For-Profit Universities

For-profit universities have been around a long time.  What is it about them now that creates a greater concern?

For many years, for-profit universities were the Rodney Dangerfields of higher education.  They were the trade schools, the certificate programs, and whatever else.  They were always viewed as second class.  Despite huge changes, they are still viewed with some suspicion.  They still struggle, as Rodney Dangerfield did, to get respect.  But things are changing, and changing fast.

I have four reasons to worry about the growing influence and power of the for-profit world of higher education.

First, they have money to put upfront to create programs, capital that the public sector can only dream about.  When John Katzman approached the University of Southern California about a partnership to offer USC’s MAT degrees nationwide, he brought to the table $ 20 million that he raised from venture capitalists.  Being able to start a single program with $ 20 million dollars is far beyond the capacity of most of our institutions.  Similarly the University of Phoenix invested $ 15 million in a writing program to assess freshman composition essays.  Our institutions could never imagine having those kinds of resources to invest in advance in specific programs or processes.

Second, their money is starting to attract some substantial human talent.  Bror Saxeberg, the recently-hired Chief Learning Officer at Kaplan University, was a Rhodes Scholar, has a Ph.D in electrical engineering and computer science from MIT, and an M.D. from Harvard Medical School.  Will the resources of the for-profit universities begin to build substantial human talent by drawing away talented people from the not-for-profit sector?

Third, money in the United States means power, particularly to lobby at both the state and federal levels for changes in public policy.  In an era when it seems like no one wants to pay taxes, and the Republicans are in an increasingly powerful position in the Congress and in statehouses, lobbying efforts by the for-profit university sector will likely be more successful than ever before.  At the same time, public universities have failed to articulate adequately their unique role as public institutions.  Public universities have failed to adequately explain their capacity to go beyond career preparation and contribute to the public good.  Ironically, for-profit universities are becoming public universities by another name.  Already the largest recipient of Pell Grants is the University of Phoenix, which receives more than a billion dollars a year from that single federal program, and that doesn’t count the guaranteed loan programs that also are in effect another federal subsidy.  Without the federal and state support systems, I suspect entrepreneurs would be much less interested in the for-profit university business.
Fourth, for-profit universities can react with lightning speed to changes in economy, student needs, or other conditions.  They have no tenure, no shared governance, no limitations imposed by long practice or hallowed traditions.  They can start and stop programs quickly, move programs from place to place, and react immediately to changing market conditions.

The rapid growth and rise in the influence of for-profit universities has been noteworthy and yet, the Rodney Dangerfield problem still exists.  I predict that the real disruption will come when a for-profit university is established which has a brand name and instant credibility, such as Google University or New York Times University.  If such a university is created, and can also prove that it can create powerful learning outcomes at the same or lower costs than public universities, that will be a game-changer.

Of course, many of the best known public institutions will remain powerful, in part a function of reputation, a strong and politically-connected alumni base, and a strong endowment.  But for many public institutions that are less well-funded and endowed, with a lesser reputation, the for-profit university sector will likely pose a greater challenge in the years ahead.