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William G. Tierney

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Understanding the Controversy Surrounding For-Profit Higher Education

Posted: 08/10/2012 10:55 am

After two year's worth of chairing frequently combative committee hearings on for-profit higher education, Sen. Tom Harkin's four-part report should come as no surprise. But there is more bad news for the industry.

Days after the release of Harkin's report, California's Student Aid Commission announced that 137 for-profit schools in the state are ineligible to receive future financial aid because too many of their students defaulted on their loans or failed to complete coursework. With 80% of for-profit schools cut off from aid, it's likely that enrollment in the for-profit sector in California will dramatically decrease if not end all together.

In his report, Harkin applauded a few for-profits and declared some others were making progress in cleaning up their act. But after reading the entire study, it's hard not to come away with the impression that for-profit colleges and universities are genuinely corrupt organizations that need to be shut down. The senator and his staff would not go that far, at least publicly, because they repeatedly say that for-profits are a needed player in higher education. But the tone of the Harkin report is so unrelentingly harsh that it reminds me of the old joke, "Apart from that, Mrs. Lincoln, how was the play?"

For-profits have two underlying problems:

- The country is currently in the throes of market-based solutions. Public dollars are handed over to for-profit hospitals to provide life-saving health care. Private security firms patrol middle-upper and upper-class neighborhoods. The stodgy U.S. Postal system is a punching bag, and FedEx and UPS are logistics superstars. Public funding for trains is constantly on life support. Many think that education is simply the next in a long line of services where privatization would produce improvement.

Except education has never been simply a "service." Correctly or not, the citizenry always has seen it as one of the things that ties the fabric of the country together. Public education is not only a right for everyone, but it also creates more commonalities than differences.

The Harkin report implies that the profit motive doesn't belong in such a noble enterprise. Its treatment of for-profit executive-compensation packages is more accusation than straightforward reporting. The CEO of American Career College, for example, reportedly made $18 million last year. That much profit, the report implies, is somehow wrong.

- Assume you are away from home, and your kid has an accident and needs to go to the hospital. You ask yourself, "Should I go to a private or public hospital?" I'm betting if you have insurance and cost is not an issue, you'll get to the private hospital, ASAP. The assumption is that private -- read: for-profit -- hospitals are generally better at delivering healthcare than their public counterparts. Certainly that is not always the case, but in general, people equate "private care" with a better kind of service.

Except when it comes to for-profit higher education. Some happy consumers will praise for-profits for their convenience -- courses are offered at convenient times in accessible locations. Such a point is not minor when students are routinely shut out of classes at public community colleges and state universities.

I have seen very few consumers, however, claim that the quality of their for-profit education has been better than at a public institution. Many are satisfied. Many are not. And too many do not finish.

With all this bad press, one might wonder if we should keep for-profits around. I happen to be someone who believes that they are essential to the country's welfare. We need more people participating in postsecondary education, and our public institutions simply do not have the capacity or wherewithal to grow. If our policy amounts to looking for ways to defund for-profits, such as appears to be the goal in California, we will not improve the long-term economic vitality of the state.

According to several studies, California will need an increase of more than 100,000 postsecondary students next year to meet future economic demands. The ruling by the Student Aid Commission will likely mean 100,000 fewer. That will help balance the state budget in the short-term, but in the long-term we will have to import more workers to fill our jobs or adjust to lower growth rates. Rather than simply shutting down for-profits, we need to help them reform and develop responsible regulations that ensure both consumer protection and a vibrant postsecondary sector.

William G. Tierney, a professor of higher education, is director of the Pullias Center for Higher Education at the University of Southern California. He is also president of the American Educational Research Association.

 
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