Making Money in Higher Education


After describing some shameful behavior by the University of Phoenix reported in the Chronicle of Higher Education, Kevin Carey says:

I’m not among those who think that for-profit colleges and universities are necessarily bad. It’s a free country and some institutions have put together a package of services that students want to buy. For-profits often seem to be focused on meeting the needs of their customers, particularly working and non-traditional students, in ways that traditional non-profits do not. But they also tend to be expensive and highly dependent on students borrowing a great deal of money to attend. Dropout rates at for-profits are often quite high. And if more than a quarter or a third of your students are defaulting on their loans within a few years of leaving, then pretty much by definition they weren’t getting a sufficiently valuable service in exchange for their money.

It is, indeed, a free country. But there’s good reason to be pretty instinctively suspicious of an outfit like the University of Phoenix and other major for-profits. These are publicly traded firms. The managers of a traditional university may or may not take and opportunity to screw over their students for money, but the managers of a for-profit are obliged to screw you over. That could be counteracted by a desire to build a good reputation, but the nature of the higher education market is such that there’s no way these for-profits can ever be anything other than low-end options.

I think the main lesson here is that traditional universities need to do a better job of getting into the niche that’s currently dominated by these poorly performing for-profits. In part, state governments would do well to shift emphasis away from trying to burnish the sheen on their “flagship” traditional universities and toward doing more in the way of providing community college services for working and non-traditional students. But given the nature of the American system, perhaps the bigger part of this is that social and intellectual pressure needs to be brought to bear on rich people to stop donating to already-wealthy universities with huge endowments and to instead focus their efforts where they’ll do more good. Harvard and Yale have plenty of money, and their students aren’t coming from needy families. But plenty of students on the low end of the higher education system are genuinely in need, and they simply don’t have much in the way of decent educational services available to him. Finding ways to target private giving where the need actually exists would do a great deal of good.