For anyone seeking to understand the interwoven problems with for-profit schools — misleading advertising, taking advantage of federal government loans, and trapping students in spirals of debt — James Surowiecki's column in the Nov. 2 New Yorker provides a great synopsis. Surowiecki explains:
Dependence on student loans was not incidental to the for-profit boom—it was the business model. The schools may have been meeting a genuine market need, but, in most cases, their profits came not from building a better mousetrap but from gaming the taxpayer-funded financial-aid system. Since the schools weren’t lending money themselves, they didn’t have to worry about whether it would be paid back. So they had every incentive to encourage students to take out as much financial aid as possible, often by giving them a distorted picture of what they could expect in the future.
