The Obama and the Bush administrations distrust the quality of education offered by for-profit schools (John Hechiger and John Lauerman, “For-Profit Colleges May Lose Tax Money Under New Rules”). The schools derive income from tuition paid largely by student loans. Apparently, a high percentage of their students graduate with large student loans that they cannot payoff with income earned based on their degrees and taxpayers are left with the bill.
Is the government’s concern due in part to mismeasurement? Public colleges and universities are subsidized by taxes and for-profit colleges are not. Student loans may be a good estimate of the cost of the education at a for profit but a poor estimate of the cost at a public institution. The tax subsidy per student at public institutions must be added to a student’s loan balance to more accurately compare the costs to the taxpayer. Public institutions should undergo the same scrutiny as for-profits.