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A college both left and right should be angry about

05/15/2012

The American, May 14, 2012

By Andrew P. Kelly

Democrats in Congress and the Obama administration have spent the past three years going after for-profit colleges in an effort to combat fraud and misuse of federal student aid monies. Some policymakers were careful to cast the onslaught as an attempt to root out bad actors. But most of the heated Democratic rhetoric went further, alleging that there is a fundamental contradiction between serving students and serving shareholders, and that for-profits simply can’t help but choose the latter (for my long take on the politics of this issue area, see here).

Because of this tension, Democrats have argued, for-profits will skimp on education and spend their resources on the things that drive their stock price—marketing and recruiting. In order to avoid wasting federal student aid dollars on such useless expenses, Democrats have argued that the government should regulate access to student aid on the basis of an institution’s tax status. Non-profit? No problem. For-profit? Let me see your hands.

If this logic strikes you as dubious, just wait until read Businessweek’s latest story about High Point University, a private, non-profit college in North Carolina. In 2005, High Point hired Nido Qubein, a motivational speaker, to serve as its president. Qubein proceeded to invest nearly $700 million in the campus, constructing shiny new buildings, high-end dining halls, and a ridiculous array of amenities that would make the manager at a Four Seasons blush. As Businessweek points out, this is a very expensive way to grow the brand. Moody’s downgraded their bonds to junk status after the campus borrowed $165 million in just a few short years. Tuition at High Point has increased 60 percent, reaching $37,800 this past year. (High Point received about $400,000 in Pell Grants and $2.3 million in federal student loan dollars in 2009-2010).

Among the juiciest nuggets in the story:

In 2010, according to High Point’s annual IRS filing, [Qubein] received a deferred compensation package that boosted his pay to $1.38 million. IRS filings show the university pays almost $1 million annually to his family’s public-relations and consulting business, now headed by Qubein’s 28-year-old daughter, Deena Qubein Samuel.

So let’s get this straight: When for-profits spend public money on marketing instead of education, Senator Tom Harkin calls them to the carpet in the Senate. But when a nonprofit university feeds at the federal trough to the tune of $700 million in fountains, marble, and a certified “Director of WOW,” policymakers don’t bat an eye because they don’t pay out dividends to shareholders?

And we wonder why we have a college cost problem.