Published on 2016/01/15

The Allure of the New New Thing (Part 2)

The EvoLLLution | The Allure of the New New Thing (Part 2)
Regulating non-institutional programming is critical when it comes to opening up public funds to support tuition payments, but the Department of Education has a lot of ground to make up to do this well.

This is the conclusion of a two-part series by Barmak Nassirian discussing the most significant concerns with the growing role of non-accredited education providers. In the first installment, Nassirian discussed some of the realities of the bootcamp model and its scalability when it comes to serving underserved student demographics. In this piece, he outlines the structural flaws EQUIP must navigate when it comes to regulation of education providers.

Let’s turn to the supply side of the Department of Education’s vision and contemplate what is likely to happen on the provider side. The EQUIP experiment suffers several structural flaws in its logic regarding providers.

First, it assumes that turning on the spigot of virtually unlimited federal funding will not change the quality of programs in question. The sordid history of waste, fraud and abuse in federal student aid programs should suffice to remind the forgetful of the silliness of this assumption. The contrast between private-market perceptions of financial risk and the government’s auto-pilot funding practices is beautifully captured in the “informal motto” of one of the current bootcamp lenders, Skills Fund: “We don’t finance students to attend crappy programs.” Sadly, the department does, as it has since the advent of student aid. Federal financing would inevitably attract fraudsters as surely as the early promises of distance learning and the ensuing elimination of the 50 percent rule did a decade ago. Ironically, broad availability of federal funding would quickly suck the oxygen out of the air for legitimate providers, who would lose market share to “more accessible” programs that would be dressed up as bootcamps and offer federal grants and lower-interest loans. In short order, federal funding would push out real innovators in favor of marketers and rip-off artists. This, by the way, is not exactly a theoretical concern, given recent acquisitions of bootcamps by current for-profit education companies.

Second, the EQUIP experiment attempts to address the obvious problem of gatekeeping by requiring non-traditional providers to pair up with an institution that is eligible to participate in federal student aid. It does so by waiving the existing 50 percent cap on the portion of coursework an eligible institution may outsource to an ineligible provider. (That the elimination of this 50 percent cap apparently does not ring any bells at the department may astonish the uninitiated. Then again, nothing the department does should be surprising to those who have been paying attention, but I digress.) Given the abysmal quality of some of the currently eligible participants in Title IV, it strains credulity to believe that the addition of an eligible participant can be seen as any assurance of program integrity. In fact, EQUIP’s partnership requirement enables a textbook example of rent-seeking behavior by institutions, which would be empowered to charge a fee to their non-traditional partners, even though the latter would be offering all of the actual instruction. The immediate inflationary impact of this circuitous arrangement would, over time, be compounded by the huge increase in demand and ensuing price hikes along the lines of what we have already seen—and apparently not learned from—in the for-profit distance education sector.

Third, the amorphous nature of the discussion of quality in the notice (for the record, the department is for it) makes it amply clear that program quality is a wish, not a well-thought-through construct. The notice is replete with the discredited vocabulary of the department’s failed regulatory oversight regime. It, for example, uses such meaningless mechanical criteria as graduation rates, net prices and median debt, and tips its hand about the department’s tendency to only act post facto—something that private funders would go bankrupt doing—by referencing program improvements and teach-outs for terminated programs. In fairness, the notice does solicit specific proposals from waiver-seekers regarding additional independent “quality assurance entities” (QAE), whose approval and monitoring is intended as an additional layer of protection for students and taxpayers, but any glimmer of hope is quickly dashed by its lack of specificity and by the absence of concrete framing of systemic oversight. The notice takes no note of the fact that education and training are, by definition, transactions where the costs are front loaded, and all the benefits come in over time, like an annuity investment. Imagine a regulator who pays close attention when the investments are made, but who doesn’t hang around to see if they pay off as promised over the years. The upfront judgment of (hopefully competent and independent) third-parties may be nice, but without some mechanism of keeping the people who cash the checks on the hook, that judgment provides little real protection for students or their financiers.

Finally, it is worth noting that the technology sector is a niche employment segment, a fact that imposes finite limits on the size of enrollments in bootcamps. The economy has a limited capacity to absorb software engineers, even if they are all well trained and reasonably treated by their training programs. In general, the impact of the macro economy on the viability of short-term programs cannot be overstated. As fashionable as it may be to look at employer demands as gospel, there is no assurance that the hot jobs of today will not be obsolete or outsourced a few years hence. Programs should certainly have the agility to respond to market needs, but that’s all the more reason to let the markets themselves address the short-term imbalances, and have the government step in only after enough evidence is at hand for public intervention.

In the end, the most damning aspect of the EQUIP experiment is not so much that the “experiments” it funds will be disasters, but that, should they work over the short horizon of their early years, they will open the floodgates of fraud. And work they will. Providers will love them for the easy financing, colleges will mint a coin renting out their eligibility, new entities will be formed and funded to fill the QAE function, and students will be delighted to have new options. As with the early phases of most federal educational initiatives—i.e., the phases that involve shoveling money out the door—EQUIP will prove quite a blast. The story will be quite different a few years out as the consequences of predictable folly stack up. That may be the long-run outcome, but as Lord Keynes used to say, “In the long run, we’ll all be dead.”

So why let go of the shiny new thing, right?

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Readers Comments

Veronica Bowers 2016/01/15 at 9:42 am

So the answer is that we should just let the free market sort itself out, do nothing to help make highly successful programs more accessible to people who aren’t rich because keeping people out is more important than trying something new that (gasp!) might not work perfectly? Forgive me if this all sounds a little like a lazy conspiracy theory.

Lauren Moreno 2016/01/15 at 12:21 pm

Perhaps some different solutions might be proposed if the author truly believes the one in the works will be an unmitigated disaster. Or perhaps some ideas about how to address the long-standing underperformance of the Department of Education?

Marjorie Hall 2016/01/15 at 3:41 pm

There are certainly problems with the Department of Education, and the point about the high-paying tech jobs eventually running out is a valid one, but I still think there’s an opportunity here to try to find a model for making the success of bootcamp-style programs more accessible. Perhaps it has more to do with having bootcamp methodologies rub off on more traditional higher education programs rather than the other way around. But no matter what, we’ve got to start somewhere and grow from there.

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