The Student Veterans of America this month announced that it has suspended 40 chapters at for-profit institutions, saying that they were "using the SVA brand to legitimize their programs." At the time, the group did not name the chapters. Today it released a list of 26 chapters at for-profit institutions that continue to have their charters revoked. "In addition to being a peer support group, SVA chapters exist as campus and community based advocacy organizations. It appears that some for-profit schools do not understand our model, or worse, they understand our model and they choose to exploit it for personal gain," said a statement from Michael Dakduk, executive director of the association.
Sophia, an online learning platform recently acquired by Capella Education Co., on Wednesday released 25,000 free tutorials aimed at college and high school students. The for-profit Capella plans this summer to introduce "Sophia Pathways for College Credit," a souped-up version through which students' competency in subject areas, beginning with college algebra, will be assessed for the granting of Capella credits, company officials said. "It's a low-cost path to getting college credit," said Steve Anastasi, Sophia's interim CEO.
Anastasi describes the open platform as a "social teaching and learning environment" in which teachers, most of them not affiliated with Sophia or Capella, create online tutorials on a variety of subjects that will soon be organized by the learning preferences of students. The crowdsourced content is ranked and given an "academic seal" by self-identified academic experts, who themselves are rated by students. A Capella spokesman said Sophia would be a "sandbox" for experiments on open course content, as well as a resource for Capella students and professors.
The reality is exactly the opposite: the for-profit sector is challenging a centuries-old practice of separating philanthropy from business.
Since the Elizabethan statute of charitable uses in 1601, Anglo-American law has sought to encourage charitable giving to promote the common good. The idea behind modern philanthropy is that nonprofits undertake services that are either inappropriate for market activity or would not be supported by the market. To ensure that these goods are provided, the state both provides them itself through public institutions and offers private nonprofits legal privileges (such as incorporation) and economic incentives (such as tax benefits).
In 1874, Massachusetts passed one of the earliest general laws exempting from taxation any “educational, charitable, benevolent, or religious” institution. Believing that citizens, not just the state, should promote the common good, Massachusetts sought to encourage citizens to devote their money to institutions that would serve the public. Implicit was the assumption that certain kinds of activities — educational, charitable, benevolent, and religious activities in particular — should be done as a service and not for a profit. Massachusetts’ law became a model for other states.
In the modern era, tax incentives are one of the primary ways in which the state encourages nonprofit institutions, whether churches, local grassroots associations, large endowed philanthropies, or universities. The state also subsidizes nonprofits that serve the community, especially in social services and education. As Olivier Zunz has demonstrated in his recent book Philanthropy in America, Americans have not only given generously but benefited greatly from philanthropy.
This is not to suggest that the history of American philanthropy is without conflict. After the American Revolution, many Americans worried about what Anglo-Americans called the “dead hand of the past.” Thomas Jefferson was among them. He believed that permanent endowments enabled one generation to influence the affairs of the next in ways that threatened democracy. “The earth belongs in usufruct to the living; . . . [and] the dead have neither powers nor rights over it,” proclaimed Jefferson in 1789.
These questions re-emerged in the 20th century. Many Americans reacted with great concern when Andrew Carnegie and others used their wealth to engage in philanthropic endeavors that some opposed. During the Cold War, foundation-sponsored research led some policymakers to question foundations’ power and political agenda. Similar concerns can be raised about the Gates Foundation today. Private philanthropies’ wealth may give them undue influence in public deliberation. Philanthropy, no less than business, requires regulation.
Moreover, public and nonprofit institutions become corrupted when profit becomes their goal rather than a means to fulfilling their mission. This has happened to some extent in American universities that invest in tangentially related programs like big-time sports. Since the passage of the Bayh-Dole Act (1980), which permitted universities to profit from publicly funded research, universities have encouraged marketable rather than socially beneficial science. Moreover, in an era of state defunding, many policy makers are urging universities to act more like businesses, even when doing so perverts their mission and institutional culture.
The state must ensure that both public and nonprofit institutions remain true to their civic mission in return for the legal and financial benefits they receive. This point was made recently by Robert Zemsky, a member of President George W. Bush’s Spellings Commission. In Making Reform Work, Zemsky urges colleges to talk constantly “about purposes, about ends rather than means,” to hold fast against the temptations of profit.
Whether colleges are for-profit or not matters a lot. It affects their mission, their culture, their labor practices and, most important, the lessons they offer students. For-profit education implies that education is a commodity bought for the advantage it provides. It makes no pretense that service is a necessary part of being a college graduate. In fact, even if it did, students are too smart to believe it. They know what they are buying -- a degree from a vendor. We expect businesses to make money, but we do not want our churches and schools to treat us as consumers but as congregants and students.
For-profits must be regulated as businesses. They are not charities, despite being subsidized heavily by public student loan dollars. In reality, in return for these public subsidies, for-profits should live by the same rules as other nonprofits. They should make the common good their primary goal and reinvest all revenue to fulfill their mission. They will not, however, because, as Kevin Kinser argues in From Main Street to Wall Street, they exist to generate wealth for investors and shareholders. As recent scandals have made clear, for-profit institutions in higher education, like other Wall Street businesses, too often put their bottom line ahead of the common good.
For-profit higher education’s advocates are declaring war on American philanthropy. They seek to profit off of charity, transforming what should be a service into another way to gain wealth. They threaten a distinction that has deep roots in American history and law. They suggest that all goods -- including education, charity, and religion -- should be commodities. History and common sense tell us otherwise. While the line between the for-profit and nonprofit sectors can be blurry at times, the differences between them are very real, of moral significance, and worthy of protection.
A U.S. District Court in Arizona last week approved a $145 million payment by Apollo Group, Inc., to settle a class action lawsuit, according to a corporate disclosure. Originally filed in 2004, lawyers for shareholders had alleged that company officials made misleading statements about a Department of Education investigation of student recruiting practices at the University of Phoenix. The court dismissed the securities-fraud verdict against Apollo and former company officials as a result of the settlement.
Democratic senators take aim at career colleges' marketing budgets, but bill would affect nonprofit colleges, too. While the legislation faces long odds, it could shape the ongoing debate over for-profits.
Student Veterans of America on Thursday announced that it had revoked chapter memberships at 40 for-profit colleges for violating the group's policies and "using the SVA brand to legitimize their programs." The group did not name the 40 institutions. (The Associated Pressreported that the association has 417 campus chapters.)
Chapters must be run by students, according to the association's rules, but a review turned up for-profits that had administrators, rather than students, listed as primary contacts at campus chapters. Michael Dakduk, the group's executive director, said in addition to that violation, some colleges lost their membership because they used primary institutional websites or pages devoted to recruiting military students as chapter websites, another no-no under association policies. "Chapter websites are organization websites devoted the group and not meant to be a promotion of the university," he said in an e-mail.
Laureate Education Inc., a major player in for-profit higher education, is preparing an initial public offering, Reuters reported. The past year has been a tough one for many for-profit entities, but Laureate's international emphasis (half of its revenues come from Brazil, Chile and Mexico, countries experiencing huge increases in demand for higher education) has helped the company grow. Laureate declined to comment for the Reuters report.
Multi-state investigation of for-profits includes review of institutional loans and recruiting of veterans. But finding common targets is a problem, and investigators have yet to take on a major for-profit.
Colorado's attorney general on Wednesday announced a $4.5 million settlement with Westwood College Inc., over allegations that the for-profit higher education provider engaged in deceptive business practices. Westwood will pay $2 million to the state and credit $2.5 million toward restitution for students who used the college's tuition financing plan. The state's complaint had alleged that Westwood inflated its job placement rates and misled prospective students about the average wages of graduates, transferability of course credits and the total cost of Westwood degrees. It also alleged that the college failed to disclose the terms of its student financing program.
Westwood made no admission of liability as part of the settlement. In 2009 the college agreed to a $7 million settlement with the U.S. Department of Justice related to a complaint about filing false claims for federal student aid. It is also the subject of an investigation by the Illinois attorney general. Sen. Tom Harkin, an Iowa Democrat, on Wednesday called for the college's accreditors and federal agencies to "immediately review whether the school has the sufficient institutional integrity and academic quality to continue receiving taxpayer-funded financial aid."