The for-profit sector of higher education is in the political spotlight these days. Last year an Obama administration official launched an attack on the legitimacy of for-profit colleges and universities. Although that official subsequently resigned his position in the Department of Education, the measures he promoted took on a life of their own. Now the for-profits are faced with what could be an existential crisis. The legal challenges have driven down the stock prices of the publicly-traded institutions and a daunting new regulation is about to take effect.
The story has been well-reported in the Chronicle. The former official who got the anti-for-profit ball rolling is Robert Shireman, who served as deputy undersecretary of education, until his resignation in July. Shireman jawboned the accrediting associations to be tougher on for-profits; called for a new system whereby each individual state in which an online university does business would have the right to regulate the enterprise; and pushed for the now notorious idea that for-profit colleges and universities would have to show high levels of “gainful employment” for their graduates in the fields they studied. His animus against the for-profits didn’t seem to sit all that well with the rest of the Obama administration. On May 11, Secretary of Education Arne Duncan went to a policy forum held by the for-profit DeVry University and declared that the for-profits play a “vital role” in educating underserved populations.
Shireman had played a key role in the Obama administration’s successful effort to abolish the role of commercial lenders in making Title IV federally-guaranteed student loans and replacing that system with direct lending managed by the Department of Education. So his decision to head for the exit had more an air of victory than of forced departure. The Chronicle, however, ran an in-depth analysis pointing to an all-out lobbying campaign by the for-profits to discredit Shireman. Whatever the case, the administration continued with the tone of suspicion and hostility toward the for-profit institutions, despite Secretary Duncan’s reassurances.
The debate that has emerged is only at the most superficial level about the for-profit motive in higher education. The problem to which Shireman drew attention is that most of the for-profit colleges and universities are aggressive rent-seekers, i.e. they had learned how to exploit the federal student-loan system with astonishing efficiency and often with unscrupulous disregard for the quality of education they provided students and for the disastrous debt they often burdened those students with. They were (and often still are) “for-profit” in the sense of creaming government resources, but not in the sense of competing in a market by offering an especially good service.
But the hard truth of the matter is that a great many colleges and universities in the not-for-profit sector are barely distinguishable from the for-profit institutions on any of these parameters—except perhaps the efficiency with which they exploit the federal loan system.
The challenge that looms for the for-profits is a Department of Education regulation that would impose a rationing of student loans proportional to the percentage of their graduates who succeed in finding “gainful employment’ in their majors. The matter has been tied up in debate among officials for several months but a meeting scheduled in late January may determine its fate. The legacy of Robert Shireman, however, includes his role in sufficiently traumatizing the for-profit institutions that they are now very actively lobbying for their case.
I have been meditating for some time what position my organization, the National Association of Scholars, should take. The for-profit colleges and universities as they are now are certainly not bastions of scholarship or liberal arts education. I see no grounds on that basis for NAS to take an interest. But they are very much part of what I take to be the fundamental transformation of American post-secondary education—and that is very much a matter of concern to NAS and to anyone concerned with the survival of liberal education. I’ll address that in my next post.
10 Responses to For-Profit Colleges on the Brink
lou25 - January 6, 2011 at 3:53 pm
We possibly could do something revolutionary and ensure both the profit and non-profit colleges teach students useful skills that transform to new hires. To pick one system over the next is a waste of time. Today, there is not a significant difference in the quality of education students get at a bad profit or non-profit college. And, until we correct the segregation of resources that exists in higher education the profit colleges are fulfilling a training need.
contreras - January 7, 2011 at 11:15 am
There are several different issues involved in the noise over for-profits and the cost and results of their programs. I may be the only college regulator in the U.S. who is also a long-time member of the National Association of Scholars, so I will take the liberty of offering a fairly long comment on Peter Wood’s essay.
One issue that NAS could look at is whether colleges ought to be job-training facilities, and if so, is that a role that all colleges should assume or which is the natural habitat of certain providers, either self-selected (better) or assigned that role by governments (plausible). It is perfectly reasonable to insist that a college claiming to be a job-training operation produce evidence that it is effective as one, and this can reasonably be expected to include evidence of gainful employment by graduates. The nature of that evidence and its validation processes can and should be debated in a public arena if public funds support the enterprise, but surely no provider, for-profit or non-profit, can credibly claim that successful job placement is an illegitimate criterion for a college that claims to train people for work.
Another issue is the relationship between program cost and value. Is it good public policy to lend scarce public money to students in college programs—in ANY sector—whose graduates routinely default owing to a mismatch between program cost and ability to earn? No, it is not. If the country is desperate for more degree-trained pastry chefs, then let’s be straight about this and establish a federal grant program to help students enter that field rather than giving each student a financial noose with which to dangle themselves from the window of the nearest unemployment office.
Keep in mind that student loans are not financial aid. Student loans are a form of debt. Incurring debt is rational only insofar as there is sufficient value in return over time. I concur with Peter Wood that the issue is not ownership structure, the issue is program quality, which is a necessary foundation for the employability of graduates. For-profit vs. non-profit is irrelevant, but for-student and anti-student is a crucial distinction.
A college that routinely produces graduates with excessive debt and insufficient ways to pay off that debt is anti-student. It is therefore necessary for the government, as the underwriter of program costs through student loans, to ensure that such colleges are removed from access to public funds. There is no “right” to public support—surely my colleagues in the NAS would concur.
I look forward to Peter Wood’s next installments.
Alan Contreras
Oregon Office of Degree Authorization
rogmar - January 7, 2011 at 11:25 am
Blaming colleges for student debt is a red hearing. The government could make huge inroads in solving the problem by limiting what students can borrow. The colleges can’t do that, but the government has to power to do so.
drj50 - January 7, 2011 at 12:28 pm
I think Mr. Wood misstates matters when he says that “or-profit colleges and universities would have to show high levels of ‘gainful employment’ for their graduates in the fields they studied.” The standards are not all that “high.” If a program prepares graduates for a $40,000 a year job, program costs should be appropriate to the potential income, and schools should be able to demonstrate that a substantial percentage of graduates actually obtain such jobs promptly following graduation. This really more of a consumer protection issue than an educational one: what schools (or auto manufacturers or pharmaceutical firms) promise, they should have to deliver — or change what they promise.
@ Mr. Contreras: I always find your posts informed and illuminating. In this case, one question: must we settle whether “colleges ought to be job-training facilities” or can we not focus instead on particular programs ? Professional programs are intended to prepare graduates to enter the corresponding profession (teaching, nursing, social work, engineering, etc.). Liberal arts programs (English, history, etc.) make no such promise, but those that claim to prepare students for graduate school in those or other disciplines (premed, pre-law, etc.) might likewise be included. Schools (non- or for-profit) could then be evaluated on their professional or pre-professional programs and graduates.
@rogmar: Surely you mean only that the federal government can limit students’ federal loan borrowing, or do you want the government to outlaw private student loans? Those horror stories of $100,000 balances for bachelor’s (or less) degrees are not simply federally guaranteed loans.
quidditas - January 7, 2011 at 1:36 pm
“Liberal arts programs (English, history, etc.) make no such promise, but those that claim to prepare students for graduate school in those or other disciplines (premed, pre-law, etc.) might likewise be included.”
Yes, but who is better placed to develop an entrepreurial venture–the English BA/PhD or the pre-law/JD student?
Do we really need to assume that a JD needs a ready-made law “job” just handed to them upon graduation or else “their life is over”? (This might extend to other PhDs as well).
In other words, everyone “wants a job” but *who* is responsible for job creation? Some people are positioned to do that for themselves (at least) and others are not, really.
It seems to me that the initial application of the “gainful employment” rule was centered on narrowly constituted certificates and degrees at lower educational levels, graduates of which really *do* need to “get” a job that is provided by some other entity and that the institution indicated it was training them for.
In other words, some students may need aggressive consumer protection and other students may have to live with “buyer beware,” and plan their lives accordingly.
This is not to say that advanced degree programs–both those educating for a particular career and those that make no such claims (ii., English)– should not provide their students with resources that assist with that process. I think they should–both for their students and for the sake of their own–dare I call it–edification.
And, yes, faculty must be part of this. It can’t be merely sloughed off one low pay administrative figure head of the sort they like to put in student service positions, just so they can say they addressed some issue.
rkitchner - January 7, 2011 at 1:54 pm
There are two noteworthy points that Mr. Woods and several subsequent commentators have made, the first being that Bob Shireman brought an agenda to the Department of Education that reflected a political ideology, not an educational philosophy. Such mercenary actions do not do justice to the mission of the Department, and the manner by which it made a mockery of the negotiated rule making process cost the Department dearly in terms of credibility within the broader educational community. Second, the issue of gainful employment – to the extent to which it can be defined unambiguously, measured accurately, and applied judiciously – should addressed by all institutions of higher education, regardless of funding model. Anything less is both disingenuous and inconsistent with the fundamental principles of free enterprise and consumer choice.
davehamilton - January 7, 2011 at 4:34 pm
Mr. Woods needs to keep up; go back and read Senator Harkins committee testimony. This was not some personal vendetta by one individual. I work with very low-skilled adults in a job training program situated in a town with a prominent for-profit. Some of these individuals have amassed $30-40K in student loan debt with nothing to show for it, they are unemployable. They cannot rent an apartment or get utilities turn on, they have ruined credit by missing payments on their student loan. They were lured by very aggressive sales people and big promises but did not have the background to do the course work. Still they were kept in the system, flunking out of one area only to be admitted into another until they maxed out their student loans or were “graduated” only to find there are not jobs for someone with a bachelors who can barely read and write. This sector needs oversight.
brunobehrend - January 9, 2011 at 3:20 pm
Some of these individuals have amassed $30-40K in student loan debt with nothing to show for it, they are unemployable.…
One could say the same for virtually ANY school.
I’m glad that the writer at least addresses the rent-seeking in the public sector universities. When one considers end-of-career bumps, collecting a large pension from one university system while working in another one, and the other lucrative games, it is clear that everyone is “efficient at gaming the system.”
The day is coming when some on-line provider will issue “knowledge certificates” for virtually ever level and domain of content. We will likely see a day where everyone can/will have a portfolio of writing, presentations, and/or demonstration of their knowledge and skills.
One’s “resume” may be a Google search, a LinkedIn or Facebook page, and hiring will be based on sending those links, along with the regular interview process.
Technology hasn’t even begun the process of doing to the K-12 & College sector what it did to travel agents. The idea that we need giant armies of public employees, brick and mortar schools, (and the huge burden they place on taxpayers) to become educated is another myth that will fall soon.
contreras - January 10, 2011 at 4:16 pm
drj50 points out quite correctly that degree programs leading to licensure have a built-in oversight function: as long as licensure pass rates for each school are made public, anyone interested in those programs are on notice as to what happens to the graduates–not necessarily in the job market, but certainly in terms of whether the program did what it claimed it would: prepare the individual for the chosen profession. Also, licensing boards can take steps to disqualify consistently bad schools, if they want to.
This method does not work with “dream schools” like culinary and other fine arts programs, or with programs such as business or history degrees.
Alan Contreras
Oregon Office of Degree Authorization
blakescafe - January 18, 2011 at 3:06 pm
It is easy to point fingers at For-Profit Colleges and say – “You are not training students for jobs” The funds are not government funds – they are debt of the students and the students are “learning” – not job training.
In all schools (around the world not just the US) how many graduates are there in liberal arts programs, music, theater, literature etc – and how many of them walk into a high paying job? Or how about this – undergraduate Education degrees allow grads to teach in K-12 schools – but in how many states does this allow paying off large loans?
We could argue the value of education – yet what about the “Freedom of Choice” – Yes- I agree that if a School boasts that you will “Get a Job” upon completion – then they are blowing smoke! – If they state “Improve your chances of getting a job” Then you must agree this is true no matter where they matriculate.
As for the Student themselves – NO ONE is showing the numbers that would allow a reasonable business person to make conclusions. These numbers that are missing: 1) How many students are presently working and are looking to advance their knowledge?, 2) How many students, upon graduation, do not have a job and how many are still jobless after 1 year?, 3) What are the differences in these numbers between schools?, 4) How do these numbers differ from Community Colleges and State Schools?
Having taught in both land based and online programs – I can attest that there are many differences. Yet, when considering the average student, the potential learning and the potential for failure have much wider outliers.
No one can deny that online education offers an opportunity for those who are living in regions of the country where there are no schools, or schools with their desired program.
And if online education is to be argued – then why are most educational institutions looking to enhance or create online offerings?
Not everyone can attend Harvey Mudd, Carnegie Mellon, or Bryn Mawr. With only 22-26% of the US population having upper education degrees – it would seem the US Government would want to find more ways to educate the population – rather than close down schools due to bias. (Many academics have a bias against online programs, including government administrators)
From a business point of view – online offers more reach for students – good for the School’s Business Strategy –and argue all we want – Universities are first a business – even if some are operating as not-for-profits.