Essay on what nonprofit higher ed can learn from for-profit sector

Once little more than a blip on the radar of American higher education, for-profit colleges now enroll about 1 in 10 of the nation’s postsecondary students. And this fast growth has not gone unremarked. The past year has brought unprecedented scrutiny and often harsh criticism of proprietary education from policy makers, regulators, and the news media. Unfortunately, too little attention has been paid to the innovative practices the best for-profits have to offer -- and how such reforms could help the rest of the higher ed world.

For-profit detractors are, of course, not entirely wrong when they complain of dubious recruiting tactics, overblown employment promises, and sky-high student-loan default rates. The sector is under heavy pressure from investors for fast growth and profits, and its expansion has been fueled by the easy availability of a large pool of federal aid. However, at a time of soul-searching about the ability of conventional colleges and universities to serve increasing numbers of students more effectively, for-profits should not be written off.

For a new white paper on private enterprise in American education, I interviewed a small collection of professors, deans, and presidents who have worked in both sectors to gather their firsthand reflections on what distinguishes the two educational universes. They were almost all quick to acknowledge the flaws of some for-profit colleges. But they drew from personal experience – at institutions including the University of Texas, Princeton University, the California State University, the University of Phoenix, and Kaplan University – to argue that the sector has many virtues as well.

These academics observe, first, that these relatively new colleges distinguish themselves, beyond their obvious goal of making money, by their targeted efforts to serve nontraditional students. Many who enroll are working adults with children, members of racial and ethnic minorities, first-generation college students, or all three.

Given the practical orientation of such students, for-profit leaders focus on building convenient campus locations, creating many online courses, and establishing market-driven, career-oriented degree programs. They emphasize data collection and systematically measure learning outcomes. And they are willing to standardize curriculum and minimize faculty autonomy to a degree that is much rarer in conventional colleges and universities.

The focus on meeting the needs of the labor market is a key philosophical dividing line between for-profits and their peers, particularly traditional research universities, according to Harold Shapiro, former president of Princeton and the University of Michigan. Shapiro is now board chairman of DeVry, Inc., which owns DeVry University, Keller Graduate School of Management, and other for-profits. "In elite higher education," he says, "you think you know what people need, so you produce that. You’re not out there asking firms and customers, 'What do you want?'… Whereas at a place like DeVry, which is much more focused on career education, management is out there all the time talking to businesses, asking 'What do you want?' "

For-profits also do something unusual in many traditional colleges and universities: they evaluate new hires on their teaching skills and give new instructors pedagogical training. Once on the payroll, instructors are evaluated much more systematically than their peers in traditional academia, even those who work at teaching-oriented colleges.

That’s in part because the culture of faculty independence in mainstream academe can make even casual evaluation difficult, says Thomas Boyd, former associate dean of the business school at California State University at Fullerton, and now dean of Kaplan's business school. "It was sort of a protocol that you had to walk on eggshells when you talked about what they were doing in their classroom. Of course you couldn’t go into the classroom and observe a professor. You could ask their permission, but you couldn’t drop in on classes. That was considered very inappropriate, to watch how they were teaching."

Perhaps the biggest appeal of for-profits for those who have joined the sector is that they are so new – works in progress in which trial-and-error is encouraged and inevitable. Entrepreneurial for-profits can move much faster to create new programs, adjust staffing levels, and change curriculums.

Michael Offerman, a onetime dean of continuing education at the University of Wisconsin-Extension who later became president of Capella University, says he was struck when he joined the online university by its ability to create new programs, such as the company’s development of "curriculum maps" tailored to skills valued by employers, accompanied by comprehensive measurement of whether students are in fact learning those skills. "The issue isn’t that for-profits are so much better at this," says Offerman. But their newness and distinctive mission "allows us to innovate and experiment in ways that I didn’t see happening as much when I was in public institutions."

Taken individually, these approaches aren’t unique to for-profits. But there is good reason to believe that such practices, when used together on a consistent basis, have particular value -- value that extends well beyond the for-profit context. For-profits will certainly need to work hard to prove their worth as they remain in the regulatory and media spotlight for the foreseeable future. But for all their flaws, for all the dismaying practices and bad actors that continue to be associated with the sector, their innovative characteristics are well worth studying. Traditional colleges and universities will be badly mistaken if they assume that the travails of for-profits today mean that profitable lessons cannot be drawn from their successes to date – and those likely to occur in the future.

Ben Wildavsky, a senior scholar in research and policy at the Kauffman Foundation, is co-editor of Reinventing Higher Education: The Promise of Innovation (Harvard Education Press, 2011) and author of The Great Brain Race: How Global Universities Are Reshaping the World (Princeton University Press, 2010). This essay is adapted from "Crossing to the Dark Side?," a new paper he wrote for the American Enterprise Institute’s series on private enterprise in American education.

U.S. Joins False Claims Lawsuit Against Texas Career College

The U.S. Justice Department announced Tuesday that the government would join a lawsuit in which former employees of American Commercial College, Inc., allege that the for-profit college chain falsely asserted its compliance with federal requirements that it derive at least 10 percent of its revenues from sources other than federal student aid. The class action was brought under the federal False Claims Act, which allows individuals to bring lawsuits on behalf of the federal government, claiming that the defendants have defrauded the treasury of funds and hoping to be joined by the U.S. Justice Department. The plaintiff shares in any financial penalties, which can include trebled damages.

American Commercial College, Inc., operates five campuses in Texas and one in Louisiana.

For-profit higher education providers have been a target of numerous False Claims Act lawsuits, and the federal government has joined several of them, including a high-profile case involving Education Management Corp. Some have speculated that the Obama administration -- which has toughened its oversight of the career college sector through regulation -- is increasingly turning to the courts to do so as well.

In announcing Tuesday's intervention, Tony West, assistant attorney general of the Justice Department’s civil division, said: “Colleges and universities that receive federal funds must be honest with the government and follow the law.... We will use the False Claims Act and other tools to protect students and taxpayers from for-profit institutions that fail to measure up to that standard.”


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House Passes Bill to Repeal Credit Hour, State Authorization

The House of Representatives voted 303-114 Tuesday to repeal the Education Department's credit hour and state authorization regulations, with 69 Democrats joining the all of the chamber's Republicans to back the bill. Higher education groups cheered the House's actions, but the next step for the measure is unclear.

While the bill might be able to attract enough Democratic support in the Senate to become law, the Obama administration has said it strongly opposes any attempt to repeal the regulations, and the chairman of the Senate Committee on Health, Education, Labor and Pensions has waged a high-profile fight against for-profit colleges. The state authorization and credit hour rules apply to nonprofit, public and for-profit institutions, but Democrats who voted against the measure characterized it as an effort to erode consumer protections.

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House to vote on repealing credit hour, state authorization

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The Obama administration opposes a bill to repeal newly enacted rules on the credit hour and state approval, but how Democrats will vote today is unclear.

For-Profits Get Half of Military Tuition Benefits

Students attending for-profit colleges received $280 million of the $563 million spent last year by the Department of Defense on tuition assistance for active-duty members of the military, according to a new study by the majority staff of the U.S. Senate Committee on Health, Education, Labor and Pensions. Six for-profit college companies collected 41 percent of the total expenditure.

The study also analyzed Department of Defense spending on on education benefits for military spouses. For-profits received $40 million of that $65 million, with $12 million going to for-profits that are not eligible to participate in federal financial aid programs. As the report noted, those institutions operate outside of the government's "regulatory regime set up to ensure minimal levels of program integrity."

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Santorum Says Obama Is Waging 'War' on For-Profits

Rick Santorum last week told an audience at the Detroit Economic Club that President Obama "had a war on private education" and that his administration has unfairly attacked private-sector, or for-profit colleges, that do most of the worker training for new jobs, according to a transcript published by The Detroit Free Press. The surging Republican presidential candidate promised that his administration would have a different attitude.

"He believes that private sector schools are somehow evil and they're abusive, and his Education Department has done everything they could to make it harder for them to compete for loans and other things and to stay in business," Santorum said. "Yet they are going to be the principal tool, along with community colleges, to respond to this, what I believe will be exploding demand for skilled and semi-skilled workers to do the jobs of the future."

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Essay praises federal legislation to gauge college programs' labor market returns

On February 9, Senator Ron Wyden, Democrat of Oregon, introduced a bill on the Senate floor entitled the “Student Right to Know Before You Go Act.” The bill gained bipartisan and bicameral support when it was introduced in the House by Duncan Hunter (a Republican from California and chairman of the House Subcommittee on Early Childhood, Elementary, and Secondary Education). 

Hunter and Wyden have been working together to increase the quality of educational data and improve transparency in measures of the success of colleges and universities. This proposed legislation was the product of this work. While its chances of passage are likely low, it is a smart piece of legislation that could help transform our expensive and inefficient system of postsecondary education.

A key provision of the bill would support states in expanding or creating postsecondary student level data systems that include measures of student success in the labor market (including average individual annual earnings by educational program, degree received and educational institution) from all institutions within the state, public and private (nonprofit and for-profit). It presents a much smarter approach to measuring what is called “gainful employment” than the U.S. Department of Education has managed so far.

In 2010, the Department of Education waded into the issue of the labor market returns of college degrees. This foray was tied to proposed regulations that would punish institutions whose students were not earning sufficient income to pay off their student debts. Whatever the merits of the idea, the department set off a firestorm with its regulations and with the quality of the data it released in August of that year.

The proposed regulations would have shut down a large number of the programs run by for-profit institutions plus some community college programs as well (like so much else surrounding the gainful employment debate, the number of programs affected was hotly contested). The department backtracked on the original regulations and last year issued watered down regulations. There was much to dislike about the department’s efforts, but one of the most problematic was putting the regulatory cart before the data horse. In short, the database to support the high-stakes regulations was at best thin and cast doubt on the department’s ability to base any gainful employment regulations on a sound foundation.

The department’s data capacity will be tested again next month, if it can stick to its plan to release new data on the labor market success of students in career-oriented programs. This time around, the Department is using wage data from the Social Security Administration and matching it to student debt data it holds within its Federal Student Aid office.

No one knows how good the matched data will be, and since the Social Security Administration (rightfully) has limited the ability of anyone outside of government to look at the merged dataset -- and since the stakes (although lower than proposed in 2010) are still high -- there will likely be a major dustup when the data are released.

This is why Wyden’s bill is smart: it builds the database first, and puts the linked data into the public sphere without the heavy-handed threat of government closure of programs.

Wyden’s approach gives everyone the opportunity to probe, poke and prod the data to develop a better sense of their limits and their strengths. Regulations can come later, but in the meantime, the availability of these data will allow students and their families to make more informed choices about the likely outcome of their investment of time and money in a given program in a given school. The data will also allow state policy makers to judge the rate of return on their state’s investment of taxpayer monies in different programs.

We can already anticipate some of the responses to this legislation: that we shouldn’t judge colleges on a single number like salaries or the return on investment, that college education is about so much more than simply finding a job, that many of the societal benefits of having an educated population will not be measured, and so on. Of course many of these statements are true.

But the national commitment to higher education is largely about economic development and creating a skilled competitive workforce. Would the Obama administration be pushing its ambitious postsecondary agenda if colleges just taught students to parse Proust? Would students flock to colleges and universities to learn postmodern poststructural critical theory? Students, their families, taxpayers, and government officials need to know the likely returns for investing so much time and so much money in the pursuit of a degree. And the Wyden bill is likely to get this information into the public sphere faster than any other approach we are currently pursuing.

On a more wonky note, the Wyden bill will help force the revision of the nation’s “premiere” data system for collecting information on colleges and universities. The Integrated Postsecondary Education Data System (IPEDS) was a reasonable data collection system in the middle of the last century, but to say it is creaky gives it more than its due.

In a nutshell, IPEDS is based on aggregated data collected for a declining number of postsecondary students (it already covers less than half). IPEDS needs to be replaced with student-level data such as the Wyden bill calls for. Wyden’s bill also makes the states full partners in this new IPEDS model, recognizing their critical role in higher education policy. In doing this, the IPEDS burden will be reduced for a great many institutions that submit both IPEDS and student data to the state.

In 2006, Congress banned the federal government from itself holding such a data system. At just about the same time, it authorized the expenditure of hundreds of millions of dollars to pay for the states to create them. Wyden’s bill will have these state systems brought together for a national view of the data, while prohibiting the feds from having access to personally identifiable information. This would improve the payoff of the nation’s investment in these data systems and keep the action at the state level, where it belongs and where, under current legislation, it can actually take place. 

Colleges and universities need to better measure the progress of their students as they work toward their degrees, they need to better measure what their students are actually learning, and they need to better measure how well students are doing in the job market after they graduate. Only then can we increase transparency and improve accountability. Wyden’s bill has many of the pieces of the puzzle right, and if it became the law of the land, it would mark a major step forward in improving postsecondary education.

Mark S. Schneider is vice president for new educational initiatives at the American Institutes for Research.

California Regulators Shut Down a For-Profit

California regulators have shut down the Institute of Medical Education, a for-profit institution with 250 students, citing operational, accreditation and financial problems, the Associated Press reported. An official of the institute said that the closure was "ridiculous," and that it might sue the state. Many students who showed up for classes Thursday -- only to find the institute shut down -- told the Bay Area News Group that they were scared they would be unable to transfer any of their credit and get back any of the money they had paid for classes that could be worthless to them.


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