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Phoenix or Canary?
October 17, 2012 - 9:18pm

The University of Phoenix, the largest for-profit higher education provider in the country, is closing over a hundred sites.  That’s over half of its physical locations.  Part of the move is driven by enrollment decline, and part by an increased emphasis on online course delivery.

Although many in traditional higher ed may feel a certain schadenfreude, I was actually saddened by the news.  This is hardly an unalloyed good.

Admittedly, part of my perspective comes from having worked in another for-profit, early in my career.  At a time when the "virtuous" non-profits offered only adjunct work, a local for-profit offered me a full time job with a living wage and health insurance.  And I wasn't the only one; I landed in a department with a cluster of young Ph.D.s who had never intended to land there.  For most of us, it functioned as a port in a storm.  Many have since moved on to other places -- mostly nonprofit -- but would not have had the opportunity if not for the first big break.

That isn't as idiosyncratic as it may sound. Just as for-profits accounted for most of the enrollment growth over the last decade, they also accounted for a disproportionate share of the employment growth over the last decade.  For all of their flaws -- and I'm not disputing those -- they hired good new people when nobody else did.  That matters.

I'd strongly counsel hiring committees at community colleges not to turn up their noses at applicants who've worked in for-profits.  Some terrific people landed there, just as some terrific people have landed in part-time or adjunct positions.  And much of the day-to-day work is less different than you might imagine.  Some Phoenix castoffs may be well worth taking seriously.

For a while, the for-profits grew like kudzu.  They had the considerable advantage of a business model in which enrollment growth more than paid for itself.  (Publics run at a loss, by design.)  Unlike their public counterparts, they didn’t have to reduce their offerings when demand increased.  And unlike private nonprofits, they weren’t wedded to, say, summer breaks.  They could scale up quickly, and they did.

But a model built on tuition alone is inherently unstable.  Small drops in income require significant cuts in spending.  As tired as those of us on the public side are of dealing with cuts, at least we have some sort of (admittedly shrinking) cushion in the operating budget to offset losses of tuition.  When states respect that cushion, and it’s large enough, it becomes possible to make (and live up to) longish term plans.  

The fatal flaw of the for-profits, in my mind, isn't that they're fundamentally different from traditional colleges; it's that they're fundamentally the same.   They use the same measures of student achievement, the same sequences of courses, and many of the same assumptions as everyone else.  Since they have many of the same cost drivers, and they lack the tax exemptions and public subsides of the nonprofits, they have to be clever to stay ahead.  That worked for a while, but a combination of a more hostile political climate and some gradual learning among the nonprofits has changed the equation.  Their lack of cushion means they experience shocks faster and harder than we do, but the shocks themselves aren’t really different.

I understand the impulse to chortle at Phoenix's misfortune.  But let's not assume that the same issues that have plagued it won't plague us.  I see the news less as confirmation that the critics of for-profits were right than as a warning sign that we could be next.  When Phoenix rose from the ashes, it signalled a new wave in higher education.  Now it may be the canary in the coal mine.  We ignore the signs at our peril.

 

 

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