3 Troubling Ways the Charter School Boom Is Like the Subprime Mortgage Crisis
"It's just a long-forming bubble," says the co-author of a new study.
Acting US Secretary of Education John King has called charter schools "good laboratories for innovation." It's that kind of language that's helped the number of public charters jump from 1,542 in 1999 to 6,723 in 2014—when more than 1 million students sat on charter school waiting lists, including a whopping 163,000 in New York City alone.
But, as four researchers argue in a recent study in the University of Richmond Law Review, charter schools could be on the same path that led to the subprime mortgage crisis.
Preston Green III, an urban education professor at the University of Connecticut and one of the study's authors, warns that the underregulated growth of these publicly financed, privately run institutions could result in a "bubble" in black, urban school districts. Many black parents, he argues, are unhappy with the state of traditional public education in their communities and view charter schools as a better alternative. As families see wait lists pile up, they may tolerate policies that allow more schools to open, even as they overlook the much-reported consequences of underregulated schools: poor academic performance, unequal discipline, financial fraud, and the exclusion of high-cost students, such as those with disabilities. It was such an issue that in 2014, the Department of Education released a letter reminding charter schools that if they receive federal funds, they must comply with the federal statutes disallowing discrimination on the basis of race, sex, or disability.
"It's just a long-forming bubble," Green says. "We are at ground zero for this."
Just how similar are the charter school boom and the mortgage crisis? We broke down the report with Green to see.
More authorizers, more problems: Much like the banks that sold mortgages to a secondary market leading up to the housing crisis, charter authorizers—the institutions that determine whether to allow a charter to open—carry a similar decision-making power. Since school districts, which made up nearly 90 percent of authorizers in 2013 and green-light more than half the nation's charter schools, tend to each oversee only five or fewer charters, proponents look to independent institutions to grant additional charters. Higher-education institutions make up the next largest share of authorizers, followed by nonprofits and state education agencies. If more states grant approval power to more authorizers, even more charter schools will result. (The Center for Education Reform notes that states with multiple authorizers have almost three and a half times more charter schools than states with only school district approval.)
School districts, not independent charter authorizers, are responsible for figuring out what to do with students. Ultimately, the independent authorizers "don't have skin in the game."
But these independent authorizers, the paper argues, may be less likely to screen charters and ultimately assume less risk if they fail. Green notes that the school districts, not these other institutions, are responsible for figuring out what to do with students—the independent authorizers, he adds, "don't have skin in the game." A 2009 study from Stanford's Center for Research on Education Outcomes found that, in states that allow different institutions to approve charters, academic performance for students appeared to wane. In those states, low-performing charter schools at risk of closing can find a new authorizer—"authorizer hopping"—to keep the school running and, researchers argue, to avoid accountability measures.
"Misalignment of incentives": Just as the banks sold mortgages to Wall Street and hired servicers to collect payments and modify loans, charter schools enlist the 3 Troubling Ways the Charter School Boom Is Like the Subprime Mortgage Crisis | Mother Jones: