What we can learn from for-profit colleges

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Today’s Senate hearing about for-profit colleges provides something to think about for anyone who feels privatization is the Great Solution to what ails the U.S. education system. We’ve already heard the stories about how much more often students at profit-seeking schools default on their loans. Now we have an inside look at the hard sell applied to get students to enroll, thanks to this Government Accountability Office (GAO) report. The video is definitely worth a watch.

One college representative tells a prospective student to lie about having kids in order to get more financial aid. Another explains that student loans aren’t like car loans—if you don’t pay, no one comes after you. A third claims that barbers can easily make $1,000 a day—about $250,000 a year—thus justifying the cost of the program. (Never mind that 90% of barbers in Washington D.C., where this conversation took place, make less than $19,000 a year.) To be fair, some of the college representatives are completely stand-up. When a prospective student asks if a job is guaranteed after graduation, one rep replies, “Any school that says that to you gets the Pinocchio award.” Nonetheless, there is obviously much wrong in the world of for-profit college education.

Let’s just not lose sight of one thing the for-profits are getting right.

In a word: growth. In the 1996-97 school year, there were 614 for-profit colleges in the U.S., according to the National Center for Education Statistics. In the 2007-08 school year, there were 1,043. (About half of those are 2-year colleges and half 4-year.) Now, some of that growth surely comes from heavy marketing campaigns and tactics like the ones described above. The nature of profit-seeking companies is that they sometimes convince people to buy things they don’t need.

But there is a secular trend afoot, too: America is a country that increasingly understands the value and importance of post-secondary education. With each passing year, it’s tougher to get a decent job without it. There are a lot of people out there primed for those marketing campaigns when they hit.

Yet traditional colleges—both public and not-for-profit private—aren’t keeping pace. While the number of for-profit institutions has grown by 60% over the past decade, the number of public and not-for-profit private institutions has actually gone down by 3%. It’s important to note that enrollment is up across the board, and that adding more professors and classes arguably makes more sense than adding brand new campuses. Still, for the number of colleges to go down, especially while cities are growing more geographically dispersed, seems a little off the mark.

One argument about why for-profit colleges attract so many students—even though their tuition is often higher than at public community colleges—is that people don’t fully realize their options. They see the for-profit sales pitch, the billboards and the TV commercials, but they don’t realize that similar classes might be had at less expense. Maybe we should get the nation’s public and private not-for-profit colleges talking.

A decade ago, for-profit colleges accounted for 9% of all people graduating with an associate’s degree and 5% of those graduating with a bachelor’s. By 2008, for-profits had 17% of the market for associate’s degrees and 5% of the market for bachelor’s. There are real reasons people turn to for-profits, even when they’re not being lied to about how cheap it will be or how much money they can make. Anyone who has an interest in taming the for-profit beast might want to look into getting those people some better alternatives.