Federal appeals court weighs in on for-profit group's challenge to tightened Education Department rules, siding partially with industry on marketing-related regulation but upholding most of lower court decision.
In his recent op-ed, “For-Profits’ War on Philanthropy,” Johann Neem misses the point. Unfortunately, his deep philosophical opposition to for-profit colleges and universities gets in the way of an honest discussion.
While he’s absolutely right that public universities have long played a vital role in society, he fails to see that it’s ultimately the students, more than the universities or their legal structure, that matter. In today’s world with a very diverse population, very diverse workplace-skill demands, and a very diverse student body, we should celebrate the diversity of our postsecondary delivery system. I’d suggest that each element of higher education today -- public, private nonprofits and private for-profits -- plays a different, yet important, role.
As a professor himself, Neem rightly takes pride in the importance of not-for-profit colleges in society and their role in advancing the “public good.” What Dr. Neem should be focusing on, however, is the needs of American students.
Private sector colleges and universities offer unique opportunities for millions of men and women, particularly young professionals, military veterans and working parents. For our schools, the first-time, full-time student right out of high school is the rare exception rather than the norm. These institutions have enabled millions of Americans to obtain specialized degrees in a wide variety of fields. If that’s not advancing the public good, I don’t know what is.
For many of our students, who are seeking higher education while maintaining a household and full employment, a career-focused and specialized education from a private sector college or university is simply the most viable option.
Neem claims, without basis, that for-profit universities don’t have a vested interest in their students. One veteran, while re-registering for new classes in one of our schools, told me, “I could have attended a lot of other colleges and universities in this area. But this school, with its focused academic delivery of one course at a time, and the flexible scheduling, was the kind of education I need at this time in my life.”
What most confuses me about Neem’s article is his suggestion that for-profit colleges undermine the traditional role of philanthropy. Having served the past six years as the president and chief executive officer of the Council on Foundations, I happen to know something about the philanthropic sector.
First, let’s understand that philanthropy -- unlike charity -- is meant to be a long-term strategic investment in positive social change.
When I first arrived at the council, philanthropies were engaged in “competitive grant-making.” They would consider multiple grant requests and select the most innovative proposals.
But as impact became an important part of their work, most grant making institutions moved to strategic philanthropic investments, where a multiyear investment was made to create positive and real social change. Since the Great Recession, philanthropy has recognized the limit of public, private and philanthropic resources. In response, the sector has moved to public-private-philanthropic partnerships. The sector’s work with the Obama administration in areas such as “Race to the Top” and the Social Innovation Fund are prime examples of this change.
Today, private sector colleges and universities represent the classic example of a public-private-philanthropic partnership in higher education. Foundations do incredible work related to research and best practices in workforce investment strategies. The government funds programs like the Workforce Investment Act and Title IV to support students seeking to obtain workplace skills. Our schools -- and yes, their owners -- invest in the design and delivery of education programming. At a time when state and federal budgets are limiting support and access in traditional institutions of higher education, we should all celebrate the role private-sector colleges and universities provide to keeping our nation competitive and to equipping our students with the skills demanded in today’s workplace.
Today, public-private-philanthropic partnerships demand that we all work together to achieve change with limits on resources. We both combine and leverage resources. Lifelong learning and workforce investment is a classic example of this exemplified by the National Fund for Workforce Solutions. This same partnership is critical to our efforts to produce the skilled workers needed for the next decade. Look at the pioneering work of the Lumina, Gates, Mott and other foundations in this area -- especially most of our community foundations across the nation.
There’s no reason why both private and public education can’t play a vital role in America’s long-term recovery. The world is changing. So must education.
Steve Gunderson is president and chief executive officer of the Association of Private Sector Colleges and Universities.
The reality is exactly the opposite: the for-profit sector is challenging a centuries-old practice of separating philanthropy from business.
Since the Elizabethan statute of charitable uses in 1601, Anglo-American law has sought to encourage charitable giving to promote the common good. The idea behind modern philanthropy is that nonprofits undertake services that are either inappropriate for market activity or would not be supported by the market. To ensure that these goods are provided, the state both provides them itself through public institutions and offers private nonprofits legal privileges (such as incorporation) and economic incentives (such as tax benefits).
In 1874, Massachusetts passed one of the earliest general laws exempting from taxation any “educational, charitable, benevolent, or religious” institution. Believing that citizens, not just the state, should promote the common good, Massachusetts sought to encourage citizens to devote their money to institutions that would serve the public. Implicit was the assumption that certain kinds of activities — educational, charitable, benevolent, and religious activities in particular — should be done as a service and not for a profit. Massachusetts’ law became a model for other states.
In the modern era, tax incentives are one of the primary ways in which the state encourages nonprofit institutions, whether churches, local grassroots associations, large endowed philanthropies, or universities. The state also subsidizes nonprofits that serve the community, especially in social services and education. As Olivier Zunz has demonstrated in his recent book Philanthropy in America, Americans have not only given generously but benefited greatly from philanthropy.
This is not to suggest that the history of American philanthropy is without conflict. After the American Revolution, many Americans worried about what Anglo-Americans called the “dead hand of the past.” Thomas Jefferson was among them. He believed that permanent endowments enabled one generation to influence the affairs of the next in ways that threatened democracy. “The earth belongs in usufruct to the living; . . . [and] the dead have neither powers nor rights over it,” proclaimed Jefferson in 1789.
These questions re-emerged in the 20th century. Many Americans reacted with great concern when Andrew Carnegie and others used their wealth to engage in philanthropic endeavors that some opposed. During the Cold War, foundation-sponsored research led some policymakers to question foundations’ power and political agenda. Similar concerns can be raised about the Gates Foundation today. Private philanthropies’ wealth may give them undue influence in public deliberation. Philanthropy, no less than business, requires regulation.
Moreover, public and nonprofit institutions become corrupted when profit becomes their goal rather than a means to fulfilling their mission. This has happened to some extent in American universities that invest in tangentially related programs like big-time sports. Since the passage of the Bayh-Dole Act (1980), which permitted universities to profit from publicly funded research, universities have encouraged marketable rather than socially beneficial science. Moreover, in an era of state defunding, many policy makers are urging universities to act more like businesses, even when doing so perverts their mission and institutional culture.
The state must ensure that both public and nonprofit institutions remain true to their civic mission in return for the legal and financial benefits they receive. This point was made recently by Robert Zemsky, a member of President George W. Bush’s Spellings Commission. In Making Reform Work, Zemsky urges colleges to talk constantly “about purposes, about ends rather than means,” to hold fast against the temptations of profit.
Whether colleges are for-profit or not matters a lot. It affects their mission, their culture, their labor practices and, most important, the lessons they offer students. For-profit education implies that education is a commodity bought for the advantage it provides. It makes no pretense that service is a necessary part of being a college graduate. In fact, even if it did, students are too smart to believe it. They know what they are buying -- a degree from a vendor. We expect businesses to make money, but we do not want our churches and schools to treat us as consumers but as congregants and students.
For-profits must be regulated as businesses. They are not charities, despite being subsidized heavily by public student loan dollars. In reality, in return for these public subsidies, for-profits should live by the same rules as other nonprofits. They should make the common good their primary goal and reinvest all revenue to fulfill their mission. They will not, however, because, as Kevin Kinser argues in From Main Street to Wall Street, they exist to generate wealth for investors and shareholders. As recent scandals have made clear, for-profit institutions in higher education, like other Wall Street businesses, too often put their bottom line ahead of the common good.
For-profit higher education’s advocates are declaring war on American philanthropy. They seek to profit off of charity, transforming what should be a service into another way to gain wealth. They threaten a distinction that has deep roots in American history and law. They suggest that all goods -- including education, charity, and religion -- should be commodities. History and common sense tell us otherwise. While the line between the for-profit and nonprofit sectors can be blurry at times, the differences between them are very real, of moral significance, and worthy of protection.
Democratic senators take aim at career colleges' marketing budgets, but bill would affect nonprofit colleges, too. While the legislation faces long odds, it could shape the ongoing debate over for-profits.
Multi-state investigation of for-profits includes review of institutional loans and recruiting of veterans. But finding common targets is a problem, and investigators have yet to take on a major for-profit.
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.