Diploma Mills

Here’s an excerpt from an interesting interview with Barmak Nassarian, associate executive director for external relations and a lobbyist with the American Association of Collegiate Registrars and Admissions Officers (AACRAO), from Frontline’s “College, Inc.” program.  The section on loan defaults –also discussed in the Barron’s article I posted yesterday–is particularly revealing, I think.  In what follows, Nassarian is discussing quality and regulation.

Q: So we’re in the middle of a recession. Record demand for postsecondary education, am I right? And just the massive growth of for-profits. I mean, those would be the sort of saving features of what we’re seeing now.

Well, there’s one important additional dimension that makes all of that toxic, which I have a hard time communicating to people without being a little sort of colorful.

We live in a society that most transactions for goods and services involve the profit motive, and we’re used to that. There’s nothing wrong with it. But we’re also living in an advanced post-industrialist society where there are fundamental assumptions about consumer protection that we all walk around with. I walked into this room without examining the building, without any engineering drawings, on the assumptions that surely it was somebody’s job to make sure it’s not going to collapse on my head, despite the fact that it might have been built by a for-profit builder who might have had profit maximization as their primary incentive.

So what I try to explain to people, when you begin to shop for higher ed and as you contemplate the higher ed market as it is emerging with all these profit-maximizing firms now entering it, leave whatever tacit assumptions you make about consumer protection behind. You are on your own. Nobody else has really vetted them. There is no minimum guarantee of serviceability. Nobody’s really vouching for them with their own money. There are rubber stamps and various kinds of decorative seals of approval, but that’s all they are. At the end of the day, you are on your own.

Now, that ought to scare people. … In higher ed, as a result of a very gradual historical evolution, we have made the, I suspect unconscious, decision to let the system take care of itself.

And you know what? The system does take care of itself. It just doesn’t take care of some students. And those students tend to be disproportionately low-income, minority students who are targeted by the profit-maximizing firms, which place much higher priority on the bottom line than on edifying the outcomes for their former students.

Q: Let’s unpack some of what you were saying a little bit. You talk to people from the for-profit industry, and they say it’s highly regulated. You’ve got the Department of Education. You’ve got accrediting bodies, be they regional or national. You’ve got Wall Street institutions looking at the moment, so the SEC [Securities and Exchange Commission] would be looking at them. In some cases, they even are subject to FBI investigations. And then that’s not to mention other state and local bodies which are occasionally looking at them. So they say, “Highly regulated is what we are, in fact.”

They are very highly regulated, true, but in purely procedural, and not substantive, ways. Yes, it is certainly very arduous to become eligible to participate in the multibillion-dollar financing system. It’s not easy. But it’s hard in the sense that you have enough resources and enough consultants and enough lawyers on the payroll, and you know how to fill out forms the right way. One salient, central fact that you would think somebody would be interested in — namely, whether what happens in the classroom results in the student’s advancing at least their economic ability to earn a living a little bit — that salient fact is never really fundamentally questioned.

So we have the appearance of excessive regulations without any kind of substantive outcome. When it comes to participating in the federal financial aid system, for decades now we have had the so-called triad, this three-legged stool of state licensure, federal recognition and voluntary accreditation. The triad is supposed to take care of quality assurance. The triad is supposed to perform consumer protection. The triad is supposed to keep the bad apples out of eligibility.

So, OK. Let’s unpack the triad.

State licensure in this country is as varied as the 50 states are from each other. In some states, it is very robust and very effective. There are other states where the guy selling hot dogs on the street corner has undergone a much more rigorous review to sell hot dogs than the guy hanging a shingle offering a university program that awards, allegedly, doctorates.

In fact, some of our more populous, more important states are among the least regulated places to incorporate the university. So state licensure really doesn’t do a whole lot to protect students.

The next issue becomes, “Oh, well, how about federal recognition?” That sounds draconian and official and significant. It is, in the sense that yes, there will be reams of very obscure, extremely byzantine forms to navigate that you have to fill out very correctly. And it is costly to do. And it’s difficult to do in the sense of procedural difficulty. But again, nobody pauses to ponder some of the more basic questions: Is this place generating good enough outcomes in light of the consequences that attending it bring about for students — the amount of borrowing they have to do, the kind of tuition it charges, the kinds of student loan defaults? …

Finally, the third leg of the triad, accreditation, is a fairly anachronistic relic of a much more genteel era, when you didn’t really have to worry about fraud, because this was not a lucrative line of work. It was a bunch of mendicant orders and a group of people for whom education and teaching was a calling and a vocation, whom you never suspected of fraud, of all things, because there wasn’t enough money to defraud anybody of. So most of the attention of accreditors was focused on qualifications and weeding out unorthodox, extremely irregular offerings. It was a fairly academic exercise. So accreditation would theoretically be where people would look at the thing itself. Accreditation would be where you would have some assurance that what is being taught in the classroom is in fact what it’s labeled to be.

Sadly, it is just completely unequipped to wrap its head around the very possibility that there may be an organized attempt by entities it has never run into before, that have vastly more by way of resources than any accreditor has in this country, to gain access to a financing system that they intend to bilk. That’s just not a function that accreditors ever had until fairly recently, and it’s a function they’re not prepared for.

So accreditors are fundamentally, first of all, unprepared to do the job. Secondly, they have themselves been somewhat compromised, it seems to me, because in this confrontation, this very asymmetrical, unequal confrontation between dinky little accreditors, which are a bunch of nonprofits, one-shoe operations with barely enough resources to cover their expenses, and multibillion-dollar corporations with friends in high places and teams of lawyers and consultants; in this confrontation, it very quickly becomes obvious which side your bread is buttered on, because yes, you can take a valiant stand, and you can say no to people who go through the motions of setting up at least the facade of being legitimate operations.

You know, I want to be emphatic here. There is a difference between a diploma mill and a Title IV mill. A diploma mill is an operation that operates completely outside the context of even attempting to act as if it’s a university. It’s an out-and-out collusion with the buyer, with the student, to defraud some other third party of whatever it is that they seek, be it a job or money or whatever.

The Title IV mills sort of go through the motions of setting up what could pass for schools, right? There are buildings; there are Web sites; there are people called faculty. Events called class sessions take place; some content changes hands.

So when you look at the behavioral dimension as an accreditor, you very quickly realize that it’s not a trick problem you’re solving, that there is no such thing as a mathematical proof that cannot be contested and litigated as to whether what you’re looking at is legitimate or not. It sure could be legitimate. It’s a matter of opinion with enough — it never surprises me that there are at least two lawyers on any contested proposition in the courtroom.

You know what’s coming. Here you are as a nonprofit attempting to police a multibillion-dollar corporation which has gone to the trouble of granting office space, classroom space; they have faculty. They look like a university from the outside. And the tendency is understandable as to why your natural instinct is not to engage in some act of beau geste, of just fighting over some theoretical objection but to kind of shrug your shoulders and, if there’s ambiguity, if there is a gray area, that it’s in your interest to say yes, and let the chips fall where they may, because they will fall many years down the line. It’s not going to happen on your watch. It’s over the horizon for you.

You say “no,” and you know what’s going to happen the next day? You’re going to get a letter from a white-shoe law firm in New York that represents them, and you’re going to be bombarded with all kinds of bad consequence.

So accreditation, first of all, was never really contemplated as a device to regulate this kind of money swishing about the system. And more importantly, accreditors have figured out that you’ve got to go along to get along, and because, unlike other quality assurance regulators who have skin in the game, right, if you’re an auditor and you rubber-stamp somebody’s financial statement, bad things could happen to you, as Arthur Andersen found out. But if you’re an accreditor and you rubber-stamp somebody’s application, you accredit them, it will be years before enough evidence of some nefarious activity such is going on will even surface. And more importantly, none of it is going to be material to you because you have no skin in the game. You simply rubber-stamp them, and should the school be found to have been not of the kind of quality that justified its participation in Title IV and federal financing, so be it. You were wrong. Oops. And you move on.