Challenges Facing For Profit Higher Education and America - William G. Tierney, President of AERA

Posted: 11/14/2014 2:40 PM
Filed under: Education, Higher

William Tierney || 2013

The for-profit higher education sector has come under increased scrutiny in Congress, in response to a flurry of criticism, alleging shoddy and fraudulent practices.   Reports in the New York Times, the New American Foundation and public television have shown stories of students who were defrauded – they thought they would get a job and did not, or they did not realize the large size of the federal loan they would have to pay back.   One commentator charged that the entire sector is “socially destructive” and “morally bankrupt.”   In arguing for public hearings on the sector Senators Franken of Minnesota and Harkin of Iowa urged that a serious look needs to be taken at the sector so that it can be brought into line and/ or shut down.   These charges are based on four assumptions about for-profit higher education, all of which are faulty.  There is also one significant challenge for-profits need to overcome.  First, the assumptions:
 
All for-profit colleges are alike, distinct from, and “worse” than traditional institutions.  The majority of these criticisms are based on a small number of cases in a small number of for-profit institutions.  The hundreds of individuals who have been flimflammed by unscrupulous recruiters, etc., are assumed to be representative of the millions of students who have completed programs at for-profit institutions and subsequently secured gainful employment. According to a recent study by the Parthenon Group, graduates at two-year or less for-profits report average income gains of $8K, or 54%, exceeding public community college student gains of 36%. At these same institutions, 65% of the for-profit students graduate with certificates or associates degrees, compared to only 44% at public community colleges. Although it is certainly true that for-profit students end up more in debt and default on loans more than their public sector counterparts, for-profit students are poorer, older, and have more risk characteristics than their counterparts in other institutions: 54% vs. 36%. The easiest way to lower default rates and debt burden is to make it harder for this population to participate in higher education – but to do that means that the very constituency the country needs to increase rates of college-going will be out of luck.
 
The United States can dramatically increase participation rates in postsecondary education without the for-profit sector.  President Obama rightly pointed out that the country no longer leads developed countries in terms of postsecondary participation and attainment rates. By some estimates America will need 22 million new degree-holders over the next eight years but will fall short by three million. The nation will also have vacancies for at least 4.7 million new workers with post-secondary certificates and the shortfall will mean lost economic opportunity for millions of American workers. A reasonable estimate is that one million more students a year for the next decade need to enter the system. In many states budget cuts have forced public institutions to cut back on enrollments rather than to increase them. In California we are likely to have 100,000 fewer public postsecondary participants next year when we should be adding an equivalent number if President Obama’s goal is to be met. Because of their access to capital (from investors) for-profits are able to scale up (and down) much more quickly than traditional colleges and universities, and over the last 30 years they have grown enrollments at an average rate of 9% per year, compared to 1.5% for traditional colleges and universities. If we want to expand college participation rates we face two broad choices – either increase taxes to support public institutions, or enable for-profits to grow.
 
Traditional admission practices and programs are sufficient to increase the postsecondary population.  Increased participation in higher education entails more than more “seats”.  We will need to focus more on two traditionally under-served populations – low-income first generation students of color and working adults. For-profit institutions generally have larger percentages than public and private four-year institutions of both populations, in part because they employ admissions practices and offer programs that are more “consumer friendly”. Community colleges usually do not have extensive admissions offices, and four-year colleges and universities have traditional admission offices geared to reach traditional populations and offer them traditional programs. With the complex array of admissions, financial aid, and transfer practices in American higher education, new populations will not simply find their way to higher education, nor will these new consumers somehow respond to marketing efforts aimed at traditional students. Critics of for-profits chide them for being too customer friendly, when the more fundamental problem for new students is bureaucratic opacity.
 
All consumers of for-profit higher education are alike – and dupes.  Many stories exist of individuals who were deceived by for-profit providers. They did not realize the debt burden they would incur. From the admittedly sketchy research that currently exists, however, such an assertion is slightly less true at for-profits than at public four-year and two year colleges. In response to a recent survey question “Going into your studies, did you have a sense of how much debt you would need to take on?”, a quarter of the for-profit sample answered “no”, compared to a third at the traditional institutions. Cost is one factor among many that determines which school a student attends. Some students choose a for-profit for locational convenience. Others choose a for-profit because the classes are available after work or on weekends or on-line. Still others choose a for-profit because they can finish sooner than if they went to a public university or the local community college.
 
Finally, the challenge for-profits face:
 
All too often for-profit leaders assume that their only viable response to such criticism is to channel Captain Renault in Casablanca and be “shocked, shocked, to find that mistakes are being made here”!  Just as critics of for-profits provide anecdotes as confirmatory evidence, for-profits all too frequently react with outrage (feigned or otherwise), obfuscation or stonewalling when presented with legitimate concerns. The for-profits tend to fight legitimate regulatory oversight with their own assumption that any oversight is bad oversight. 
 
The for-profit industry is not as guilty as their critics allege, and they are not as blameless as the for-profit leaders claim. Unfortunately, a lack of research and hard evidence about for-profit higher education, by far the fastest growing sector higher education, continues to stymie rational discussion and decision-making. Assumptions with significant implications for public policy ought to be supported or refuted by hard evidence.  
 
I am convinced that all sectors can eventually learn to work together for the greater good.  But we have a long way to go before the sectors trust one another. Such trust needs to be built on mutual goals and clear evidence of performance – in all sectors. Rather than kill an industry based on anecdote or let it grow without responsible oversight, what is vitally needed is a useful program of research on higher education performance, and there are some promising indications that this is finally beginning. If it continues to grow my own assumption is that what Rick said to Captain Renault at the end of Casablanca, will hold: “Louie, this is the start of a beautiful relationship.” Without a data-informed relationship among all sectors of higher education, faulty assumptions will persist, and the United States will never reach President Obama’s goals and the country’s economic productivity remains at risk.

Dr. William G. Tierney, President of American Educational Research Association (AERA), is the Wilbur-Kieffer Professor of Higher Education & Director of the Center for Higher Education Policy Analysis at the University of Southern California.  Having spent over two decades conducting research on college access for underrepresented youth, as well as improving the performance of colleges and universities, Dr. Tierney is committed to informing policies and practices related to educational equity and postsecondary effectiveness. He is currently involved in studies pertaining to remediation and college-readiness, access to college, governance in higher education, and the role of universities in under-developed countries.

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