Eisman, who is profiled in Michael Lewis's recent book, The Big Short
Eisman, who recently appeared at U.S. Senate hearings on the for-profit education sector, said that he likened for-profit education to the real-estate market before the collapse, with easy credit driving prices ever higher and large defaults looming. He also said that he would make money if the sector collapsed, but also that the American taxpayers would save money.
I tend to believe that for-profit education is like most other markets for products and services. Barriers to entry are fairly low; all you need is classroom space, a Web site, people willing to teach, a call center and students willing to pay for the education. The ability to receive third party payments, in this case government-guaranteed student loans, is also an attraction.
But each player needs to seek competitive advantage to survive. This sector, like most others, is consolidating down to a small number of players who can offer undergraduate, graduate and professional degrees. The competitive advantage might be military contracts (U of Phoenix is one example) or establishment of a network of medical schools (DeVry through Ross University). The competitive advantage has to be something tangible and legitimate to prospective students.
In this story, the student who will receive Mr. Eisman's money attended the Sanford-Brown Institute in Yonkers, New York to learn to become an ultrasound technician.
However, she had not bothered to find out that her degree program was not properly accredited. The story, however, gives no mention of whether the parent company, Career Education Corporation, sought to have the program accredited, at least in the State of New York. They defended the quality of the education in the program and the success of other graduates at finding employment.
While the story mentions Yonkers as the student's campus, the online company directory showed that the Sanford-Brown closest campus was in White Plains, which is in the same New York county.
This is what the page states about programmatic accreditation:
An additional form of accreditation that a school may undertake to obtain is a specific, individual accreditation of certain programs (programmatic accreditation). Institutional accreditation is not the same as or a substitution for programmatic accreditation.
Although programmatic accreditation is not required for employment in many cases, the existence of programmatic accreditation is a further indication that a program meets the standards of the profession, and may therefore indirectly enhance employment opportunities.
Also, in some cases, programmatic accreditation will allow the graduates of the accredited program to sit for some credentialing exams immediately upon graduation without any requirement of work experience.
I also found a list of program accreditation and certifications across the Sanford-Brown system. Medical Assistant was the only program listed as accredited for the White Plains campus. The Diagnostic Medical Sonography program, where a student would learn about ultrasound was stated to be accredited for the campuses in Atlanta, Cleveland, Dallas, Houston, Iselin (NJ) and Pittsburgh.
If an admissions officer or other marketing representative for the White Plains campus lied to this student and told her that her program was accredited then the school misrepresented itself. The student would be entitled to a refund, and Mr. Eisman could keep his money.
But if they didn't, the school took itself off the hook with the passages I cited above. They did not promise an accredited program. They stated the competitive advantages of attending one. A smart attorney might interpret that as meaning: if you want to be assured that your degree program is accredited, then you should shop around.