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UW-Madison’s Mead co-authors paper examining potential charter school ‘bubble’

January 12, 2016

UW-Madison’s Julie Mead is the co-author of a recent paper examining whether charter schools may be developing conditions that are reminiscent of the subprime mortgage crisis.

The report, published by the Social Science Research Network, is titled, “Are We Heading Toward a Charter School 'Bubble'?: Lessons from the Subprime Mortgage Crisis.”

Julie Mead 2015
The authors explain the “process in which charter school bubbles might form and burst in Black, urban communities” and “discuss the steps that federal and state governments should take to avoid the creation of bubbles in these vulnerable neighborhoods.”

Mead is a professor with the School of Education’s Department of Educational Leadership and Policy Analysis. The other co-authors of this report are: Preston C. Green III, the lead author and the John and Carla Klein Professor of Urban Education at the University of Connecticut’s Neag School of Education; Bruce Baker of Rutgers, and Joseph Oluwole of Montclair State University.

Among those taking note of the paper was Jennifer Berkshire, a freelance journalist, public education advocate and author of the EduShyster blog. The Washington Post’s Answer Sheet blog took note of Berkshire’s Q&A with Green and further highlighted the report with a blog post headlined, “Are charter schools the new subprime loans? (Think ‘The Big Short’).”

That Washington Post report begins: “With ‘The Big Short’ doing well in theaters — a film about the near collapse of the financial system because of the bursting of a housing and credit bubble — here’s a piece that asks the simple question: ‘Are charter schools the new subprime loans?’ The post by Jennifer Berkshire refers to a new study by four academics titled, “Are We Heading Toward a Charter School ‘Bubble’?: Lessons From the Subprime Mortgage Crisis.”

The Answer Sheet blog then reposted the Q&A that Berkshire conducted with Green about the study.

In their paper, Mead and her co-authors conclude: “As state and federal policymakers ponder over the wisdom of increasing the number of charter schools, they should pay attention to the lessons provided by the subprime mortgage crisis. According to several analysts, the creation of an alternate granting structure helped to create that debacle by removing the risk of mortgage default, while also removing the incentive to conduct careful screenings of mortgages. The alternate granting structure also created a principal-agent problem between mortgage investors and servicers that the legal structures were poorly equipped to counter. Finally, many charter schools are engaging in predatory practices that are similar to the subprime mortgage crisis.  We fear that charter school advocates may be inadvertently making the same mistakes in their attempts to create more charter schools. If state and federal policymakers are not careful, they could create a charter school bubble in Black, urban communities that could eventually burst. Therefore, policymakers should put safeguards in place to prevent this undesirable event from occurring.”
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