1. Thought Leadership
project-firefly.com /node/19100
Conventional wisdom would dictate that there is no greater oxymoron than the concept of “for-profit
education”. Since the first recorded lesson in history, where God taught Adam to eat from some trees and
not others, education has conjured the image of a more-learned being benevolently guiding those under
his care- not for personal gain, but because of a genuine interest in seeing them further enrich
themselves.
The modern term “higher education” implies exactly that- education which has been elevated to a higher
level. Higher education evokes thoughts of marbled halls and thick-volumed libraries, of avuncular
professors teaching on sun-drenched quadrangles and mortarboards-in-the-air graduation celebrations.
Such romantic notions are far removed from the typical student in a for-profit institution. Classes take
place in office-style meeting rooms instead of expansive lecture theatres, often taught by part-time faculty
who hold regular jobs elsewhere. Some students may complete a significant portion of their degree online,
without ever stepping foot on campus. Extra-curricular activities are limited, and courses are structured to
facilitate the quickest possible completion.
Although derided by critics as “education-lite”, for-profit education today is big business. The US for-profit
post-secondary industry was estimated at $31B in 2012[1]. Between 2000 and 2010, this sector added 1.3
million students, an annualized growth rate of 16%[2]. In contrast, the not-for-profit sector grew at 2% and
added only 440,000 students over the same period[3]. For-profits now account for 10% of all US college
enrolments, up from 3% in 2000[4].
With this growth has come increasingly loud criticism. In June 2012, Senator Tom Harkin released the
Harkin Report, a scathing 249 page compendium of a laundry list of misdeeds committed by 30 of the
largest for-profit education companies. The Report found that taxpayers had collectively spent $32 billion
on companies operating for-profit colleges, with dubious returns. Half of all students who enrolled left

2. within 4 months[5]. Dropout rates at associate degree and bachelor programs were double those at non-
profits. Also uncovered were exorbitant tuition, aggressive recruiting practices and systematic regulatory
evasion.
To supporters of for-profit education, such incidents are aberrations, bad apples. To detractors, the
frequency of such events suggests more of a bad orchard. So what should our stance be on for-profit
education? Does it have a role to play in the wider higher education landscape?
The role of for-profits
For-profits were created to serve a very different niche from traditional universities- the so called “non-
traditional students”. Non-traditional students typically delay their enrolment for a few years after high
school, attend classes part-time and may be single parents or individuals who are financially independent
from their parents[6]. For-profits also practice “open admissions” (accepting students so long as they meet
the pre-requisites) and are purely academic-drive- no research, no publications and no tenure. These
fundamental differences make direct comparisons with traditional non-profits difficult.
However, that doesn’t stop people from trying. Taking potshots at the for-profit industry has become
something of a cause célèbre. Steve Eisman, the short seller who famously profited when the US housing
market collapsed, labelled for-profits “socially destructive and just as morally bankrupt as the subprime
mortgage industry”[7].
For example, one of the major criticisms of for-profits is the disproportionate amount of money spent on
marketing relative to student instruction. The Harkin Report found that on aggregate, for-profits spent 30%
more on marketing than on student instruction[8]. These figures are often waved around as a sort of ipso
facto proof of for-profit education’s immorality- these companies prioritize roping in other students over
teaching the ones they already have!
But consider another hallowed tradition of American state colleges- athletics. The Knight Commission on
Intercollegiate Athletics (tasked with improving accountability on spending in college sports) found that the
98 institutions in the highest tier of college football spent an average of $92,000 per athlete in 2010, 7
times the amount spent on student instruction[9]. In the Southeastern Conference, spending per athlete
was a whopping $164,000 versus $13,000 per student. Expenditure on athletics is growing at
approximately twice the pace of academic spending.[10]
Defenders of college athletics say that sports improves the visibility of the school, builds school identity and
attracts applications. Which, curiously enough, sounds an awful lot like marketing. Two wrongs don’t make
a right, but our outrage needs to be consistent. If we are outraged that for-profits are spending 30% more
on marketing than instruction, surely we must be many times more outraged that state universities are
spending 7 times as much on athletics as teaching.
Lessons for traditional education
In fact, the for-profit model has some valuable lessons for traditional education, one of which is flexibility.
For-profits schedule their courses to match the calendar year, with classes starting every few months. This
allows students to complete their courses quickly and minimizes the opportunity cost of education. Such
flexibility is not possible at traditional non-profit universities simply because they have not been configured
this way. Faculty members need the summer to attend conferences, design new courses and write the all-
important research papers which drive university rankings. Universities, on the other hand, have lucrative
summer schools, executive education programs and symposiums to run.
Furthermore, course offerings at traditional institutions have lagged behind the changing demands of the
workplace. How do we know this? Consider the demand for H-1B visas. The H-1B visa allows US

3. employers to hire foreign workers in “specialty occupations”, typically in fields like engineering, education,
law and accounting where a minimum of a bachelor’s degree is required. There is an annual quota of
85,000 visas, and in every year since 2003 this cap has been reached[11]. With the exception of a three
year blimp after the Financial Crisis, in every year since 2003 the supply has been exhausted earlier and
earlier. In 2013 and 2014, the entire quota was exhausted within the first week of petitions opening[12].
This suggests that American employers are unable to find the right skill sets within the local graduate pool.
The misalignment of courses with growth areas may also explain why after adjusting for inflation, the
average graduate earned no more in 2007 than he or she did in 1979.[13]
In contrast, for-profits focus on offering business-relevant courses like accounting, finance and
engineering. They have also carved out a niche in healthcare, a sector expected to add 162,000 jobs over
the next 10 years[14]. Analysis at Wells Fargo suggests that as much as 40% of America’s medical
assistants receive instruction at for-profit colleges.[15] By offering courses driven by market demand, for-
profits provide a steady stream of graduates equipped with the skills the economy needs.
Finally, teaching methods at traditional institutions have been slow to evolve. A case in point- for the
longest time, traditional institutions have criticized the model of online learning, questioning its quality and
effectiveness (this despite a 2009 meta-analysis by the US Department of Education which concluded that
students who took all or part of their classes online outperformed those learning through pure face-to-face
instruction[16]). Only recently have they started exploring options with MOOCs and distance learning.
Georgia Tech’s partnership with Udacity and Harvard and MIT’s joint-venture Edex are some examples
that come to mind. If these initiatives have a grafted-on feel to them, it’s because they are. Traditional
universities have extensive investments in physical capital- classrooms, labs, libraries. Their business
model is still predicated upon bums-in-seats contact education.
For-profits have been built from the ground up to incorporate virtual learning. The University of Phoenix has
relied on online learning to scale from 8 students in 1976 to more than 200,000 today[17]. Nearly 40% of
Career Education’s 45,000 students are enrolled in web-based virtual campuses[18]. Online instruction
provides busy individuals with work and family commitments the option of learning as and when they can.
Conclusion
Does profit cheapen education? Proponents of this view point to advertising strategies used by for-profits
like posters on the subway, rags-to-riches infomercials and gimmicky special offers on tuition - selling
education like a hamburger. Such tactics may be tacky, but what is more disconcerting is the underlying
current of academic elitism inherent in the criticism. It is all good and well to snigger at such
advertisements when you come from a system that includes higher education as a natural stepping stone.
But for many underprivileged individuals, for-profit education may be the only viable way of improving their
lives.
Non-profits have had a monopoly on higher education for most of the past century, yet have failed to offer a
viable route to a degree for non-traditional learners. Regulators should acknowledge this reality and
examine how for-profits can be integrated alongside traditional education as a safety net. Dismissing for-
profits as pantomime villains in a simple morality play is not the solution. Prune the orchard, don’t burn it
down.

4. References:
[1] Education Sector Factbook 2012, GSV Advisors, 2012, http://gsvadvisors.com/wordpress/wp-
content/uploads/2012/04/GSV-EDU-Factbook-Apr-13-2012.pdf
[2] Total Undergraduate Fall Enrolment in Degree-Granting Postsecondary Institutions, National Center
Education Statistics, 2012, http://nces.ed.gov/programs/digest/d13/tables/dt13_303.70.asp
[3] See (1)
[4] See (1)
[5] Executive Summary, Tom Harkin, June
2012, http://www.help.senate.gov/imo/media/for_profit_report/ExecutiveSummary.pdf
[6] Non-traditional undergraduates/ Definitions and Data, National Center for Education Statistics, n.d,
http://nces.ed.gov/pubs/web/97578e.asp
[7] Big Short Eisman Vies With Goldman Over For-Profits, Kambiz Foroohar and Esme E. Deprez, Jan 25
2011, http://www.bloomberg.com/news/2011-01-24/big-short-eisman-vies-with-gold...
[8] Executive Summary, Tom Harkin, June 2012,
http://www.help.senate.gov/imo/media/for_profit_report/ExecutiveSummary.pdf
[9] Restoring the Balance, The Knight Commission On Intercollegiate Athletics, 2010,
http://www.knightcommission.org/images/restoringbalance/KCIA_Report_F.pdf
[10]Academic Spending vs Athletic Spending: Who wins? Donna M. Desrochers, Jan 2013,
http://www.deltacostproject.org/sites/default/files/products/DeltaCostAI...
[11] Data Published by the US Citizenship and Immigration Services Bureau,
http://www.uscis.gov/portal/site/uscis
[12] USCIS Reaches FY 2015 H-1B Cap, UCIS, 7th April 2014, http://www.uscis.gov/news/uscis-reaches-
fy-2015-h-1b-cap
[13] Higher Education-Not what it used to be, The Economist, 1st December 2012,
http://www.economist.com/news/united-states/21567373-american-universiti...
[14] Employment projections, Bureau of Labor Statistics, 2012, http://www.bls.gov/emp/ep_table_102.htm
[15] The rise and fall of Corinthian Colleges and the wake of debt it left behind, Jessica Glenza, 28th July
2014, http://www.theguardian.com/education/2014/jul/28/corinthian-colleges-for...
[16] Evaluation of evidence-based practices in online learning, Means, Toyama, Murphy, Bakia, Jones, US
Department of Education, September 2010, https://www2.ed.gov/rschstat/eval/tech/evidence-based-
practices/finalrep...
[17] History, University of Phoenix,
http://www.phoenix.edu/about_us/about_university_of_phoenix/history.html
[18] Online learning and the world of for profit education, HigherEdJobs, n.d,
http://www.higheredjobs.com/higheredcareers/interviews.cfm?ID=224
Submitted on: February 28, 2015