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Improving Our Discourse on For-Profit Colleges

These schools are playing critical roles in higher education.
University Business, Oct 2005

Most discussions on the rise of for-profit colleges begin and end with an arbitrary moral judgment that there's something inherently wrong with for-profit colleges, or an unfounded assertion that these institutions offer inferior academic programs.

It has been almost 30 years since University of Phoenix--and, arguably, for-profit, degree-granting, regionally accredited institutions--began. In 2005, more than 500,000 students will attend such schools for their bachelor's, master's, or doctoral degrees. While dismissed by traditional IHEs as uninformed consumers, thousands of students are using their free-market choice to endorse for-profit colleges.

The for-profit education industry is the investment community's shining star. But our collective analysis of the effectiveness of these schools should move beyond the initial fear and largely unsupported accusations. Few critics stop to consider that most college athletic programs and the campus amenities race direct far greater resources away from learning than the 12- to 18-percent profit margins of proprietary colleges.

A more meaningful dialogue of legitimate questions about for-profit colleges is required because much is at stake. Consider some of the critical roles that for-profits are now taking in higher education:

Accessible institution. For-profit institutions are increasingly assuming the role once occupied by public institutions in providing access to higher education for thousands of underserved minority and lower-income students. The baby boomers' youngest children are beginning to enter college and many public institutions lack the capacity to accept additional students. Others are seizing the chance to become more selective regardless of their historical mission. A disturbing result of this admissions landscape, as studies have shown: Fewer first-generation college students are being admitted to traditional colleges. For-profit colleges are, for many students, the best option for a college education and the chance to improve their socio-economic condition.

Innovation driver. The free-market incentive of for-profit institutions makes them uniquely suited to drive innovation in higher ed. Venture capital is virtually unheard of at most nonprofit institutions (other than specific grant funding usually designated to activities other than student learning), but the financial investment of for-profits has resulted in vastly improved learning experiences and resources.

For example, research has shown that these schools invest in college prep courses, better financial aid and information systems, smart classrooms, higher quality online platforms, and academic support systems and software. Additionally, for-profits have made significant contributions to the development of weekend, accelerated, evening, and online-learning formats, making higher education more accessible to adults and first-generation students.

Alternative degree provider. The programs offered at for-profit institutions have dramatically changed the quality of options for students who once faced a stark choice between a traditional education and a technical degree. For-profits have produced programs that allow students studying graphic arts, allied health, culinary arts, and other career and professional fields to receive a college experience including general education and the liberal arts rather than just traditional technical training.

Return-on-investment model. For-profits, with their emphasis on assessment and performance metrics, are uniquely suited to provide a framework for better accountability of the return on the public's investment in higher education. In addition to addressing the educational imperative for accountability and assessment, these organizations are in the business of being able to demonstrate individual students' return on their educational investments in terms of quality of life and economic earnings.

Recent accusations of unscrupulous business practices by a few for-profit institutions, such as overly aggressive admissions tactics, questionable academic policy, and financial aid irregularities, have been alarming. But blanket accusations that for-profits are inherently unable to serve educational needs are disingenuous. For-profits are serving an important role in higher education and college-bound students cannot afford for-profit institutions failing because of greed or mismanagement.

The best hope for for-profit institutions to meet their mission and contribute to educating our diverse population is an open, honest dialogue about their role in America's higher education system.

Important questions need to be addressed, such as:

Will for-profit companies
spend the revenue
necessary to promote
faculty development?

Can leaders of publicly traded companies that own for-profits resist the temptation to manage solely for quarterly results?

Are companies that primarily own career and trade schools, and acquire or build degree-granting institutions, willing to adjust their historic benchmarks for profit margins and instructional cost (the quality tax) to reflect the additional revenue required to produce quality academic degree programs?

Are trade and career school owners acquiring traditional colleges and universities confident that the institutions share sufficient fundamentals to produce synergy and savings in facility costs, admissions, back-office operations, and instructional costs?

Are leaders of for-profits prepared to adjust leadership styles to embrace shared governance and consensus building?

Are they prepared to promote faculty development and appropriate scholarship?

Do for-profit leaders have the foresight to acknowledge that, as more institutions offer student-centered formats, quality becomes a long-term business strategy?

Is there a difference in how privately held corporations set strategy that make them superior to publicly traded companies as operators of educational institutions?

Should the same level of scrutiny and federal regulations applicable to for-profit colleges be applied to traditional institutions?

The higher education community can protect students by improving their dialogue concerning for-profit colleges. I believe these schools have much to offer students and higher ed in the United States, but only if we ask important questions, conduct an open dialogue, and receive appropriate assurances.

David Harpool, the author of Survival College: The Best Practices of Traditional and For-Profit Colleges, has taught law and served as general counsel and president of several IHEs.

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