“Fail State:” A Study of American Higher Education

Fail State -- A Study of American Higher Education

Produced by Dan Rather, the 2018 documentary Fail State takes a look at American higher education, student loans, and for-profit colleges. Here are some key takeaways from the film.

"Fail State:" A Study of American Higher Education

A bit of history

The Higher Education Act of 1965 created student loans backed by the federal government, work study, and access to student grants. As a result, state colleges popped up everywhere, as well as private, for-profit colleges. Tuition also began to rise dramatically.

Then the Higher Education Act of 1972 created direct student aid. Pell Grants allowed students to use the funds to attend any educational institution. This was considered a “market-based” approach to higher education.

Vocational schools, especially those specializing in computers and cosmetology, began directly receiving taxpayer money. The highest risk loans went to trade schools. But students never got jobs and couldn’t repay their loans. Defaults led to massive taxpayer losses.

You have this explosion

of new proprietary schools . . .

because they had access

to the U.S. Treasury with no risk.

Senator William Roth (R-Del.)

New regulations in 1992 finally cracked down on technical and correspondence schools, and many of them closed or went bankrupt.

The rise of DeVry, ITT, Strayer, Kaplan, and University of Phoenix

Higher education funding is the largest discretionary funding item in most states’ budgets, and so it’s often the first to face budget cuts. That’s why tuition has grown so dramatically. Students seeking a secondary education often turn to for-profit schools because they are often easier to finance in the short-term.

For-profit schools like Strayer and University of Phoenix are publicly-traded companies, and hedge funds on Wall Street have huge stakes in these companies. In 2010, when the rest of the economy tanked, ITT Tech actually produced a bigger profit margin than Apple. After the George W. Bush administration dismantled regulations against private colleges, marketing and recruiting for “online only” schools exploded. Subprime went to college.

For-profit colleges target low-income and minority students, charging them 17 and 18 percent interest on student loans. But these companies actually don’t care if their students never pay back their student loans. What’s important is that the college gets immediate access to federal grant money.

American higher education should actually offer an education

Students who attend for-profit collegese take on huge debt and too often get a terrible education in the process. Even those students who actually graduate find themselves woefully unprepared for the job market, and most do not find employment in their field of study.

Yet the fact is that most students do not drop out of college because of grades, but because of financial reasons. In 2018, 7 million low-income Americans attended college. Most of them won’t graduate. In fact, poor student have just a 9 percent chance of actually graduating from college. Their student loans, unfortunately, aren’t forgiven even if these students do not graduate.

About Brian V. Lee 380 Articles
Brian V. Lee provides bankruptcy, foreclosure defense, business turnaround, and litigation services to clients in the District of Columbia, Virginia, and Maryland. Brian was the Washington, D.C. state chair of the National Association of Consumer Bankruptcy Attorneys from 2016 to 2018.