Can For-Profit Colleges Ever Compete?

Moneybox
A blog about business and economics.
Jan. 17 2012 11:42 AM

Can For-Profit Colleges Ever Compete?

Felix Salmon mounts a challenge to the for-profit higher education industry on the level of principle: "How can a company which exists to maximize the profits for its shareholders, and therefore to extract as much money as it possibly can from its students, possibly cost less than a traditional college which is run on a not-for-profit basis and which might well have a substantial endowment subsidizing tuition fees?"

I think the counter-question here is whether non-profits and the people who donate to them are interested in spending money on the right kind of undergraduate education. After all, the typical for-profit college student didn't have Wellesley or Swarthmore as her second choice. Educating the marginal college student is a low-prestige activity compared to educating the 18 year-olds with the highest SAT scores in all the land, even though it's objectively more difficult to do. If donors with money to burn became interested in tackling the problem, it's entirely possible that the for-profit sector would be blown out of the water. But most donors seem to prefer the idea of getting their name on a building at Yale. So it's not really a head-to-head competition. It would be interesting to see Harvard abandon the admissions process and just admit 1,600 freshmen by lottery and see how well the faculty and administration do at teaching the students. But in the real world, the best-funded non-profit educational institutions seem very wedded to a model where they select their own customers which leaves open the question of who's going to teach everyone else.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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