The trouble with for-profit colleges.

Examining higher ed.
Nov. 16 2005 3:18 PM

The Profit Chase

For-profit colleges have lots of champions—and lots of problems.

(Continued from Page 1)

All this bad publicity has hurt stock prices for the companies involved, but it hasn't diminished the industry's political capital. In the last year, Congress has moved toward relaxing all the restrictions of the '92 crackdown. Most important, the version of the Higher Education Act currently before the House would include proprietary schools in a single definition of "an institution of higher education." Right now, they are eligible for student aid but not other kinds of subsidies available to nonprofit colleges; the change would potentially allow them to compete for millions more in infrastructure and program-related grants.

Conservatives like Vedder embrace for-profit colleges precisely because they are businesses. They see them as more focused on cutting costs and raising productivity than state-supported universities, with their tenured professors and their money-losing philosophy departments. They have a point there. The cost of public higher education has been rising steeply for decades. Colleges are a common budget-balancer for states facing fiscal crises; institutions in turn raise tuition, with much of the bill ultimately going back to the federal government in the form of student aid. The prevailing sentiment in Washington is that it's time to turn off the spigot and force colleges to control their spending. The current budget-reconciliation bill, in fact, includes the largest cuts to student aid in the 40-year history of the program.

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It's true that proprietary institutions have taken the lead in money-saving innovations like accelerated courses, distance learning, and the deprofessionalization of teaching (hiring only instructors); nonprofit schools, for better and for worse, are already following these examples. Yet pointing to proprietary schools as models of probity is wishful thinking. Experts like Vedder, praising the "highly profitable" for-profit schools, willfully ignore the reality that the big higher-education companies were built to suck up federal handouts, which provide the majority of their income; these schools grab a share of federal aid higher than their share of enrollment, while public community colleges receive less than their share. Even worse, the prevalence of fraud, waste, and abuse in these schools from their origins down to the present day is a clear signal that turning a profit, not serving students, is their top priority. When students equal revenue, the pressure is on to pack them in and charge them as much as the market will bear. When colleges have shareholders, decisions are going to be made with short-term profitability in mind, and the shiny images in those subway ads will displace honest assessments of performance. Or as a University of Phoenix enrollment director told recruiters, as quoted in a 2003 Department of Education report, "It's all about the numbers. It will always be about the numbers. But we need to show the Department of Education what they want to see."

Anya Kamenetz is a New America Foundation fellow. She is a contributing writer for Fast Company and the author of Generation Debt and DIY U.

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