The New York Times's Tamar Lewin took aim at the Washington Post Company this week with a news article with the Web headline "Washington Post's Kaplan Faces Growing Scrutiny." It's kind of a self-fulfilling headline, because, by publishing a 2,600 word front-page news article on the topic, the New York Times itself both engages in the scrutiny and contributes to its growth.
What's avoided much scrutiny so far, however, is the Times's coverage of the issue. A close reading is in order. From the Times: "All these schools get most of their revenue from federal student aid. Kaplan Higher Education, for example, gets 91.5 percent of its revenue from the federal government, through Pell grants, Stafford loans, military and veterans benefits and other aid."
There are no comparison figures given for percentages of revenue from government sources for other universities. Right under the Times's nose in New York City, for example, there exists something called the City University of New York, which gets 50% of its funding from taxpayers of the state of New York, and 11% from taxpayers of the City of New York. Of the remaining 39% that comes from tuition payments, $329 million of it came from federal Pell Grants.
From the Times: "On average, for-profit colleges spend about 30 percent of their revenue on advertising and marketing." So what? It's a rapidly growing business, and these are new entrants competing with non-profit and government-owned colleges and universities that have been around for hundreds of years. The New York Times makes about half the money it uses to pay Ms. Lewin's salary by selling advertising. Now it's campaigning to have businesses spend less money on advertising? If more businesses took the Times' advice on this point, the paper might go out of business, or have to raise the prices on its remaining readers by more than the 333% it raised them over the past decade.
More from the Times on for-profit colleges: "Such schools enroll about 11 percent of the nation's college students, and get a quarter of all federal student aid. But their students account for 43 percent of those defaulting on student loans." But federal student aid is only one piece of federal subsidies to higher education funding. The federal government also spends about $25 billion a year on research funding, of which for-profit colleges get pretty much nothing.
More from the Times: "Since its recent high last spring, Washington Post Company stock has dropped by more than a quarter. Other for-profit education companies, including Corinthian Colleges, in which the Post owns an 8 percent stake, fell even further." What the Times doesn't say is that while WPO has gone to about $390 now from about $540 in April 2010, New York Times Company stock has gone to about $8 from about $12 over the same period. In other words, the Times is publishing a front page attack on the management of the Washington Post company for the performance of Post company shares, while the New York Times company management, as measured by stock price, has done an even worse job. And on top of that, WPO shares pay a dividend, while NYT has suspended its dividend.
More from the Times:
Mr. Wratten and other admissions representatives said they were trained to "emphasize that Kaplan is owned by The Washington Post, one of the best newspapers in the country, and that Warren Buffett, and Bill Gates's wife, Melinda Gates, were on our board of directors."
Kaplan officials said that was never part of their training. In response to a question about this, they said they scanned two million recruiting calls and found "Buffett" or "Gates" in only 85.
Bloomberg News's Daniel Golden beat the New York Times to covering this aspect of the story by 10 days; we noted Mr. Golden's reporting here at the time. Why doesn't the Times credit Bloomberg's reporting, as internal Times guidelines for attribution dictate that they should? Is it because they don't want to hurt their chances of winning a Pulitzer Prize for this coverage by giving the Pulitzer judges the impression that it is anything less than groundbreaking?
Finally, the Times article doesn't even mention the way that short-sellers have targeted for-profit education companies. Go on Yahoo! Finance and look up short interest as a percentage of float for WPO and you can see that there are a lot of people with a lot of money riding on driving down WPO share price. What sort of help has Ms. Lewin gotten from them, their public relations agents, or the advocacy groups they work with? She doesn't say.
But it's pretty clear that there's some outside force driving this coverage. How else to explain that the same day Ms. Lewin issued her piece, Bloomberg News came out with its own attack on for-profit colleges, with the Web headline "Executives Collect $2 Billion Running U.S. For-Profit Colleges on Taxpayer Dime."
It's similar logic as observing that because Bloomberg makes its money renting terminals to banks like Goldman Sachs and RBS that got bailed out by U.S. and British taxpayers, and because its owner Michael Bloomberg has made billions of dollars doing that, there should be a news article headlined, "Bloomberg Collects Billions Running Terminal Rental Business on Taxpayer Dime."
From the Bloomberg article: "Strayer Education Inc., a chain of for-profit colleges that receives three-quarters of its revenue from U.S. taxpayers, paid Chairman and Chief Executive Officer Robert Silberman $41.9 million last year. That's 26 times the compensation of the highest-paid president of a traditional university." It's pretty rich to see Mr. Silberman vilified for his compensation, because last year the New York Times's Gretchen Morgenson was holding him up as an executive compensation hero, and the year before that, Morningstar named him its CEO of the year: "Over the last five years, the stock has more than tripled, and it was up over 60% in 2007. Returns on invested capital have exceeded 100% the past four years."
The Bloomberg article compares the for-profit college compensations to those of the president of Harvard, Drew Faust, who it says makes $800,000 a year. But there's no mention of the sticker-price tuition, room, and board Harvard charges students, which, at more than $50,000 a year, is way more than the for-profit colleges charge. If you are going to make the apples to orange comparison of Harvard to Strayer and DeVry and Kaplan and fault the for-profits for their high executive compensation, at least credit the for-profits for giving their students a relative bargain. More broadly, the point of a for-profit is making profits for the owners. A non-profit has a different purpose. So it's hard to see why Bloomberg News would be surprised that the owners of for-profit colleges are getting richer than the non-owner managers of non-profits.
The Bloomberg goes on and on using words to describe how the for-profit executives make their money — "collect," "windfall," "receive." Any word but "earn." Using that word would concede there was actually some work involved or value created.
There are two more particularly egregious aspects of the Bloomberg News article. The first is that the article uses an "expert" from, of all places, Columbia University to inveigh against the for-profit colleges:
Education corporations, which receive as much as 90 percent of their revenue from federal financial-aid programs, are "private enterprise that's almost entirely publicly funded," Henry Levin, director of Columbia University's National Center for the Study of Privatization in Education, said in a telephone interview....
"For-profit colleges are reaching into the public trough to finance luxurious lifestyles at the expense of people who are going to have to pay back loans," said Levin, a professor at Columbia University's Teachers College in New York.
Luxurious lifestyles? Has this guy ever been to Lee Bollinger's residence? Columbia collected $426 million in federal research funding in 2007, and hundreds of millions, maybe billions, more, in Medicare and Medicaid revenues run through its medical school's New York Presbyterian Hospital. It wants to expand in Manhattan by using the state power of eminent domain to force out private landowners. And it's on the high horse about the public trough? If Mr. Levin has a problem with for-profit education, he may want to take it up directly with Columbia's president, Mr. Bollinger, who is a paid corporate director of Kaplan University parent company Washington Post.
By the way, one of the few institutions that gets more federal funding than Columbia is a certain Johns Hopkins University in Maryland, which receives $1.186 billion a year. It's home to something called the Bloomberg School of Public Health. Public trough, indeed.
Doubtless the taxpayers get a lot in return for the research investment, but so do the students who freely choose to attend for-profit colleges.
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