Home > Uncategorized > “Watchdogs that don’t bark” Mislead Students, Add to Loan Defaults, Rip-Off Taxpayers, Reward Shareholders

“Watchdogs that don’t bark” Mislead Students, Add to Loan Defaults, Rip-Off Taxpayers, Reward Shareholders

A New York Times article by Patricia Cohen describes an ongoing scam in the issuance of student loans that has an eerie resemblance to the scams that led to the meltdown of banks in 2008. Here’s the way it works: a bunch of shady for-profit post-secondary educational institutions get together and create an accrediting agency whose “seal of approval” the pro-privatization US Education Department accepts as evidence that an institution is providing a quality education. The Department’s acceptance means that students attending the shady for-profit post-secondary educational institution can receive student loans from the US Government. A deregulation minded Congress supports this cycle of corruption because the shady for-profit post-secondary educational institutions make campaign contributions to them and, in addition to favoring deregulation, they love the idea of privatization.

But here’s where the problem occur: the students who receive loans to these shady for-profit post-secondary educational institutions do not get a good education and they are unable to pay back their loans. In the meantime, the government has guaranteed the shady for-profit post-secondary educational institutions that they will be paid in full. So… where does the money to the the shady for-profit post-secondary educational institutions come from? If you guessed “the taxpayers” you win a higher deficit that your grandchildren will pay for. If you guessed the shareholders of the shady for-profit post-secondary educational institutions you must also believe in trickle down economics and maybe even unicorns.

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