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First Thoughts on "Frontline"
May 5, 2010 - 4:41am

Last night "Frontline" did a show on for-profit higher education.

It was a disappointing episode in many ways.

First, and most obviously, it created clear good guys and bad guys. Investor Michael Clifford was clearly intended to be the bad guy, mixing "money, management, and marketing" with a druggy past and a born-again Christianity that I couldn't quite square with his Del Mar beachfront home. (I don't know if the correspondent quite caught the New Testament overtones of Clifford's story of converting prostitutes into students, but it would have made for a fascinating conversation.) The mostly absent traditional colleges were supposed to be the good guys, though the only significant talking head I caught from a traditional college was LaGuardia's Gail Mellow. (For the record, I'm a fan of hers.) Although the show didn't mention it, Mellow is in a unique position to comment on for-profit higher ed. Fun internet exercise: go into your favorite maps program, and navigate a path from the main campus of LaGuardia to the New York City campus of DeVry. Go ahead. I'll wait.

Things that make you go hmm...

Second, the episode was terribly sloppy in what it attacked. It conflated 'online' with 'for-profit,' which is simply false. There are plenty of nonprofit colleges, both public and private, running online classes, and it isn't hard to find for-profits with classrooms. The former Phoenix exec who spoke dismissively of tenure was taken as shocking, even though tenure has been waning in traditional higher ed for the last forty years. A discussion of the connection between regional accreditation and financial aid eligibility led quickly to stories of financial aid fraud at a college that didn't have regional accreditation, leaving the viewer to wonder exactly what point was being made, if any.

Third, despite a glancing reference to a lack of measures of instructional quality across all of higher ed, it approvingly fell back on arguments from "ineffability." I guess that's all you have when you don't actually have evidence, but it really doesn't resemble an argument. Is the quality of instruction in, say, Business Management at a Phoenix better, worse, or similar to the quality of instruction in Business Management at Compass Direction State? I don't know how to answer that, and neither did the show. In the absence of an answer, it's hard to get terribly worked up either way.

But most fundamentally, it failed to get to the 'why.' Why are for-profits growing?

At a really basic level, the for-profits' advantage is that they put (more than) the entire cost of their operations on the students. That means that growth more than pays for itself. They don't have subsidy income, endowment income, or philanthropic income. It all comes directly from operations. The reason that their students consume a disproportionate amount of federal financial aid -- and they do -- is that unlike the private nonprofit colleges (whose tuition is often higher), there's no offsetting revenue stream.

The publics, on the other hand, set tuition deliberately lower than the cost of operations, using subsidies and (a little) philanthropy to make up the difference. When those subsidies lag, growth becomes a cost.

To recap: for the for-profits, growth more than pays for itself. For the publics, growth is a cost. Now which do you suppose will grow faster?

If you really want to change the equation, you have to do several things.

First, as the show clearly indicated, stop the outright sale of regional accreditations. Any transfer of ownership of a college should automatically trigger a new evaluation by the accreditor. That's just basic. I have to give the show credit on this one.

Second, adopt some of the reforms that the for-profits have shown clearly work. Drop the agrarian calendar as an absurd holdover from a bygone era. Help students navigate the financial aid process. Abandon the ridiculous "tenure or adjunct" model in favor of something closer to regular employment. And for the love of all that is holy and good, abandon the credit hour and go to outcomes-based measures. Until you do that, you'll be stuck in a productivity trap and its resultant cost spiral forever, by definition.

Third, set subsidy levels high enough -- and tie them closely enough to enrollment -- that growth will more than pay for itself for the publics. Until you do that, the various institutions will simply follow their own imperatives: for-profits will grow, and publics will cut.

When I refer to subsidy levels, I'm not referring to financial aid. Financial aid ties money to individual students, which is exactly the for-profit model. I'm talking about operating subsidies that go directly into institutional operating budgets. The more we shift costs from institutional budgets to students directly, the less will differentiate the two sectors. If you want the publics to add enough capacity to compete more effectively with the for-profits, you have to give the publics the resources directly. Given the choice between a college getting infusions of private capital and a college taking significant budget cuts, which would you choose?

I found myself agreeing quite a bit with Arne Duncan, who argued that the issue isn't some sort of moral purity about keeping education separate from money, but that it's really about the rules of the game. If you're serious about changing the game, change the rules. I just wouldn't expect that all of the changes will be on one side.

I'm curious to see how others reacted to the show. Wise and worldly watchers -- what did you make of it?

 

 

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