Your Taxes Support For-Profits as They
Buy Colleges
So
goes the headline of an article in BusinessWeek by Bloomberg columnist Daniel
Golden. I have seen a dozen articles
recently with the same message in large and small publications (including
seemingly unlikely places such as Going Concern: Accounting news for
accountants and CFO’s). Many of these seem to be minor rewrites of the above
article and a subsequent article by the same author.
The
issue that attracts so much interest and passion is pretty well encapsulated in
a paragraph in Golden’s article:
The nation’s for-profit higher education
companies have tripled enrollment to 1.4 million students and revenue to $26
billion in the past decade, in part through the recruitment of low-income
students and active-duty military. Now they’re taking a new tack in their quest
to expand. By exploiting loopholes in government regulation and an
accreditation system that wasn’t designed to evaluate for-profit takeovers,
they’re acquiring struggling nonprofit and religious colleges -- and their
coveted accreditation. Typically, the goal is to transform the schools into
online behemoths at taxpayer expense.
Aha- many for-profits are “buying
accreditation”, and that must be bad!...Or must it be bad? What are the assumptions that seem to underly the paragraph above?
****
First
is an assumption that some of our laws and institutions are not up to dealing
with the rapid changes taking place in this area. It is quite possibly correct to have this
view of our laws and institutions, but one could say that of many areas of
modern life. I assume “loopholes in
government regulation” of this paragraph refers to the two-year rule that
requires for-profit institution to be in existence for that period before being
eligible to qualify for federal assistance.
The rule obviously did not envisage this situation in which the
for-profit in not starting a new institution, but taking over the management of
an existing one. The Department of
Education undoubtedly will consider whether it thinks a rule change is needed,
given these new circumstances – whether a “loophole” exists. Golden has made his opinion clear, but the
pertinent government officials have not.
As for accreditation, it likely struggles with evaluating many of the
activities of the for-profits. However,
as Kevin Carey recently has eloquently described, accreditation struggles with
evaluating many of the activities of traditional non-profit institutions. It is
not just the for-profits that are sometimes getting a “free pass”. In my mind,
a more correct conclusion is that all of higher education is becoming so
complex that the traditional approach to accreditation needs to be reexamined
and reinvented.
****
The
second assumption is that the for-profits will be getting student aid from the
federal government is somehow a raid on taxpayers’ monies. However, they are getting this aid by
teaching students, which is the reason that Congress had in mind in setting up
the programs. It is the same reason that
non-profits get the aid. Associated with this “raid” assumption is the fact
that the for-profits seem to be able to grow the programs they take over
rapidly. From another perspective, that growth can be taken to show that there
are many prospective students whose educational needs are not being met by
traditional educational institutions.
That would probably make Congress happy. A complaint sometimes lodged against this growth
is that it is a result of advertising power, and that the money being spent on
advertising could better be spent on education.
True enough. However, the
for-profits have some leeway in their spending since they are run much more
efficiently than most non-profits, and do not have so much per student sunk
into very expensive “social” infrastructure such as residence halls, athletics,
etc. So the non-profits are also
spending a lot of money per student on non-educational expenses – including, by
the way, recruiting.
****
A
third assumption is that “online” is somehow really lower quality. In terms of learning, Department of Education
studies (see Is online learning ready to become a disruptive technology, July 29, 2009) have shown that online is not inferior to classroom, and may be better. Obviously, online does not bring the social
learning benefits of the real campus experience. However, for most of the students who are
signing up for these programs, traditional four year residential programs may
not be possible or even desired. Thus, these programs are not likely to be of
lower quality as perceived by the students.
****
The
really big underlying assumption in all of these articles, however, is the
conviction that for-profit higher education is inherently inferior to
non-profit higher education because the former is interested in profit, the
latter in education. This assumption
might be correct, but the reality is there is little if any actual data to show
that it is, at least in the core area of student learning. We lack data on learning outcomes from
different institutions, so it is not possible to say that Harvard University
does a better job of education than the University of Phoenix. It is obviously true that incoming Harvard
students are generally much better academically prepared than incoming Phoenix
students, but we don’t know which institution provides the greater growth in
knowledge, critical thinking, etc. As
Derek Bok himself has pointed out, even our great non-profit institutions do
not lead to nearly so much growth in these areas as we all imagine. Some of the for-profits actually spend large sums of money creating new courses, using not only subject matter specialists, but also education and media specialists, in an effort to remedy some of the learning problems Bok identifies. Few non-profits do as much. And in any case, the real comparison of
educational quality should not be between the 100 top non-profit colleges and
universities and the for-profit world, but between the for-profit world and the
roughly 4,800 accredited non-profit institutions that are not in the top 100. That is where the prospective students are
really making their choices. In making policy, we must not ignore the enormous
range of quality that exists in those 4,800 non-profit institutions that have
obtained accreditation, as well as in the for-profit sector itself.
On
the other hand, it is true that several of the for-profits have gotten into very visible
difficulties over time by pushing the rules too far in the search for
profits. One of the major problems has
been the linking of admissions salaries to students recruited and funded by
government scholarships. However, it is
to be noted that in the most recent GAO report on this problem, there were
roughly as many non-profits cited as for-profits. Everyone needs to make their
enrollment targets, no matter what their profit status. For some of the less
financially robust non-profits, making those targets is a matter of
institutional life or death. Thus, this problem is more general than the profit
status of institutions. There are also
concerns regarding whether some for-profits are admitting unprepared students
in an effort to increase enrollments.
Very low graduation rates are one indicator of a problem in this area,
and several of the for-profits do have lower graduation rates that might be
desired. This is a complex issue,
however, and there are questions as to whether appropriate comparison groups of
institutions have been assembled to evaluate whether the profit motive is
influential in graduation rates. In any case, Carey’s article states that the
Department of Education reports that over 250 accredited non-profit
institutions in the “lower echelons of higher education” have graduation rates
of less than 30%, putting them right into the midst of some of the for-profits
that are cited as reason for concern.
Similar concern often is voiced in discussions of default rates, which
are higher at many for-profits than at non-profits. Again, Carey tells us that the Department of
Education has identified over 200 non-profit, accredited institutions that have
default rates similar to those of the worst for-profit offenders. It is logical
to assume that the financial health of the non-profit may influence the
preparation level of admitted students in a way similar to what may be occurring
in some for-profits.
*****
One important thing must be remembered when we think of traditional non-profit higher
education – the top 100 institutions cannot be used as a surrogate for the
whole. Within the roughly 5000
regionally accredited non-profit institutions lies enormous variability in all
dimensions: academic rigor, fiscal stability, mission, honesty, concern for
students, etc. Many of those institutions bear only very faint resemblance to
the top 100 institutions. Within the
for-profit sector there is also considerable variability within these same
dimensions, but with very little overlap in most dimensions with the top 100
non-profits. There is, however, significant overlap with large portions of the
remainder of the non-profits. The
for-profits obviously are the “new kids on the block”, and sometimes behave in
ways that hurt their own long term interests and, in fact,the interests of all of higher education.
However, in general, that negative behavior is not so much different
from that which can be found in the non-profit world as well.
I think we make a mistake when we look at
higher education through the lens of for-profit or non-profit. What are important are not the drivers, but
the outcomes. The drivers, in any case,
are quite complex for both sectors, and more overlapping than we often
acknowledge. The focus should be on
producing desired learning outcomes, and assuring fair and honest treatment of
students. Casting a bright light on bad institutional
behavior is appropriate, desirable, and necessary – but we should look at the entire field of
education, not just one component. There
are enough problem cases in both sectors to go around, and new approaches to accreditation are likely to be necessary in order to improve the entire, rapidly changing, field of higher education.
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