Phi Beta Cons

Paying for the Profits of the For-Profits

It turns out that the biggest supporters of the $30 billion for-profit college industry are Democrats. In response to the Obama administration’s attempt to impose restrictions on the huge flow of federal funds to these colleges and to tie it to their students’ ability to get jobs — as much as 90 percent of their revenue comes from federal aid while their student default rate is over 40 percent — the colleges spent more than $16 million to hire prominent Democrats with close ties to the White House to press their case, according to the New York Times

Among the lobbyists hired were Anita Dunn, a close friend of President Obama; Jamie Rubin, whose private equity firm has a stake in ATI, a for-profit college network based in Dallas; former Louisiania senator John Breaux; former House leader Richard Gephardt; and Tony Podesta, brother of Obama advisor John Podesta. Also exerting pressure on the White House were politically well-connected investors, including Donald F. Graham, chief executive of the Washington Post Company, which owns Kaplan University; and John Sperling, founder of the University of Phoenix and a longtime friend of the House minority leader, Nancy Pelosi.

The cronyism has been successful in getting the administration to water down the restrictions. The article also reports that the for-profits were once small, local operations, but are now multistate networks owned by Wall Street firms looking for big profits, that is, looking to redistribute taxpayer money to so-called investors. Consumer groups that tried to rein in the networks were outmatched, probably because they didn’t have access to federal funds to pay for lobbyists. 

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