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If Only We Had a Government Capable of Making Rules...
August 5, 2010 - 9:21pm

As regular readers know, I used to work in for-profit university. I fled it for various reasons, but still find some of the commentary about them unhelpfully reductive. Naturally, I’ve been following Senator Harkin’s hearings -- and the responses to the hearings -- with interest.

Broadly, the hearings are addressing abusive and/or misleading and/or illegal recruitment practices at various for-profit colleges and universities. The stated idea is to prevent taxpayer money (in the form of Federal financial aid) from being squandered on diploma mills or colleges that charge far too much for what they deliver. The unstated idea seems to be to have a referendum on the very idea of for-profit education.

It seems to me that it would be a lot more productive to focus instead on the rules of the game.

In my time at Proprietary U, there was a chronic internal tension between Admissions and Academics. The folks in Admissions were accountable for hitting their numbers -- they did somersaults and backflips to explain how that wasn’t commission pay, but it was commission pay -- and some of them did pretty much whatever they had to do. On the positive side, that meant helping students set up carpools, navigate paperwork, and get scheduled. On the negative side, it led to some pretty dramatic overpromising, some really unhelpful denigrating of the gen ed classes that students still actually had to take, and a level of ‘message management’ that sometimes became silly.

On the Academic side, we had to actually teach the students who got recruited. The numbers by which we were judged were retention percentages and job placement statistics. As some of us never tired of pointing out (hi!), those two numbers often pointed in different directions. Those of us who believed that fighting attrition by lowering standards was a bad idea would cite the employability of graduates, but we weren’t always on the winning side.

When the market was booming, the conflict was more stylistic than substantive. Students stayed in programs because they saw the payoff; retention efforts amounted to little more than open discussions of starting salaries. (For a while there in the late 90’s, the truth was good enough that you didn’t have to sugarcoat it.) Since the institution charged more per student than it cost to educate each student, growth was a source of profit, so it could grow quickly to meet mushrooming demand. On the national level, that growth has continued, and has far outpaced anything happening in the nonprofit world, where growth is typically a cost.

When the market turned, though, things got ugly fast. And this, oddly enough, is where the nonprofits have an advantage (or would, if the states would step up).

In most public colleges, there’s an allocation from the state and/or county and/or city that goes directly to the operating budget. In practice, if not in theory, that allocation is usually pretty independent of enrollment numbers. During enrollment booms, that means that the percentage of the budget paid for by the students directly increases. But during declines, there’s at least the cushion of some revenue that’s independent of tuition.

The for-profits can grow much more easily, but they have a harder time dealing with decline. That’s because they don’t have the enrollment-independent cushion of funding that the non-profits have.

Now it’s certainly true that the state-provided cushion is proportionately much smaller than it used to be, which means that declines hurt more now than they once did. But a drop that might register as ‘difficult’ for a community college could put a for-profit out of business altogether.

That is, unless the for-profit does what cornered animals tend to do. I’d expect to see any ethical gloves come off in times of decline, as they fight and scrap for every single student.

And this is why my position on for-profits is neither ‘for’ nor ‘against.’ It’s that they need to be meaningfully regulated. If they’re forced to fight fair but still manage to thrive, then presumably they’re adding value somewhere. At that point, the sober objection to their existence seems to fade away. But leaving them alone to do as they will is madness. Left to their own devices, they’ll act much like the cable tv monopolies did when they were deregulated; it’s naive to expect that they wouldn’t..

In the hearings, the for-profits have raised some fair points in their own defense. The one I find most compelling is the (correct) contention that the investigation doesn’t have a control group. Do we really, honestly believe that unethical behaviors are confined to the for-profit sector? Do we really believe that desperate tuition-driven nonprofits won’t do whatever they have to do to survive? For that matter, do we really believe that every accredited nonprofit actually provides a quality education?

But there, too, my response is that picking one side over the other misses the point. The point is a need for rules of the game, evenhandedly enforced, that will punish institutions for giving in to the temptations of untoward behavior. That’s true whether the institution is publicly traded, church affiliated, or state-identified. If a college is incompetent or corrupt, I don’t much care that it’s not for profit.

Ideally, the nonprofits would learn from the best elements of the for-profits. Is the agrarian calendar really cast in stone? Might a ‘career development’ style class make sense as a requirement, at least in some majors?

And ideally, higher ed will get past the kabuki of outrage at the existence of profit and actually address the rules of the game. If only we had a government capable of making rules...

 

 

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