Is Mark Cuban onto Something? Student Loan Related

All the for profit colleges need to go out of business tomorrow. They are basically diploma mills built on student loans.

Take for instance, the 32 year old mother of three kids by two fathers scenario. We'll call her Debbie. Debbie barely made it through high school, making Cs and Ds and never went to community college. Just started spreading her legs and collecting welfare.

When her oldest kid is about 8 years old, she starts to notice that some of her kids parents do pretty well. She's hung around trash most of her life, you see. Debbie decides its time to go to college. She has no real job, no support and certainly doesn't have the academic profile to go to a traditional 4-year college, so she has two choices: Junior college and for profit colleges.

She heads down to the junior college and the worker gives her a poorly designed brochure, a couple of printouts of Word documents explaining that tuition is about $1000 a semester and that she can easily receive a Pell grant. If she studies hard and keeps a good GPA, a regional college (think SE Louisiana, Delta State, etc.) might give her enough of a scholarship that when combined with her Pell Grant, could lead to very little out of pocket.

Debbie is ready to make the first step. Then Debbie runs into her friend Jasmine. Jasmine goes to Strayer/Capella/Phoenix. Girl, its so easy! she says. So she goes to the big office building just to check it out. They don't have admissions counselors, they have sales people. They treat Debbie like a million bucks. Everything is professionally designed, classrooms look like office training suites rather than classrooms, and there are pictures of business people smiling, wearing suits, etc. A much different view book than the junior college.

Tuition at these places runs about $15,000/semester. Ironically, that's about what the max Pell Grant + student loans run for Debbie. There's no ACT requirement, and with rolling admissions, she can start next week rather than waiting until the beginning of a semester.

Once Debbie signs the paperwork, she's in.The classes are jokes and by the time she realize it, she's either $30,000 in debt or $100k in debt with a worthless degree.

Hey, and they are worthless on the stock market as well.

[link]https://finance.yahoo.com/q?s=COCO
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I did my master's thesis at LSU in Higher Education Administration based on the concept that these for-profit schools are going to ruin higher education if they aren't taken care of.

I loathe Obama, but as seen in the stock prices of the Big 3 for profits, his new higher ed policies are going to be good as far as getting rid of the for profits.

But as far as the OP's point that schools are going to close, he's right. I'm in Mississippi - and there are three publicly funded schools (Alcorn State, MVSU and MUW) that have zero worth to the people of Mississippi. Add to that a couple of tiny privates (Rust, Tougaloo and BMC) that are way behind the bigger privates (MC, Belhaven, Carey), Millsaps) and you have at least six schools that are going to have a hard time surviving.

Without looking at a full compliment of data, I'd imagine in Louisiana that the Southern system and their atrocious graduation rate is on the cutting floor if push comes to shove. The entire LSU system is probably okay. UNO is struggling in the UL system, and Dillard is struggling in a crowded private market around NO, although their endowment is healthy.

The problem is not for profit schools.

The problem too easy money. Too much money.

Oh there are some for profit schools that are turning out crap but that doesn't mean we should end for profit schools. We have a bunch of degree at schools like LSU that are crap and we have schools that are crap--SUNO comes to mind quickly.

Despite the fact that "96% of students at for profit colleges take out loans" I suspect the amount of loans going to students at for profit schools pales in comparison to the amount of loans going to public schools.

These loans and grants and TOPS programs have resulted in bloated brick and mortar schools and have held back online education. Like the housing loose money caused unreasonable prices for housing in many parts of the country the student loans have caused unreasonable prices for education.

I agree with Cuban--these loans are going blow up and tuition is going to crash and schools are going to close and in the end it will be a very good thing.

Lower cost schools will be a good thing. If I am in charge of LSU I start looking at ways to make education cheaper quickly. Lots on online classes, less BS degrees, more competition for professorships,expansion of tested competency degrees--like the CPA designation for accounting majors--to prove students have mastered the concentration.

(Have you seen the story about the Korean professor who makes $4 million? LINK)

quote:

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How do I make money off of the collapse of the education bubble?

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Short DV in 2015. They are going to fall big. New 2016 regulations are going to kill them.

Yes, if a cap was placed on the federal backed guarantee attached to student loans, it would end up capping the amount most kids could borrow, which would lead to a shortage of students, with the end result being deflation of college costs and some schools may go under.

But that insurance isn't free. Companies are willing to make the loans because the loans are damn near impossible to kill off. Once you sign the line, you are on the line for life.

Also... the amount of political capital that such a limitation would cost... well I don't have a lot of faith in our politicians actually doing that. The lobbying, the charges of racism and elitism, etc, that will come out of this will be amazing.

They're going to fall, it's just will it be 2015, 2016, etc.