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Conventional wisdom would dictate that there is no greater oxymoron than the concept of “for-profiteducation”. Since the first recorded lesson in history, where God taught Adam to eat from some trees andnot others, education has conjured the image of a more-learned being benevolently guiding those underhis care- not for personal gain, but because of a genuine interest in seeing them further enrichthemselves.

The modern term “higher education” implies exactly that- education which has been elevated to a higherlevel. Higher education evokes thoughts of marbled halls and thick-volumed libraries, of avuncularprofessors teaching on sun-drenched quadrangles and mortarboards-in-the-air graduation celebrations.

Such romantic notions are far removed from the typical student in a for-profit institution. Classes takeplace in office-style meeting rooms instead of expansive lecture theatres, often taught by part-time facultywho hold regular jobs elsewhere. Some students may complete a significant portion of their degree online,without ever stepping foot on campus. Extra-curricular activities are limited, and courses are structured tofacilitate the quickest possible completion.

Although derided by critics as “education-lite”, for-profit education today is big business. The US for-profitpost-secondary industry was estimated at $31B in 2012[1]. Between 2000 and 2010, this sector added 1.3million students, an annualized growth rate of 16%[2]. In contrast, the not-for-profit sector grew at 2% andadded only 440,000 students over the same period[3]. For-profits now account for 10% of all US collegeenrolments, up from 3% in 2000[4].

With this growth has come increasingly loud criticism. In June 2012, Senator Tom Harkin released theHarkin Report, a scathing 249 page compendium of a laundry list of misdeeds committed by 30 of thelargest for-profit education companies. The Report found that taxpayers had collectively spent $32 billionon companies operating for-profit colleges, with dubious returns. Half of all students who enrolled left

within 4 months[5]. Dropout rates at associate degree and bachelor programs were double those at non-profits. Also uncovered were exorbitant tuition, aggressive recruiting practices and systematic regulatoryevasion.

To supporters of for-profit education, such incidents are aberrations, bad apples. To detractors, thefrequency of such events suggests more of a bad orchard. So what should our stance be on for-profiteducation? Does it have a role to play in the wider higher education landscape?

The role of for-profits

For-profits were created to serve a very different niche from traditional universities- the so called “non-traditional students”. Non-traditional students typically delay their enrolment for a few years after highschool, attend classes part-time and may be single parents or individuals who are financially independentfrom their parents[6]. For-profits also practice “open admissions” (accepting students so long as they meetthe pre-requisites) and are purely academic-drive- no research, no publications and no tenure. Thesefundamental differences make direct comparisons with traditional non-profits difficult.

However, that doesn’t stop people from trying. Taking potshots at the for-profit industry has becomesomething of a cause célèbre. Steve Eisman, the short seller who famously profited when the US housingmarket collapsed, labelled for-profits “socially destructive and just as morally bankrupt as the subprimemortgage industry”[7].

For example, one of the major criticisms of for-profits is the disproportionate amount of money spent onmarketing relative to student instruction. The Harkin Report found that on aggregate, for-profits spent 30%more on marketing than on student instruction[8]. These figures are often waved around as a sort of ipsofacto proof of for-profit education’s immorality- these companies prioritize roping in other students overteaching the ones they already have!

But consider another hallowed tradition of American state colleges- athletics. The Knight Commission onIntercollegiate Athletics (tasked with improving accountability on spending in college sports) found that the98 institutions in the highest tier of college football spent an average of $92,000 per athlete in 2010, 7times the amount spent on student instruction[9]. In the Southeastern Conference, spending per athletewas a whopping $164,000 versus $13,000 per student. Expenditure on athletics is growing atapproximately twice the pace of academic spending.[10]

Defenders of college athletics say that sports improves the visibility of the school, builds school identity andattracts applications. Which, curiously enough, sounds an awful lot like marketing. Two wrongs don’t makea right, but our outrage needs to be consistent. If we are outraged that for-profits are spending 30% moreon marketing than instruction, surely we must be many times more outraged that state universities arespending 7 times as much on athletics as teaching.

Lessons for traditional education

In fact, the for-profit model has some valuable lessons for traditional education, one of which is flexibility.For-profits schedule their courses to match the calendar year, with classes starting every few months. Thisallows students to complete their courses quickly and minimizes the opportunity cost of education. Suchflexibility is not possible at traditional non-profit universities simply because they have not been configuredthis way. Faculty members need the summer to attend conferences, design new courses and write the all-important research papers which drive university rankings. Universities, on the other hand, have lucrativesummer schools, executive education programs and symposiums to run.

Furthermore, course offerings at traditional institutions have lagged behind the changing demands of theworkplace. How do we know this? Consider the demand for H-1B visas. The H-1B visa allows US

employers to hire foreign workers in “specialty occupations”, typically in fields like engineering, education,law and accounting where a minimum of a bachelor’s degree is required. There is an annual quota of85,000 visas, and in every year since 2003 this cap has been reached[11]. With the exception of a threeyear blimp after the Financial Crisis, in every year since 2003 the supply has been exhausted earlier andearlier. In 2013 and 2014, the entire quota was exhausted within the first week of petitions opening[12].This suggests that American employers are unable to find the right skill sets within the local graduate pool.The misalignment of courses with growth areas may also explain why after adjusting for inflation, theaverage graduate earned no more in 2007 than he or she did in 1979.[13]

In contrast, for-profits focus on offering business-relevant courses like accounting, finance andengineering. They have also carved out a niche in healthcare, a sector expected to add 162,000 jobs overthe next 10 years[14]. Analysis at Wells Fargo suggests that as much as 40% of America’s medicalassistants receive instruction at for-profit colleges.[15] By offering courses driven by market demand, for-profits provide a steady stream of graduates equipped with the skills the economy needs.

Finally, teaching methods at traditional institutions have been slow to evolve. A case in point- for thelongest time, traditional institutions have criticized the model of online learning, questioning its quality andeffectiveness (this despite a 2009 meta-analysis by the US Department of Education which concluded thatstudents who took all or part of their classes online outperformed those learning through pure face-to-faceinstruction[16]). Only recently have they started exploring options with MOOCs and distance learning.Georgia Tech’s partnership with Udacity and Harvard and MIT’s joint-venture Edex are some examplesthat come to mind. If these initiatives have a grafted-on feel to them, it’s because they are. Traditionaluniversities have extensive investments in physical capital- classrooms, labs, libraries. Their businessmodel is still predicated upon bums-in-seats contact education.

For-profits have been built from the ground up to incorporate virtual learning. The University of Phoenix hasrelied on online learning to scale from 8 students in 1976 to more than 200,000 today[17]. Nearly 40% ofCareer Education’s 45,000 students are enrolled in web-based virtual campuses[18]. Online instructionprovides busy individuals with work and family commitments the option of learning as and when they can.

Conclusion

Does profit cheapen education? Proponents of this view point to advertising strategies used by for-profitslike posters on the subway, rags-to-riches infomercials and gimmicky special offers on tuition - sellingeducation like a hamburger. Such tactics may be tacky, but what is more disconcerting is the underlyingcurrent of academic elitism inherent in the criticism. It is all good and well to snigger at suchadvertisements when you come from a system that includes higher education as a natural stepping stone.But for many underprivileged individuals, for-profit education may be the only viable way of improving theirlives.

Non-profits have had a monopoly on higher education for most of the past century, yet have failed to offer aviable route to a degree for non-traditional learners. Regulators should acknowledge this reality andexamine how for-profits can be integrated alongside traditional education as a safety net. Dismissing for-profits as pantomime villains in a simple morality play is not the solution. Prune the orchard, don’t burn itdown.

References:

[1] Education Sector Factbook 2012, GSV Advisors, 2012, http://gsvadvisors.com/wordpress/wp-content/uploads/2012/04/GSV-EDU-Factbook-Apr-13-2012.pdf

[2] Total Undergraduate Fall Enrolment in Degree-Granting Postsecondary Institutions, National CenterEducation Statistics, 2012, http://nces.ed.gov/programs/digest/d13/tables/dt13_303.70.asp

[3] See (1)

[4] See (1)

[5] Executive Summary, Tom Harkin, June2012, http://www.help.senate.gov/imo/media/for_profit_report/ExecutiveSummary.pdf

[6] Non-traditional undergraduates/ Definitions and Data, National Center for Education Statistics, n.d,http://nces.ed.gov/pubs/web/97578e.asp

[7] Big Short Eisman Vies With Goldman Over For-Profits, Kambiz Foroohar and Esme E. Deprez, Jan 252011, http://www.bloomberg.com/news/2011-01-24/big-short-eisman-vies-with-gold...

[8] Executive Summary, Tom Harkin, June 2012,http://www.help.senate.gov/imo/media/for_profit_report/ExecutiveSummary.pdf

[9] Restoring the Balance, The Knight Commission On Intercollegiate Athletics, 2010,http://www.knightcommission.org/images/restoringbalance/KCIA_Report_F.pdf

[10]Academic Spending vs Athletic Spending: Who wins? Donna M. Desrochers, Jan 2013, http://www.deltacostproject.org/sites/default/files/products/DeltaCostAI...

[11] Data Published by the US Citizenship and Immigration Services Bureau, http://www.uscis.gov/portal/site/uscis

[12] USCIS Reaches FY 2015 H-1B Cap, UCIS, 7th April 2014, http://www.uscis.gov/news/uscis-reaches-fy-2015-h-1b-cap

[13] Higher Education-Not what it used to be, The Economist, 1st December 2012, http://www.economist.com/news/united-states/21567373-american-universiti...

[14] Employment projections, Bureau of Labor Statistics, 2012, http://www.bls.gov/emp/ep_table_102.htm

[15] The rise and fall of Corinthian Colleges and the wake of debt it left behind, Jessica Glenza, 28th July2014, http://www.theguardian.com/education/2014/jul/28/corinthian-colleges-for...

[16] Evaluation of evidence-based practices in online learning, Means, Toyama, Murphy, Bakia, Jones, USDepartment of Education, September 2010, https://www2.ed.gov/rschstat/eval/tech/evidence-based-practices/finalrep...

[17] History, University of Phoenix,http://www.phoenix.edu/about_us/about_university_of_phoenix/history.html

[18] Online learning and the world of for profit education, HigherEdJobs, n.d,http://www.higheredjobs.com/higheredcareers/interviews.cfm?ID=224

Submitted on: February 28, 2015