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  • The Assault on For-Profit Universities

    President Obama and Education Secretary Arne Duncan want the United States to lead the world in the percentage of people who graduate college by 2020, which will mean increasing by at least 8 million the number of students completing college over the next 10 years. President Obama noted in a speech yesterday that by “making college affordable … we’ll reach our goal of once again leading the world in college graduation rates by the end of this decade.”

    But new proposals for regulating the for-profit higher education industry outlined by the Department of Education could actually have the opposite effect. For-profit higher education is serving the needs of students, as evidenced by the significant increase in enrollment over the past two decades.

    According to a new report by the Center for College Affordability and Productivity, since 1986 alone, enrollment has increased nearly sixfold and has now reached nearly 1.8 million students. While traditional public universities and nonprofits have grown just 1.6 and 1.4 percent (respectively) each year, for-profit institutions have enjoyed an 8.4 percent annual growth rate. This growth rate has been achieved because for-profit universities serve a wide range of student needs, from more traditional degrees to vocational and technical schools. According to a new report:

    Traditional universities are configured as non-profit organizations whose stated mission often invokes a service of the public good. In contrast, for-profits are structured as profit-maximizing firms whose success depends of providing a valuable service to the student/customer. For-profit institutions can only be profitable if they are able to provide a service that is valuable to the student.

    While there are likely bad actors in the for-profit industry, the Department of Education has proposed capping costs at any for-profit that receives federal subsidies. This would affect virtually all for-profit, private higher education institutions since nearly all of them accept students who receive federal subsidies in some form.

    But what would this mean for achieving the Administration’s goal of increasing the number of college graduates? For-profits have been particularly popular among those students historically underserved by the traditional college model. African-American and Hispanic students are enrolling in for-profit universities at a greater rate than in traditional universities, and female enrollment in for-profit institutions has skyrocketed in recent decades. For-profit institutions also serve non-traditional students who are often older and have to work full-time jobs outside of their academic pursuits.

    But the Obama Administration argues that increased regulation is also needed in the for-profit sector because students attending these schools tend to default at higher rates than students in traditional four-year institutions. This is true: Average default rates for students attending for-profit schools stood at 11 percent in 2007, compared to just 5.9 percent at public universities. But some argue that these higher default rates are a function of serving a student population that has been shut out by public and nonprofit institutions.

    Neal McCluskey over at the Cato Institute points out that in a recent Congressional hearing about the for-profit industry, Senator Tom Harkin (D–IA) stated that “GAO’s findings make it disturbingly clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or even a few schools with lax oversight.” But findings from the GAO’s investigation, released just last week, found that “results of the undercover tests and tuition comparisons cannot be projected to all for-profit colleges.”

    So the question becomes: Is it the profit in for-profit that has the Administration uneasy?

    Federal subsidies for higher education have increased significantly over the past several decades. But—probably as a result of those increases—so has tuition. It has become a vicious cycle whereby the federal government increase subsidies for college, increasing students’ purchasing power, in turn allowing universities to raise tuition, which increases the demand for student subsidies. For some students, the for-profit market has broken this cycle, eliminating a barrier to entry to postsecondary education.

    While there are certainly bad actors—as with any industry—the answer isn’t to expand federal control and regulation over an industry that is meeting the needs of millions of students. The answer is to increase transparency and information about what students can expect to get in return for their investment in these schools. Vedder et al. said it best in their report:

    The roots of market-based education stretch as far back as classical Greece in the fifth century B.C., when proprietary schools and traveling teachers for hire … provided instruction to students willing to pay for their services. The Greek citizenry’s growing demand for educational services combined with the freedom of educators to establish private for-profit schools led to the emergence of a nimble educational system. … In response to the needs of the students and their families, educators taught the subjects students wanted to learn.

    One-size-fits-all approaches don’t work in education, and they certainly don’t work in the higher education industry. If the Administration really wants the United States to lead the world in college graduates, all options should be allowed to flourish to meet the needs of students.

    Posted in Ongoing Priorities [slideshow_deploy]

    13 Responses to The Assault on For-Profit Universities

    1. R A Tillinghast, Bir says:

      Excellent article on the obsession this administration has with destroying anything related to the private sector. My only real comment is the perhaps Lindsey will want to take advantage of her editor: "But new proposals for regulation the for-profit higher education industry outlined by the Department of Education could actually have the opposite effect" should read "regulating the for-profit…" And " If the Administration really wants the United States to lead to world in college graduates" should read "United States to lead the world…" Just thought since this is the Heritage Foundation and we are discussing higher education, a higher level of editing might be in order.

    2. Larmanius, USA says:

      There should be an assault on for-profit universities. They are often hugely expensive, total rubbish, and leave gigantic debts for the "students". There should also be an assault on not-for-profit universities–especially the state and land-grant schools! For the same reasons–only it is more onerous because they are supposed to have been created and given special access to State and Fed funds to educate and develop the territories in which they have been founded. The private not-for profits like Stanford and the Ivys can do whatever they feel like–as long as they don't use State and Fed $$$ to do it–sadly NOT the current case.

      • Richard T says:

        Are you telling me that you failed taking the classes for-profit university's? You never get anything if you don't want to work and that is why you call for-profit universities rubbish. I graduated from the University of Phoenix and I worked hard to pass. I didn't offer excuses like your doing!

    3. Patrick D. says:

      I strongly believe that we need to promote community colleges more so than larger universities and for-profit institutions. The quality of teaching in a public, non-profit community college is far greater than what can be found in the for-profit world where instructors perform little or no research and have few responsibilities.

      The powers that be in United States need to get off the “you need a 4-year degree” mantra. Too many students today wind up in colleges working towards unworkable degrees such as communications, women’s studies, basket-weaving and more. The students with soft degrees will likely end up working at a job where they ask if you would like fries with that drink.

      Community colleges are America’s hidden jewels in that they are the modern-day equivalent of what were once trade schools. Community colleges offer so many more options for students these days at much more affordable prices than either profit or for-profit institutions.

      The problem with these so-called “institutions such as the University of Phoenix is that their curriculum is remedial at best. Sadly enough, the University of Phoenix’s main goal is profit. In reality, everything else is secondary to making a buck. They are obsessed with enrollment numbers and they graduate subpar students with little preparation. Hell, they even admit students who have no business being in an academic setting even if it is a subpar institution like Kaplan or U of P.

      Higher education was never meant to be easy. It wasn’t designed so that a person can complete courses in his or her pajamas like some tacky television commercials suggest. I question the quality of these degrees because I have witnessed the utter stupidity of for-profit graduates on a much higher frequency than grads from sub-par non-profit schools.

      I would never hire a graduate from a for-profit institution and suspect that view rings true across the country because more and more for-profit graduates are being left out in the cold due to their inefficiencies brought on by attending such a poor-performing school. Look, I know the Heritage Foundation folks want to stick to their free-market ideals but for-profit education is a completely different animal altogether. Education isn’t some service or product that can be lumped together and traded or even bought. Education is one of the pillars of society, not some damn widget rolling off an assembly line.

    4. William Cann says:

      In regard to traditional universities tuition pricing, you should note that they price the tuition on an ability to pay scheme. Hence, the outsized increases in tuition is aimed at those who can pay the higher price. For families of lesser means, they discount the tuition with differing forms of school aid such as scholarships.

    5. Castro, Texas says:

      I am quite disturbed with the bias opinions expressed by the special interests in both the media and the US Senate. The strength of this country derives from the strengths of its people. Much like a corporation, its employees are its greatest asset. Not only am I a citizen of this great country, I am also a disabled US Navy veteran and a University of Phoenix student. During my first 12 months of service, I paid into the Montgomery GI Bill but because I was medically discharged before I reached 24 months of service, I am not eligible to receive the MGIB funding. When I was discharged, I was not able to acquire adequate employment and needed government assistance for my daughter and myself. I am grateful for those first couple of years of assistance that Texas medicade provided my family; however, I am more grateful for the last 3 years I have used PELL grants and federal Stafford Loans to attend the University of Phoenix, a place that creates a unique opportunity to educate more Americans than any other institution in the country. University of Phoenix is the only institution that could accommodate my lifestyle. The state school and traditional, non-profit school systems have failed people like me: People that are dedicated to higher education and want to earn their degrees as quickly as possible, all the while maintaining fulltime jobs and raising the future leaders of this great country. Additionally, my University of Phoenix education is the reason I no longer need government healthcare, food stamps, or similar assistance. I thank University of Phoenix for the lifestyle it has provided for my family and me. Neither a lifestyle that military experience nor any other educational institution could provide for me.

    6. Anna Forferty says:

      Well said, University of Phoenix vet. Additionally, your writing is fantastic, which says and means a lot. There are surely many at the community college and public university levels who certainly can not express themselves (nor spell) as well. However, I teach at a for-profit university that let’s anything breathing attend that school. It is so difficult trying to teach adults (not all of them; but many of them) to read. I did not apply for a teaching position at a university to spend an entire social sciences hour or two trying to teach third and fouth grade writing, reading, and comprehension. Many of the students simply can not read, write nor comprehend. So many students here do not understand that just because you can say the word doesn’t mean you can comprehend all of the words wholistically. Their critical-thinking skills oftentimes leave a lot to be desired causing me to seriously worry about any children they may have, as reading medications, etc. is so very important as one raises a child.

    7. IAmWinstonSmith says:

      Sadly, what everyone seems to be missing is the inherent danger of the federal government dictating who can go to what university. The complete government takeover of the student loan industry was the start of what will be equivalent to a nationalization of the university system as a whole.

      We can debate the relative merits of different types of university settings. I teach for a for-profit university and can proudly say that I am more effective than several previous instructors I have had in "non-profit" universities.

      People can rip on universities like Univ. of Phoenix all they want, but the truth is that we give students a chance to further their education when other options may not be available.

      I don't turn my nose up at people who are sorely behind in their reading or writing skills (no doubt due to a substandard public education system). Instead, I try even harder to make sure they get what is often not offered at more traditional universities: something of value for their money.

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    9. Dr. Pelletier says:

      Castro, the last line in your post is not a complete sentence. How much debt have you incurred for this "knowledge?"

      If the cost for the same degree at a junior college costs 75% less than a "for-profit" education business, how is that course at the Univ of Phoenix something of value for the money as stated by I am Winston Smith?

      Anne, cannot is one word, not two. The word "let's" is incorrect. Check your U of Phoenix books to see the appropriate use of an apostrophe. Seriously worry is a split infinitive. Check your fifth grade grammar books.

      In short, I teach at a public university. My freshmen write better than many of the alums of Univ of Phoenix who have posted kudos to this site.

      End of story….

    10. Brandon says:

      As a participant of both a profit and non profit school, I understand where the current administration is coming from. I was amazed at how much my loans were after a year with a profit university. And the education was nothing short of sub-par. The concern is the bill us as students will have to pay after we receive our degrees. If we were receiving a higher standard of education from these profit universities, this article would have a valid point. After a year of enormous loans for the same education if not better at a non profit organization, I am behind what the Obama administration has introduced. For once, at least with education, can we try to protect the consumer rather than the business?

    11. Kenny says:

      As a liberal, I can't believe I find myself agreeing with the Heritage Foundation. For profit colleges serve an important function within higher education.

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