The US DOE’s sunk costs into for-profit colleges
There’s been a lot of squabbling around how to deal with student debt lately, especially the debt incurred by shitty for-profit colleges. I claim these are sunk costs and should be treated as such.
If you aren’t familiar with the for-profit college boondoggle, let me break it down for you: there’s a federal aid system that guarantees loans to poor students for accredited colleges. This system has been gamed by an industry that includes Corinthian College, ITT Tech, and University of Phoenix, among others. They get accreditation through slimy and questionable means, then they lie to potential students about how great their education will be, then they collect the money.
The issue that the Department of Education (DOE) is now grappling with is this: should those students, who were misled and manipulated, be forgiven their debt?
From the side of the students, it seems pretty clear the answer should be yes. They didn’t receive proper educations, they were lied to and manipulated, and they are, by construction, quite poor. This debt will be hanging over them, making it even harder for them to eke out a living.
From the side of the government, the answer is less obvious. After all, it’s very expensive to write off a bunch of debt. And it would set a dangerous precedent. When would it stop? What if someone who went to a reasonable community college wanted to stop paying their debt? Or what about a graduate from a private college?
I’d argue that this is a sunk cost. Which is to say, the DOE fucked up when it allowed accreditation when it should not have. Once you let your standards go that far, you are on the hook. And although it looks “expensive” to forgive this debt, there’s really no other option, because it’s never getting paid back. That’s what happens when you let a predatory industry prey on the most vulnerable.
So, sunk costs. What’s good about acknowledging sunk costs is that you can learn your lesson and fix the problem that got you into this mess. When you don’t acknowledge sunk costs, you’re in the wrong mindset, hoping against hope that somehow the money will be paid back. It won’t.
What would it mean to fix this problem? We need to turn off the federal aid spigot for bad colleges. We need higher standards for accreditation.
The good news is that the DOE has just come out with recommendations for doing just that. In particular, they’re closing down one of the worst accreditation offenders.
If only they’d just forgive the debt so we could move past this ugly chapter of educational history.