• The World View

    A blog from the Center for International Higher Education


The Alarming Expansion of the For-Profits

The growing presence and influence of for-profit higher education internationally is worrisome and seems to be attracting less attention than it deserves.

October 27, 2014

The growing presence and influence of for-profit higher education internationally is worrisome and seems to be attracting less attention that it deserves. Supporters of the trend towards more for-profit universities, like to claim that this sector expands access. This may be true to some extent but access to what? For-profit higher education has the primary objective (of course) of generating profit. It is possible that for-profit universities could offer a respectable alternative to private non-profits and public institutions, yet to do so would imply significant changes to the current model, starting with more selective admissions as well as more intensive student support programs—both with significant implications for revenue. Given the anecdotes that are surfacing, it would seem that the educational product is often of dubious quality with more concern given to profits than student success— completion rates tend to low and (where government subsidized loans are available) default rates high.

In the US, only 10% of the undergraduate enrollment is in private for-profit universities yet these students account for 25% of federal loan dollars and 50% of the loan defaults. Shockingly, some of the publicly-traded college corporations receive nearly 90% of their revenue from federal student aid programs. As a result, these private business enterprises profit as a result of the considerable investment of public funds. Yet, in a recent article published in Washington Monthly ranking “America’s Worst Colleges” for-profit universities dominate their tables.

The growth of for-profit higher education is a worldwide phenomenon. This sector has grown very quickly in Latin America in recent years. In Peru, according to 2010 data, 19 private, for-profit universities, accounted for 38% of the undergraduate enrollment. The growing presence of for-profit higher education in Brazil is clear; it is estimated that 36% of all universities students in Brazil are enrolled in for-profit universities now. 

Data from Chile are impossible to collect because “legally” there are no for-profit universities yet with some financial and legal finagling, they do exist.  It is likely that more than 120,000 students are enrolled in in these for-profit, non-profits. Laureate, a for-profit education firm, operates several higher education institutions there. (To add a little perspective, Laureate earned $3.4 billion in total revenue in 2012, 80% from outside of the US). Several other Chilean institutions are clearly generating profit as well.

In all of the countries that host private universities there is growing concern about the quality and ethics of their activities. To date, there are more anecdotes than data, but enough of the former to be concerned. In Latin America scholars and legislators recount incidents where faculty rosters are padded with distinguished individuals who may show up periodically to give a lecture but who make rare appearances in regular classes, of judges offered nicely remunerated appointments in law schools with limited responsibility, of laboratory equipment and libraries rented for occasions when the institution is being reviewed for accreditation. In Brazil, it has been reported that students performing poorly are “retained” so as not to be eligible for the ENADE, the national exit examination given at three-year intervals and used for monitoring institutional performance. These “irregularities” make it possible for these universities to maintain legitimacy, obtain protection in the courts, and (often) achieve accreditation. 

In Chile and Peru, newspapers warn of close relationships between administrators and investors at for-profits with individual politicians who protect these institutions from sanctions. Chile has witnessed numerous scandals in which individuals and agencies involved in accreditation reviews received suspicious benefits from these interesting “non-profit”, for-profit universities. The closeness of the for-profit sector to US politicians is also cause for concern. For-profits have found political cover by investing heavily in the US Congress. There is little doubt about the influence of lobbies on behalf of these institutions. According to a 2011 article in the Huffington Post, the for-profit industry spent more than $8 million on lobbying activities in 2010. It is hard to imagine that the budget has decreased since. 

Sadly, even with quality and ethics in doubt, quality assurance agencies don’t seem to be able to stand up to the influence of the for-profits—they are outmaneuvered by the funding and political clout of this sector. Yet, there is too much at stake to allow this sector to continue to function with impunity.

Clearly, for-profit post-secondary education is generating considerable revenue, but to what end?  What does it mean when the financial objectives of a university require that income be directed to owners and investors rather than fully invested in the further development of institutional resources, programs and infrastructure?  Isn’t it time for public authorities to recognize that not all activities operate best when profit is the key objective and acknowledge that there are some social services that are diminished when revenue has to be diverted to profit individuals and corporations? Education must be removed from the for-profit sector. If only there were more courageous public officials willing to say so and support the allocation of the public funding necessary to provide quality access to all those who deserve it and protect them from questionable programs. 


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