ITT Tech had four North Carolina campuses—one in High Point—that were victims of the for-profit college’s nationwide shutdown, leaving its student in the lurch.
Warning signals were everywhere—ITT announced earlier it would no longer enroll new students, then the Department of Education barred the school from receiving federal financial aid such as student loans and Pell Grants.
As you can imagine, a big part of the mainstream media narrative is the Education Department took necessary action against the evil for-profit college and its predatory lending practices. Indeed, in its analysis, Forbes does not dispute that point of view—but:
The Department was not necessarily unjustified in its actions. This is not a traditional case of government meddling with the free market. ITT Tech was receiving substantial taxpayer subsidies in the form of student loans and Pell Grants, so it is perfectly reasonable, if not desirable, for the Department to attach conditions to such largesse. But it is also reasonable for taxpayers to wonder whether the Department has been an effective steward of their money.
….After all, why should anyone hold the school accountable? The Department of Education does not spend its own money—it spends yours. There is no incentive for the Department to allocate those resources wisely. Should it lose half a billion dollars to the collapse of a giant such as ITT Tech, the Department will face no financial repercussions. The political objective—make sure everyone can go to college, even if that “college” might be a shady institution that could go down in flames—far outweighs the goal of financial responsibility. Then, when the problems with a school to which the Department has given money become too big to ignore, the school gets shut down almost instantly and its students get a bailout.
While the Department can issue new regulations to proactively curtail lending to questionable colleges, one wonders whether it can ever be an effective steward of taxpayer dollars so long as it has no real incentive to do so. In reality, only private sector lenders can provide real accountability to colleges. After all, if a private lender makes too many bad loans,it goes out of business. But under the current system, the government originates more than 90% of new student loans. The ITT Tech disaster shows us just how terrifying the results of the status quo can be.
I would venture to say the issue is relevant with so-called nonprofit public universities as well—they have no incentive to reduce tuition when the government is flooding them with taxpayers’ money with the student acting only as the middle man.
