• October 20, 2014

For-Profit Colleges Change Higher Education's Landscape

Nimble companies gain a fast-growing share of enrollments

For-Profit Colleges Change Higher Education's Landscape 1

Noah Berger for The Chronicle

The U. of Phoenix's San Francisco Learning Center, in the financial district, offers information-technology, business, and other degrees. As of this month, the university's total enrollment is 455,600.

At a time when American public higher education is cutting budgets, laying off people, and turning away students, the rise of for-profit universities has been meteoric.

Enrollment in the country's nearly 3,000 career colleges has grown far faster than in the rest of higher education—by an average of 9 percent per year over the past 30 years, compared with only 1.5 percent per year for all institutions, according to an industry analyst. For-profit universities now educate about 7 percent of the nation's roughly 19 million students who enroll at degree-granting institutions each fall. And the proportion rises to 10 percent, or 2.6 million, if you count students who enroll year round. Just this academic year, the University of Phoenix eclipsed California State University as the second largest higher-education system in the country, with 455,600 students as of this month—behind only the State University of New York.

"It's been a tremendous growth story," says Jeffrey M. Silber, a stock analyst and managing director of BMO Capital Markets, which figures the for-profit sector brought in $26-billion in 2009. Most of that was earned by 13 large publicly traded companies that now dominate the market.

As those companies face shareholder pressure to expand, the for-profit sector is poised to capture students that public institutions can't accommodate and that small private colleges desperately need to maintain their enrollments. The sector is likely to be a key beneficiary of President Obama's $12-billion plan to produce five million more two-year-college graduates over the next decade. That's partly because for-profit colleges, which first opened more than 150 years ago offering certificates and diplomas, are increasingly encroaching into the territory of traditional higher education by awarding degrees. "All of the conditions are there for them to capitalize on their advantages and continue to grow," says David S. Baime, vice president for government relations at the American Student Association of Community Colleges.

Yet most professors and administrators on traditional campuses continue to dismiss for-profit colleges as inferior alternatives that cost too much, consume more than their fair share of federal student aid, and turn out unprepared graduates who default on their student loans. "Traditional faculty members think of this as a little sideshow or as those matchbook places you see advertised on the bus," says Mark S. Schneider, a vice president at the American Institutes for Research.

But the for-profit sector is not only more robust than the rest of higher education, it is helping to force some changes in the way traditional colleges do business. Like for-profit institutions, traditional colleges are reaching out to adult students, starting online programs, and saving money by rejecting tenure in favor of hiring professors by the class. Still, traditional higher education is not known for being nimble. It has been operating in roughly the same way for hundreds of years, so by its very nature it may not be well suited to respond to competition from the for-profit sector. Cary Nelson, president of the American Association of University Professors, likens the for-profit sector to "the blob," an alien life form that consumed everything in its path in the 1958 Steve McQueen movie of the same name.

"The blob would shimmer and then be half again as big as before," Mr. Nelson says. "You'd turn your attention away and look back and suddenly, it's blocking out most of the sun." At the end of the movie, Steve McQueen kills the blob. The difference here? For-profit colleges aren't going away.

Neon Lights

Just over 30 years ago, fewer than 100,000 students attended for-profit colleges and universities. The sector was populated primarily by small, privately owned businesses, "mom and pop" enterprises that looked little like their traditional, four-year counterparts. The colleges—the first of which had started primarily in port cities like New York, Philadelphia, and Boston—taught skills for front-line jobs in high-demand fields, including business and health care, and later, cosmetology and food and secretarial services. And they enrolled people that traditional higher education tended to ignore: working-class adults with children of their own who needed more skills to get better-paying jobs but couldn't take time out to attend a traditional campus.

For-profit colleges maintain much of the same mission today, but the market has seen sweeping changes. Of the roughly 3,000 for-profit institutions, 40 percent are now owned by one of 13 large, publicly traded companies. And whereas only 10 percent of the institutions offered associate, bachelor's, or professional degrees in 1990, half do so today. Further, more than 90 percent of students at for-profit institutions are now enrolled in degree programs. Only about 30 percent attend part time. As the sector expands, it is attracting students who might otherwise have attended community colleges or even four-year institutions. "They are clearly a threat for both public and private schools," says Jim Scannell, president of the higher-education consulting group Scannell & Kurz, "especially for adult students returning to get a B.A. or going part time to get a master's."

Some small, private liberal-arts colleges, seeing enrollments decline because of the economic downturn, are looking to make up that lost tuition revenue by boosting their enrollment of adult students. Such institutions are competing head to head with for-profit colleges. In addition, students who have been turned away by budget-strapped public colleges, or who simply find the bureaucracy there too difficult to deal with, are being welcomed by the for-profit sector. It's not clear whether this shift of students from public institutions to for-profit universities will be permanent, industry analysts say, but for now it adds to the size and legitimacy of the for-profit sector.

Corliss A. Ford attended a public junior college more than 25 years ago to earn her associate degree in nursing. But when she decided to go back to earn her bachelor of science in nursing two and a half years ago, she chose a for-profit, Kaplan University. Because she works two jobs, she says, she would never have had time to travel to a traditional campus. "Trying to make it to a place where you sit in a class was almost impossible," she says. At Kaplan, she started her program during the summer and took online classes in the evenings. "I could start anytime online," says Ms. Ford, who graduated from Kaplan last month and already has a new job as director of nursing for a home-health-aide company.

While Kaplan Higher Education is one of the country's largest for-profit companies, with approximately 103,800 students, it is owned by the Washington Post Company and so is not one of the 13 large publicly traded for-profit universities.

The biggest player among those is the Apollo Group. Its flagship University of Phoenix has morphed from an institution with 25,100 students in 1995 to one with 455,600 today. That means that 15 years ago Phoenix was about the same size as George Washington University. Now it is larger than the entire undergraduate enrollment of the Big Ten.

Phoenix, by far the biggest part of Apollo, has 200 campuses in 39 states, Canada, Mexico, the Netherlands, and Puerto Rico. Still, much of the university's growth has been fueled by students who work primarily online (one of its key targets: working mothers, who can take classes from home in the evenings while their children are sleeping). Phoenix's enrollment dwarfs that of each of the other 12 publicly traded companies, including Education Management Corporation, with 136,000 students; Career Education Corporation, with about 113,900 students; and DeVry Inc., with 101,648 students.

Education Management is a case study in the trajectory of the for-profit sector. When John R. Mc­Kernan Jr. took over as vice president in 1999, the company had 19 art institutes with 24,000 students. Since then, the company's student population has increased more than fivefold as Education Management has purchased a set of junior colleges in the Midwest, a small group of health-sciences colleges, a law school, and Argosy University—which began as a graduate institution. Whereas in 2006, 4,000 of the company's students worked fully online, says Mr. McKernan—who is now the company's chairman—that number has grown to more than 30,000 today.

At first glance, the corporation's flagship art school—the Art Institute of Pittsburgh—doesn't look like a traditional college. The "campus" is a 10-story building, just off the Monongahela River, that blares the institute's name at the top in red and white neon. Each floor is devoted to a different program, starting at the top with culinary arts and descending through industrial design, Web design, fashion and retail management, interior design, and photography. The walls of each floor contain glass cases that display posters, furniture, clothing, photographs, and even wrapping paper and greeting cards—all the work of the institute's students and some of its 55,000 alumni.

But on the fourth floor is a classroom labeled "Western Civ. I," a course the institute added in 2001 after it began offering bachelor's degrees. The institute also has a library and a writing center, where a teacher and a handful of students work quietly. And a few blocks away are three residence halls that the art institute opened in 2007 and 2008.

George L. Pry, the president, says that like other for-profit universities, the institute—which opened in 1921—has reinvented itself during the last decade, converting many of its associate-degree and diploma programs into bachelor's degrees.

"Employers were asking for more well-rounded employees coming out of here, with communications skills and the ability to comprehend more complex issues instead of just hands-on skills, " he says. "What I see happening is the maturation of our sector, moving more and more toward traditional higher education."

Student Focused

A big reason places like the Art Institute have been so successful is that they offer course schedules that suit students' lives. At traditional colleges, students might have a class at 9 a.m., another at 11 a.m. and a third at 3 p.m. The Art Institute of Pittsburgh, however, runs three sessions each day: from 8 a.m. until noon, 1 p.m. until 5 p.m., and 6 p.m. until 10 p.m. By concentrating their courses in one block, it is easier for students to negotiate time for school and work, and 85 percent of the students at the institute have jobs.

The University of Phoenix has pioneered another model that allows students to concentrate on one or two classes at a time. Each class lasts from five to nine weeks, and students take courses year round. When students enroll at Phoenix, the university lays out their entire course plan all the way through graduation. "They know what that schedule will be, and they can plan their lives around it," says William J. Pepicello, the university's president.

Unlike traditional colleges, Phoenix never turns away students because classes are full. It simply adds more, depending on demand. And for-profit institutions move quickly, adding new programs to match careers that are on the rise and getting rid of others that are on the decline. Phoenix can be so agile because it is a business, with a 10-story, glass-and-copper corporate headquarters where most decisions are made. Traditional campuses, by contrast, are run not only by administrators but by powerful faculty committees that must approve most academic changes—a process that can take months, if not years.

Gregory M. St. L. O'Brien left a long administrative career in traditional higher education at the University of New Orleans and then at the University of South Florida before serving as president of Argosy University from 2004 until 2007. "I used to joke that if, at my public university, we were going to host the world's fair and try to develop a program to manage it, the world's fair would be over by the time our committee finished meeting on it," he says.

On traditional campuses, says Mr. O'Brien, the focus is on faculty members. At for-profit institutions, he says, students are the No. 1 concern. "One senior faculty member would say: 'I just don't teach on Tuesdays or Thursdays,' and we'd rewrite our schedule to accommodate that professor," says Mr. O'Brien, recalling his days in traditional higher education. At for-profit institutions, faculty members teach courses established by the university at times that work best for students.

"We have crafted our entire world around students," says Donna M. Loraine, vice president for academic affairs at DeVry University, which offers undergraduate and graduate degrees in technology, science, business, and management. "We are here to improve their futures, not make it more convenient for us." Ms. Loraine, who has worked for DeVry for 17 years and was a professor there herself, says the university offers early Saturday-morning classes because students have said that's a convenient time for them. And in major urban areas like Washington, DeVry waits until after 10 a.m. to start the day because students complained that crowded commutes made it difficult for them to get to class earlier. 

The process of enrolling at a for-profit institution is often much quicker than at a traditional college. Prospective students who make an inquiry at a traditional campus might get something in the mail a week or two later, telling them how to apply. Then it takes months for the college to review their application and either admit or reject them for the following fall.

At for-profit institutions, the timetable is entirely different. "If you express an interest today at a for-profit, you will get a phone call from someone within 15 minutes, and that person will work with you to complete your application and figure out what program makes sense for enrollment starting the next month," says John Katzman, chief executive of 2tor—a company he founded that works with traditional universities to establish online degree programs.

For-profit universities spend a lot of money to get students in the door. For the three-month period ending November 30, 2009, the Apollo Group spent $275-million on "selling and promotional" expenses, or about 20 percent of its total net revenue of $1.3-billion for that quarter, according to a report the company submitted to the federal government. Turn on a television, and within a half-hour, you'll most likely see a slick commercial touting a for-profit university, complete with personal testimonies from graduates who say the experience changed their lives—and pushed them up the economic ladder. If you telephone the main number of a for-profit university, a recruiter is likely to call back to ask when you want to enroll (even if you are a newspaper reporter trying to reach the university's president). The big-bucks advertising campaigns and marketing savvy, plus the high-pressure recruitment techniques, have helped the for-profit industry blossom.

Once students are enrolled, for-profit institutions work hard to hold on to them. Phoenix has what it calls an "early alert" system. If a student is absent or struggling in class, the student's professor contacts one of three counselors who are part of the student's "graduation team": an enrollment counselor, who helps choose and plot out students' program of study; an academic counselor, who works with them on any classroom difficulties; and a financial counselor, who helps them complete student-aid applications and sort out financial concerns. Of course, it's in a for-profit university's financial interest to hang onto students through graduation, so that tuition money (and financial aid) keeps flowing.

Cost Questions

Proprietary schools charge a lot more than public colleges—an average of $14,174 this year, compared with $2,544 at public two-year institutions and $7,020 for in-state tuition at public four-year institutions, according to the College Board. But students frequently choose proprietary schools over public colleges because for-profits do so much to limit the hassle of enrolling and applying for aid, and because students can take the classes they need quickly and get on with their lives. Ms. Ford, the Kaplan student, said she chose it for her nursing degree "because I could get into the class without having to wait."

Still, there are plenty of horror stories about career-college students who never graduate, or those who leave with large student-loan bills and then fail to get jobs. Students from proprietary institutions borrow more than students in other sectors of higher education, and have the largest student-loan default rates. But they graduate from two-year programs at a much greater rate than do students at community colleges: 60 percent in 2007 compared with 26 percent, according to the U.S. Education Department. In addition, for-profit university leaders say their students are bound to have higher loan-default rates because they are more likely than students on traditional campuses to be low income, to live on their own—without their parents' support—and to be the first from their families to attend college.

When it comes to jobs, some for-profit institutions have become key suppliers of workers in certain markets. Keiser University, a privately owned institution with 15 campuses in Florida, has been the No. 1 producer of associate-degree graduates in health professions and related sciences in the state for three of the last five years. "Students like our culture," says Arthur Keiser, founder and chancellor of the university. "It's very personal."

And employers like his graduates. The Cleveland Clinic Florida has hired more than 50 Keiser graduates in the last five years. Keiser students, who become radiology or surgical technicians and medical assistants, for example, are more mature and focused than those from other institutions, clinic officials say.

Harris N. Miller, president of the Career College Association, acknowledges that for-profit institutions aren't for everyone. "You don't go to one of our schools to be a classics major," he says. But proprietary schools are often the top choice of students who want skills "related to a real job in the real world," he says. And not just in the United States. If the growth curve for proprietary schools continues, they could be educating more students than any other sector of higher education worldwide by 2020, says Mr. Miller.

The stocks of publicly held for-profit education companies have outperformed the Standard and Poor's 500 by about 40 percentage points in each of the past two years. And companies like Stifel Nicolaus that analyze the market predict that the sector will continue to enjoy a "significant tailwind." Indeed, BMO Capital Markets predicted in the fall that revenue from the for-profit sector would rise by 10 percent per year through 2014.

But a report issued last month by Stifel Nicolaus says there is evidence that the rate of growth may be slowing and that for-profit universities may have seen their largest enrollment gains this past summer and fall. "Although we believe the benefits of the economic cycle will eventually wane, and growth for these entities will slow to more normalized levels (and in some cases turn negative)," says the report, "we see favorable prospects for potential price appreciation."

That doesn't deter Mr. Miller. "When you ask where the capacity is," he says, "the short answer is primarily in our sector. We have the capital to invest the dollars to hire faculty, to make sure technology is up to date, and to make sure these are real skills people can contribute to the economy."

Comments

1. richardtaborgreene - February 08, 2010 at 07:15 am

1. Credentialling, informing, and educating are quite different things.
2. Colleges selecting students are a barrier compared to students selecting colleges.
3. What a course is---event delivery (a semester in 3 days of 12 hours each)---when re-invented, can fit modern lives and careers better than the old college default model of course.
4. What homework is---every student reading a different book on the same topic weekly combining differences of perspective---when re-invented can propel one beyond traditional colleges.

The question is---when will the pain hit the biggies of traditional higher education? The for-profit sector will be so big by then that adequate response may not be possible, instead, the non-profits may be bought as brands within a brand family of a for-profit. Harvard as a niche in U Phoenix for example.

While professors desultorily ponder web reshaping of lives and education, the for-profits and their students are doing it.

Nice.

2. esselan - February 08, 2010 at 09:14 am

The only real drawback of for profits in general is the lack of grant aid available to students. The amount of debt students amass just to get an associate's or bachelor's degree can approach the debt load of law school or medical school graduates. For profits would do well to reinvest a larger share of their profits into financial assistance for their students.

3. 22280998 - February 08, 2010 at 09:30 am

Career Colleges 9and traditional schools) can be very good at teaching existing knowledge. Yet, they must still rely on the traditional schools that support the discovery of new knowledge. The Career College business model does not support a research mission.

4. signaledu - February 08, 2010 at 09:58 am

The price comparison you make is disingenuous. You are comparing prices at for-profit schools with prices at institutions subsidized by their states. The real comparison is with other private (not-for-profit) institutions where the for-profit prices are lower on average. More to the point, the state-funded model of education no long works. As states and the national government allow deficits to grow, they are freezing subsudues and prices continue to rise at state institutions at a pace that far outstrips that of not-for-profit groups. The second disingenuous but more subtle point alluded to if not asserted, concerns default rates. The GAO has published a report that shows that default rates across higher education correspond with socio-economic status and not with the governance structure of the university. There is a class story here (and a class bias story) which your piece fails to fully address.

5. rchampagne - February 08, 2010 at 10:18 am

Let's see, publicly subsidized colleges at the two year-level are substantially cheaper than for-profit two-year colleges yet students are flocking to the for-profit schools. Why? Could it be the lousy customer service extended by the community colleges? Or perhaps the fact that the average community college student drops out before earning a degree (only 23% graduation rate at community colleges even if you give them 3 years to measure 2 year gradaution rates - great value for the tax payers?)

6. cdwickstrom - February 08, 2010 at 10:27 am

Cherry picking programs in demand will always provide better results than sustaining a broad set of courses and degrees. I doubt that Apollo or Corinthian, or even Kaplan will be offering programs in archeology, linguistics or even ESL for that matter, any time soon.

7. sunking_2007 - February 08, 2010 at 10:59 am

The quality of students at the undergraduate and graduate levels that enter for profits is uneven at best. Many of the students that enter business programs cannot even do basic mathematics which is used in the quant courses. It is more horrific on the graduate level. To many of them, the use of EXCEL is too "advanced" and they simply do not want to learn it. I know hiring managers that will not review resumes with degrees from for profits. These resumes are placed in the circular file. Why spend $30,000 for an MBA that does not have program accrediation such as AACSB.

Sure the administrators' focus is on the students since the students bring in the revenues. If the course is too hard, they simply tell the faculty members to reduce the rigor in order to prevent an exodus of students. Revenue and other numbers drive these places not academic rigor. If one wants academic rigor, go to a traditional school. Many students in for profits just go and get a degree because employers will think they have value to the workplace. Just go there and download their powerpoint degree and off we go.

There is still quite a disparity in the quality of education between for profits and traditional schools. I hope people will wakeup and look beyond the slick advertising and realize the quality does matter. Sure traditional schools obtaining a degree may take longer, but there are greater quality assurances in place. I advise students to go AACSB programs for MBA's and related degrees.

8. kimchronicle - February 08, 2010 at 11:03 am

Students go to those schools because they can't get into state institutions. For-Profit schools have no standards. Some of them don't even have tests - testing knowledge, which I say is a joke compared to the degrees I earned from real universities. It just goes to show you that money can buy you anything.

9. unusedusername - February 08, 2010 at 11:29 am

Of course for-profit colleges have high graduation rates. They have dumbed down their courses to the point where anyone with a pulse can graduate. Any professor who makes the class rigorous enough so that someone might not pass is fired. Gotta keep those numbers up. I found it very telling that many administrators, but no faculty were interviewed for this article. If you're an adult student looking for a quality education at a low price, you're much better off at a community college, where the quality of teaching is better, and you won't have masses of student loans to pay back.

10. tprestby - February 08, 2010 at 11:38 am

To #7and #8:
Unfortunately that is the wrong way to view this. As a product of BOTH traditional community colleges and private for profit institutions, I would tell you that my education that I received is actually more rigorous and the quality was just as good. As I am now in a doctoral program in a public four year state college, the assignents are the same but the instructors are weaker. Joke? I don't think so. My education is REAL. I worked hard for it, I earned every single grade through hard work and adhered to the rubrics and standards of the private for profit institutions I attended.

11. intered - February 08, 2010 at 11:47 am

State and large independent universities can compete effectively with for-profits. More than a few independents are doing so now.

That said, state and most independent universities are not positioned to stem the tide of lost market share. First, they must commit to changing the antiquated guild-like institutional structure under which they labor with ever declining efficiency. Absent this change, their losses will continue to mount and they will be left offering the expensive, low margin programs while smarter schools take their market share from them. The loss of high-margin programming by public institutions is making it increasingly difficult to offer the important orphan programs that are part of their public mission.

Here are a few things state and independent universities could do today if they had the will.

1. Understand and act on the reality that half of their potential market consists of adults including working adults with families and career-oriented positions, and younger adults (22-24) who think and make decisions much the same as working adults.

2. Understand that there is no such thing as a university's market. Today's higher education consists of a variety of markets, most of which are defined by unique needs for services and outcomes. One, two or even five sizes do not fit all. This kind of antiquated thinking guarantees decline.

3. Implement modern information and accounting systems so that they can understand the costs, revenues, margins, market share, trends, and other behaviors of prospective students, students, and instructors (a) in each individual program and market and (b) aggregated in various ways to facilitate intelligent decisions. http://www.intered.com/higheredbriefing/2010/1/26/an-alternative-to-begging-how-our-state-universities-can-do.html

4. Use their newly developed information system to:

a. Refine needed programs to meet the needs of their publics. Sometimes, success will be achieved by doing nothing more radical than offering programs when, where, and how the market wants them. This seldom happens because the university lacks understanding of the markets' needs, and because faculty-driven programming seldom chooses to inconvenience itself. On other occasions, success will come only when the focus or emphasis of a program is better aligned with what students need.

b. Eliminate programs for which there is no external market and that do not otherwise align with an important institutional mission. I am not suggesting that state or independent universities eliminate all programs that don't make money. State institutions serve the public under a rich and broad agenda, not all of this service can be profitable. Independent colleges often serve spiritual missions that stand apart from considerations of margin. I am suggesting that it is irrational to make decisions about program retention in an intellectual vacuum or the rarefied atmosphere created by the squeaky wheels of internal program advocates.

c. Graduate students on time instead of letting four year degrees creep to five, six or even seven years. State universities are among the best at teaching supply chain management but they are incapable of practicing what they teach.

5. Implement three-year degrees. No, they are not of inferior quality. Many employ modern learning and assessment sciences to achieve superior outcomes across the board. There is no doubt that three-year degrees will become the standard. The only question on the table is whether state and independent schools will lead the way or will be dragged, kicking and screaming along the way to the 21st century. http://www.intered.com/higheredbriefing/2010/1/5/the-three-year-degree-part-ii.html

6. Address lost productivity. Using their new information and decision-support systems, state universities, especially, will see that the productivity of their faculties has been declining for years. In most industries, the more you make, or sell, or do, the more you earn. In higher education, the more professors make, the less they teach and the more they engage in consultation for which they are compensated by outside sources. While the nation's productivity has soared (notwithstanding the occasional recession) The productivity of full professors has declined approximately 25% in the last 50 years.

7. Manage the enterprise. As much as we would like to see our state and large independent universities as defined by our special interests, the simple, undeniable fact remains that the core business of a university is the production of credits and degrees to defined standards. If this mission were aggressively managed, we would not see higher education costs consistently outstripping the CPI by a factor of two or more. http://www.intered.com/higheredbriefing/2009/11/23/sidebar-the-hepi-too-clever-by-half.html

Will much, or any of this change take place. We'll see. I would like to be optimistic but my fear is that the not-for-profit sectors have to decline further before leave the early 20th century and they wake up to the realities of today's markets. We need strong state and independent universities. Their strength is declining and it should worry us.

-----------
Robert W Tucker
President
InterEd, Inc.
www.InterEd.com

12. rthezel - February 08, 2010 at 12:18 pm

Thank you, Robin Wilson, for the excellent overview of for-profit higher education. Ultimately (and now), the proof is in the pudding: Can we stabilize the true cost of a degree? Can we release student enrollment demand pressure on public institutions? Can we prepare students for productive jobs? Can we increase the number of students engaged and retained and working toward a degree? Can we continue to increase learning and critical thinking? These are questions and issues that challenge all insititutions, not-for-profit and for-profit.

It's that last item--learning--that attracts the most lightning, and we are only beginning to establish assessment processes and tools that work inter-institutionally across many disciplines.

13. unclibrary - February 08, 2010 at 03:13 pm

Robin, excellent overview of the rise of the for-profits. You've omitted the response of the "traditional" higher education sector in terms of our significant growth in online degree offerings, expansion of off-campus programs closer to student's homes and work, highly innovative professional degrees leading the way in responding to governmental, organizational, and industries needs, customized onsite programs, and year-round accelerated programs. The characterization of today's higher education non-profit sector is a bit old. These responses to serve the changing needs of students are by no means the sole purview of the for-profits. Also, faculty at "traditional" universities are reaching out to serve these students in innovative ways at considerable personal sacrifice as they are fully engaged in university governance while contributing to knowledge creation, teaching on-campus and travelling around their regions, states, and beyond to suit students' needs. From my close working experience with these faculty, I can attest that they are committed to knowledge creation, preservation, application, dissemination, integration and focused on student success. I'd like to see a companion piece on how the not-for-profit universities and their continuing and professional education units are providing educational services to serve the needs of our country at a much more reasonable cost to our students.
Patricia A. Book, President
University Continuing Education Association

14. melindajo612 - February 08, 2010 at 04:22 pm

I would have thought that any examination of for-profit colleges would include a discussion of accreditation, but I see none here, other than sunking's passing reference to program accreditation for MBAs. Are these institutions regionally accredited? If students decide mid-degree to transfer to a (much cheaper) community college, will their credits earned at a for-profit college be applicable?

15. anonscribe - February 08, 2010 at 05:24 pm

I worked for a for-profit vocational school after getting my M.A. in English. It was a joke, despite the fact that it was ranked the #1 for-profit college in the city. I was routinely pressured to pass students who didn't deserve to pass because they were paying 30K for a nursing A.A. The caliber of student was partly to blame for some of these programs, but the poor quality of the curriculum was also to blame. Students were graduating as paralegals who could barely complete an introductory college essay. It was shameful.

Anecdotal evidence aside, I'm often confused by the hyper-optimism of the technophiliacs who seem to think for-profits are destined to gobble up the education sector. It will never happen. They have a purpose to serve in helping career professionals, or in helping impacted programs like nursing, but public and private universties and colleges still command the best brands in education: Harvard, Berkeley, etc. Many for-profits feed like parasites on the quality produced at superior institutions. No one teaching at the vocational school I worked at had a degree from said school, nor from its parent company's schools (hint: rhymes with chaplain). Coincidence? Or, was the school smart enough to know its graduates weren't smart enough to teach at its own schools?

I'll count down the days until we have a member of the presidential cabinet from Online U.

16. anonscribe - February 08, 2010 at 05:27 pm

And to answer melinda's question above: no, credits don't transfer. Students from the nursing program I taught in were often shocked when they tried to apply for a bachelor's program in nursing, or some other higher degree, only to find that the 30K they dropped in tuition was completely untransferable to other universities. The college told students this repeatedly...once they had paid their first semester of tuition.

17. intered - February 08, 2010 at 05:29 pm

A few additional thought in appreciating the comments above.

1. The for-profit universities (University of Phoenix, DeVry, Capella, Argosy, National American University, etc.) are all regionally accredited. By objective measures, and on balance, they measure up no better nor worse than the independent colleges with respect to accreditation standards and criteria.

Most of the 3,000 career colleges mentioned by Robin Wilson are accredited by national career college accrediting bodies. Like the regionals, these bodies are also recognized by the U.S. Department of Education. Principal among these are ACICS, ACCSCT, and ACCET. A few of the regional's get into the career guild game as well.

2. I do note that the tuition price comparisons in this article need to be amended. For any profitable for-profit, and that is most of them, taxpayers are paid a little something when these universities pay federal, state, and local taxes of various kinds. The payment may be only a few hundred dollars per student but the margin between the for-profits and the others is large. With state universities and independent colleges, taxpayers pay many thousands of dollars in the form of direct payments and not-for-profit subsidy to underwrite the education. Moreover, the difference between taxpayer support for state universities and independent colleges is not so large as many believe. In the past, we have maintained and published precise figures on taxpayer payments/costs under various higher education business models. Unfortunately we no longer publish these data. I can tell you, however, that the differential is increasing. State universities and independent colleges are receiving increased taxpayer support and for-profits are returning more payments to the taxpayer.

3. The inter-student variance in outputs is indeed large among the for-profits but so is it large among independents and state universities. A few moments thought will tell you that this is largely due to the greatly increased range of inputs into our educational systems. In terms of value added, the implication of this point, career schools and community colleges add the greatest value (outputs / inputs). Elite schools add the least.

4. We interview faculties in for-profit and not-for-profit institutions. It would be specious, I think to attempt to generalize much. That said, we do not see any pattern of preference against the for-profits or for the not-for-profits. Again, this looks like bias lacking evidence.

What I continue to see in discussions on this topic is widespread bias instead of the clear-headed, objective thinking we would hope to see among those representing our universities. There are problems enough to go around in higher education. I fail to see that they favor one business model over another.

-------------------
Robert W Tucker
President
InterEd, Inc.
www. InterEd.com

18. anonscribe - February 08, 2010 at 06:32 pm

Robert, your first point misses the point: even with their "regional accreditation" (which often isn't the same accreditation earned by a CSU, for example), they often lack proper accreditation that would allow their courses to transfer to other schools. Got your M.A. in English from National University? Want to go for the Ph.D. at U of Washington? You can't--rather, the M.A. would count as nothing if you did. This "we're regionally accredited" scam is what confuses students. One regional accreditation may have only limited value between institutions. If you go to a "traditional" university, like CSU or SUNY, you have the comfort of knowing you can pursue degrees at other institutions and have your credits counted. This isn't true of most of the colleges you mention.

Your 4th point also misses the point: I agree that there isn't a hiring preference for faculties between for-profit or not-for-profit schools: both prefer hiring faculty from not-for-profit schools.

19. intered - February 08, 2010 at 07:17 pm

Anonymous (I confess preferring to respond to individuals who are willing to identify themselves):

1. Regional accreditation is regional accreditation. Regionals do not accredit programs, only institutions. This is accreditation 101. Nationally accredited institutions do have difficulty transferring credits into some regionally accredited schools. Some of the bases for these difficulties have scientific merit, some do not.

What you are speaking of in general is arrogance and elitism on the part of many of our antiquated institutions. University X, on its own in and the complete absence of empirical evidence, decides that its Econ 101 course is superior to the same or similar course offered by University Y and, therefore denies credit or allows half credit, etc. These tempest-in-a-teapot academic gotchas interest no one and only serve to harm hapless students who are focused on getting ahead and could not care less about the chimerical reasons for which one institution judges itself superior to another.

If we fail to put an end to this kind of unjustified inability to play well together, we will surely see the imposition of greater controls by the U.S. Department of Education in the interest of the consumer. If you want that, keep up the Lilliputian battles.

By the way, students can sue, and may prevail, against this kind of treatment; i.e., non justifiable denial of credit between two regionally accredited institutions of higher education.

2. My point in #4 was to say that we see few differences between not-for-profits and for-profits in the attitudes of their faculties toward their own institution. We have evidence, not opinion. In fact, we see differences that favor the for-profits but I downplay them because the largest for-profit tends to hire practitioner adjuncts who, as a group, have little interest in whining about how they are or are not treated by their part-time employer.

------------------
Robert W Tucker
President
InterEd, Inc.
www.InterEd.com

20. kmellendorf - February 09, 2010 at 07:32 am

Before making final decisions about any university, for-profit or not-for-profit, one must ask a very imortant question. Is the institution responding to the students' needs, to the students' wants, or to both. In many cases, wants and needs are really quite different.

There was a time when most educational institutions focused on the needs of the students, on what the students would need in order to be recognized as having a truly higher education, in order to take knowledge and awareness one step higher. This is not what many of the students wanted while in the institute, but they were grateful ten years later. An in-depth education is a long-term process that takes quite a bit of time to show its worth.

Many students want to see the benefits right now. Many reports speak only of the immediate benefits. What concerns me when I contemplate a university is what its graduates have contributed to our world throughout their lives. Is the world a better place because a graduate of a specific university was launched along a path that few could have followed? If we do not have these launching pads, if education does not inspire students to be more than they ever hoped to be and in ways they never imagined, then education is little more than apprenticeship.

21. loweredexpectations - February 09, 2010 at 10:12 am

One question I have is about graduation rates--citing the "low" graduation rate at community colleges might be misleading. Not all community college students enroll with the intention of earning a degree; many intend only to take courses they need to meet a specific career goal, or enroll out of interest in learning more about a given topic. (I've done so myself.) So, although we'd all love to see graduation rates of students who do intend to earn a degree when enrolling at community colleges increase, the 25%ish completion rate statistic might be misleading, if it includes students who enroll without intending to graduate.

22. loweredexpectations - February 09, 2010 at 10:21 am

I am a bit troubled about the fact that students at for-profits can use federal student aid to pay for classes. I understand that such schools return some money to the public coffers; I understand, too, that if the graduates get better jobs, they'll ultimately return more revenue to the Feds through increased income taxes. I also understand that a lot of not-for-profit schools, especially the privates, use revenue unwisely--that Fed student aid subsidies mortgages on luxury dorms and world-class athletic facilities and bloated upper-echelon administrative salaries. But it still feels uncomfortable to me that at for-profits, Fed student aid subsidizes payments to shareholders--especially given that there's a terrible shortage of funding for publicly-funded institutions. Shouldn't Fed, and state, student first fund public institution, then not-for-profit privates, then for-profits?

23. loweredexpectations - February 09, 2010 at 10:25 am

My last comment--having taught at community, private, non-traditional, and for-profit colleges, I myself have seen great and terrible "quality" in every sector of higher ed; the "quality" of institutions as a whole varies wildly, as does the quality of instruction by individual faculty members. If only it were as easy as "private, not-for-profits = high quality; publics = the potential for high quality; and for-profits = low quality." The puzzle is just more complex than that, especially now, when great and terrible often students choose institutions based on cost and accessibility/flexibility of course offerings.

24. johnvknapp - February 09, 2010 at 06:35 pm

Asses in the classes -- when THAT becomes the dominant administrative motivator, the quality of the education those backsides get, however variously defined, always always takes a back seat to numbers. Students are all too often admitted who cannot do the work most colleges assume students should be able to do for a given level/domain, and then they are either cruelly tossed aside, sans their substantial tuition $$, or, more commonly, they are "passed" with watered-down assessments. While any institution could reflect some standards abuse, the likelihood of that happening when profit is the dominant motive is far higher than not. This rise of the for-profits, and their concommitant claims of just-as-good, may be one of the many myths perpetrated by Capitalism's willing executioners.

JVK

25. bobcongdon - February 10, 2010 at 04:10 pm

Higher Education is easy to mimic.

Government funded or guaranteed student financial aid supports virtually the entire budget of for-profit institutions. If federal and state financial aid dried up, so would the for-profits.

Some years ago I attended a dinner where the President of a newly created for-profit spoke at length about his free enterprise institution, one that was definitely not "government funded" like those pesky state universities. Upon inquiry, he admitted that all of the institution's income was from student loans. Indeed, I learned from another source, getting approved at the state level to accept student loans was his first priority, far more important than accreditation, admission standards, course content, professorial qualifications, and other marks of a decent institution of Higher Education.

When, in order to survive, a for-profit's business model focuses upon selling a student an opportunity for a "new career" in return for that student's signature on a loan, one is justified questioning whether that is Higher Education or some caricature of it.

Bob Congdon
Professor Emeritus
University of Alaska Anchorage

26. intered - February 10, 2010 at 05:25 pm

I find an interesting strand above wherein we are seeking to distinguish wants from needs and balance the two with respect to learner's choices within or among universities. With respect to that strand, it seems to me that a few distinctions need to be added to the discussion.

First, is the nature of the learner. Second is the nature of the academic or professional discipline. A third distinction might be the degree of transparency among the available choices; i.e., is the prospective student making a fully informed choice to emphasize his expressed wants over what experts tell him will best meet his needs in the long run.

With respect to the nature of the learner, I hope we can agree that we do not enjoy the same prescriptive rights rights over a successful 35 year old manager, father of three, Rotarian, as we might claim over a 17 year-old recent high school graduate of marginal ability in a college environment. At some social-developmental stage, other things being equal, it would seem that the student is a sufficient rational agent in the logical sense.

With respect to the nature of the discipline, it seems clear that externally branded degrees (e.g., accounting degrees that subsume passing a CPA, a degree in physical therapy, etc.) carry a different prescriptive weight than do degrees in literature, general business, etc. If one wants a degree in nursing, the profession has prescribed in considerable detail the knowledge and proficiencies entailed by that degree. End of discussion.

With respect to the transparency issue, could we not agree that having highly transparent degrees (we have very few now) would go a long way toward alleviating our concerns about the differences between students' wants and needs? The MBA degree might serve as a good example. In today's market, we have MBA degrees ranging from the "appreciation level" to deep quantitative analytics. If someone desires employment with a leading investment banking firm (sic), he will, if fully informed, choose the analytic and not the appreciation-level degree. If someone wants to understand MBA level issues at a very general level, as part of some larger professional goal, an "MBA Light" degree may be perfect for him. Who are we to say he will or will not thank us or be sorry later. He has the same right to say that we will be sorry for choosing to go into higher education!

-----------------------
Robert W Tucker
President
InterEd, Inc.
www.InterEd.com



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