Are Charter Schools the New Subprime Mortgages?

A new study warns that we may be headed towards a charter school *bubble*…

sad bubbleEduShyster: It’s unusual to see the words *hair-raising* and *academic study* in tandem, but your new study merits that marriage. You and your co-authors make the case that, just as with subprime mortgages, the federal government is encouraging the expansion of charter schools with little oversight, and the result could be a charter school *bubble* that blows up in urban communities. Do I have it right?

Preston GreenThe problem of subprime mortgages began in part because the government tried to increase homeownership for poor people and minorities by enabling private entities to offer more mortgages without assuming the risk. Under the old system, the mortgage originator was still at risk if the mortgage went into default. With subprime, they were able to spread that risk by selling the mortgages on the secondary market. You had all these mortgage originators that could issue more mortgages without careful screening because they no longer had skin in the game. Now how are charter schools similar to subprime? In the charter school context, charter school authorizers are like mortgage originators. Continue reading →