors. There were 19th-century business colleges, which recruited working-class prospective clerks, offering broad promises of employment; late-19th-century medical schools, which awarded quickie certifications after mere months of study; and the glut of mid-20th-century vocational programs, founded to reap cash from veterans flush with GI Bill tuition funds.
I spoke with historian A.J. Angulo, author of the recent book Diploma Mills: How For-Profit Colleges Stiffed Students, Taxpayers, and the American Dream, to find out whether his investigations of two centuries of for-profits shed any light on our present-day problems. We talked about the history of regulation of the sector, the historical relationship between for-profits and student debt, and—of course—Donald Trump.
This conversation has been condensed and edited for clarity.
So first, I have to ask, given the news of late: If you were to sketch out a historical taxonomy of for-profits, where would Trump University fit?
The very first for-profit institutions in this country were really looking at professional studies: law and medicine. Before that, you had reading and writing programs that taught calligraphy, making sure people had the right kind of penmanship to trade across the Atlantic. The earliest for-profits saw a niche they could fill that hadn’t been filled anywhere else. But as they expanded in number and size, what we saw was a great deal more in terms of fraud, and more institutions that emphasized their financial return, instead of emphasizing instruction.
There isn’t a particular niche Trump was filling that wasn’t filled by anyone else. So in that regard, you’ve got him really just capitalizing on his name, and attempting to sell a product. [Students] would come in, take a $3,000 course that was just run by salespeople, not even people who had content expertise. They were selling an experience where students would learn about real estate, but it appears from the documents made available through the suit against Trump University that these instructors didnt even have any qualifications to do that. And they were constantly upselling them to get them to sign onto the more expensive program.
So in that sense, Trump University was just so obviously not an educational experience that it’s tough for me to link it up with institutions like Corinthian Colleges [now defunct] or the University of Phoenix. The latter do, or did, at least attempt to put together a program of study; they attempt to hire instructors who have experience in that content area. Whether they’re successful in that or not is a different matter, but there is an effort there.
You have a lot of these institutions behaving unscrupulously, but I think it’s on a spectrum. So with Trump University, you have almost an outlier, the extreme on one end of the spectrum, where it’s like “We’re really not giving you much at all, and you’re being sold to.”
One of the things that surprised me most about your book was the number of times over the 20th and 21st centuries that government officials, deans of various nonprofit universities, and researchers had discovered anew that the for-profit world is full of fraud, and investigated it. So have any of these previous investigations left a mark on the industry?
So what you’re talking about are the kinds of investigations that occurred, let’s say for instance at the very beginning of the twentieth century, when the medical profession and the law profession were saying, “We want nothing to do with for-profits. Because they’re clearly not serving our interests, which is to uphold standards.”
We’ve done a lot of investigating. The number of documents that I came across—and I didn’t even get a chance to introduce all of them in this book!—it’s just an avalanche of thousands upon thousands of pages of investigating. The problem is connecting that to regulation.
We’ve tried certain things. We’ve tried to regulate the percentage of income that could be coming from the federal government, versus that coming from tuition dollars…but even there, you just see this aggressive push by for-profit lobbyists to find loopholes. So we decided that no more than 90 percent of a for-profit’s funds can come from the federal government. But, then, with the Department of Defense tuition program for their active and former military servicemen and women, those funds aren’t even counted as part of the federal income that could be derived for the for-profits. It makes zero sense, but it’s a way for for-profits to get around even the meager regulations that are on the books.
I would just say that getting the kind of regulation that you need, and getting the support to back, maintain, and keep the regulation where it needs to be…history doesn’t prove that we’ve done a good job of that.
It’s not until the early 1970s that many people could access federal grant and loan money to pay for-profit tuition. Before that move towards large-scale federal grants and loans, how did people pay for for-profit programs?
People saved up money, they pooled resources, they loaned to each other, families got involved. You see a number of different kinds of small commitments on the local level; philanthropists, and even the institutions themselves have been able to sponsor some people.
It’s always been hard for people to access these for-profits. And when they did finally put their money in them, especially in the mid- to late 19th century, there were fly-by-nights, which promised students a program of study, and then the school would close up shop and disappear. There are lots of cases where you see people being asked to pay tuition in advance, then showing up, and there is no program; it’s just gone.
For-profits have always been way more expensive than the traditional institutions that were available, or the alternatives that were available at the time, when those alternatives began to emerge. In the late 19th century, or the beginning of the early twentieth century, we start to see junior colleges for the first time. These are technical schools, trade schools, also transfer schools—and once those appear, it’s almost like the writing’s on the wall. These for-profits are gone, because how could they possibly compete in a sphere where these institutions are subsidized—they’re providing the same sort of studies but for far cheaper. People went crazy for the junior colleges, and rightfully so. And that’s why you see a really big growth spurt in those kinds of non-profit institutions in the first couple of decades of the 20th century, and that’s why you see for-profits just kind of drop off in a big way at the same time.
Is there ever idealism involved in starting a for-profit college? Over the years, has this ever been something people have done out of some altruistic motivation, or is it usually a business proposition?
A really good place to look at is the period after the GI Bill was passed. You have this 300-percent increase in the number of for-profit institutions that were established, in a short period of time. So you go from a very small number, to hundreds to thousands of these institutions that are recognized, or at least on the radar screen of federal authorities. There were all kinds of restrictions that the federal government imposed on itself when it wrote the GI Bill, as far as what they could do in response to these institutions that were not doing right by veterans, and were not doing right by the funds. With the restrictions that were placed on the federal authorities, it made it very difficult for the Veterans’ Administration to investigate and to try to enforce regulations, and so a lot of that was left up to the states.
One state after another attempted to pass laws, to respond to these new for-profits. They were seeing the growth of these fraud vehicles that were mushrooming in their state, and the minute a state would pass a law, you can see that these operators were moving across state lines.
There is a history of people doing this sheerly to defraud others. And that’s why I say yes, Trump is an extreme outlier, but it’s not as though we haven’t had people in the past who have used these institutions as a vehicle for simple self-enrichment.
To put the question a different way, do you think the idea of a for-profit is fundamentally bankrupt? Do you just think the marketplace is the wrong place for education?
Some of the early for-profit founders were thinking in an altruistic way. Ben Franklin, for instance, said “We need to be done with traditional colleges and universities, because I want to be able to learn basket-weaving if I want to”…I’m paraphrasing, but the basic idea was “I want to be able to study anything that’s practical.” And so there was definitely some of that motivation in the early practical studies-oriented institutions, which provided an alternative to the non-profit colleges that weren’t teaching trades.
And there’s a line of that that continues to the present. And I have met with and have talked with people who work in technology, people that I know who work at BuzzFeed, who talk about the need to develop some programming skills and some technology skills that just aren’t available in traditional institutions of higher education. And they have discussions about, “Should we start a for-profit, so we can train people to do these sorts of things?”
My concern is that the very structure of a for-profit, whatever the noble intentions might be to begin with, really erode that initial motivation and that initial drive to provide that service. Because at some point, either through growth or through the demands of the owners or shareholders, the motivations turn from providing that instruction that’s missing elsewhere, to providing the revenue that’s desired and demanded by the people who are the top of that organization.
I wrote this book because I wanted to explore what “for-profit” meant across time. And what bothered me was that so much of our discussions about for-profits really do boil down to some basic perspective. Some people on the left would argue, “For-profits are great because they break people out of cycles of poverty.” And then you get people on the right saying “For-profits are terrific because they’re an example of innovation, in an academic space that doesn’t have much space for innovation; it’s crusty, it’s musty, it’s been the same since the medieval period.” And I think both of those arguments really fall flat on their face.
Before writing this book, I would probably have said “Regulations are probably the solution. We need to have better regulation, and we can monitor and we can adjust.” But the more I look at the way in which the money is used to lobby the very people who are in charge of monitoring and regulating these institutions, the more I realized it’s really difficult to do that.
I think my bottom line with this isn’t “Let’s bean-count how many bad versus how many good”; my final conclusion is “Let’s recognize that there are certain limits to the way market forces can operate in an educational context.” And if you take this story all the way back to Socrates, in 400 BC, he talked about the fact that if you start down the road of taking money for lessons, you’re going to have, this is his phrase for it, “merchants of knowledge.” And these merchants of knowledge are not going to give you what you need, they’re going to give you what you want to hear.
Not everyone involved in for-profits is bad. Not everyone is malicious. But the system itself creates forces that erode the academic standards that I think are key to higher education.