For about fifteen years, from 1995 to 2010, enrollments grew rapidly in the for-profit higher education sector, but since then have fallen substantially. The reason for the decline is mainly the overt hostility to for-profits during the Obama administration. The Department of Education killed off two of the largest for-profit competitors (Corinthian and ITT), and rhetoric from top officials created the impression that the for-profits were in general an educational scam.
That impression is challenged a newly published book Unprofitable Schooling, edited by Todd Zywicki and Neal McCluskey. It consists of eleven interesting and varied chapters; the one I will focus on is entitled “Assessing For-Profit Colleges” by professor William Shughart of Utah State and Jayme Lemke, senior fellow at the Mercatus Institute. In it, the authors argue that the for-profit sector has unappreciated virtues, particularly for many students who are the most at-risk, and that singling it out for regulatory attack is counter-productive.
For most of our history, for-profit higher education was almost non-existent. As Shughart and Lemke explain, “The significant tax advantages enjoyed by private and public nonprofit colleges make that market one into which competitors find it difficult to enter.” Nevertheless, starting in the 1990s, for-profit schools began to attract large numbers of students, suggesting that they must have provided many students with value in excess of the cost.
But why would students who were after a short-term, occupationally related course of study choose to enroll in a for-profit and pay more than if they enrolled in a community college, which is almost costless? Our two economist authors knew there had to be reasons and dug for them.
The first important difference, according to Shughart and Lemke, is that for-profit schools are more accessible for many students. How could that be?
For one thing, community colleges have enrollment caps, so students who don’t apply early enough have to wait until the next period. That matters because the student population for whom vocational training is attractive often have short time horizons and complicated lives. If they can’t start classes when they’re ready, they might never get back to that point.
Furthermore, for-profits are apt to be much more helpful to prospective students. Getting in touch with someone who can answer questions is far easier in the for-profit sector, where customer service is a top concern, than in the non-profit, more bureaucratic world of community colleges. Moreover, the authors report, community colleges usually have few counselors compared with for-profit schools. That matters to many students who have very little experience navigating educational labyrinths and making optimal decisions.
Another important factor is time. Not only can students start when they’re ready in the for-profits, but they can complete their studies sooner. The authors quote one student who told researchers about his community college experience, “I thought to myself, do I really have time for this? There are schools that will let me know right away, like the one I am at now. Getting into community college has just way too many barriers for no reason. I just want to learn.”
Cutting down the time to completion can compensate for the higher expense of for-profit schools. One study looked at a nursing program and found that while the for-profit cost far more ($34,000 versus $5,000 for a similar community college program), students were done and ready to work in only 13 months as compared with two years. The desire to get into the workforce and earning money earlier is a significant advantage for the for-profits in the eyes of many students.
All right, but what about the complaints leveled against the for-profit sector?
One complaint that has often been made is that for-profits, compared with non-profit and public colleges, spend relatively little on actual instruction—and quite a lot more on promotion. There’s no doubting the numbers, but, reply Shughart and Lemke, spending on instruction doesn’t tell us much about the efficacy of that instruction. The faculty at for-profits is composed of individuals who work under contract, term by term. Their compensation is quite low compared with the faculty at non-profits, where you find a…(continue reading)