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The Rise of For-Profit Colleges

Brian Leiter

This is a striking article.  I realize I am almost wholly in the dark about how these places operate and whether, and how, they teach philosophy, if they do.  I would welcome input from readers with knowledge or experience.  Since I don't know whether for-profit colleges safeguard the academic freedom rights of their teachers, I will permit anonymous comments on this thread, but with a valid e-mail please, which will not be published and which will be treated as wholly confidential.

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20 responses to “The Rise of For-Profit Colleges”

  1. Shane Ralston

    I taught Political Science for Platt College (Alhambra, CA) in the summer of 2004…low faculty pay, poor working conditions, lowered academic expectations and immense pressure on students to pay their tuition promptly.

    The Frontline special "College, Inc." is also a good source of information about for-profit colleges and their unethical practices.

    Reply
  2. Tim

    I would recommend this Frontline episode "College, Inc." if you haven't seen it:

    http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/

    Though I warn you what they portray is horrifying. It made me realize that the money-changers who have infested higher education go far, far beyond a few administrators at universities here and there. These people have a corporate base and lobbying power that goes far beyond anything I ever imagined. They also educate (if that's the right word) a far greater proportion of today's young people than one might think–just the University of Phoenix, if I remember the statistic right, has more students than all the Ivy Leagues and the entire University of Texas system combined. And what's more, they are ripping off not only their students, whom they recruit with predatory means and then dupe into taking out more loans than they can ever pay back, but also the whole country, since it is these taxpayer-subsidized loans that constitute to up to 90% of their profits. Sorry for the rant, but ever since watching the Frontline show I have been angry as hell, and feeling like whatever education I'm doing is just a drop in the bucket compared to the damage the for-profits are causing.

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  3. A.P. Taylor

    I was almost recruited to work for one of these places in Western Upstate New York. I am a 5th year Phd student, with an MA in Philosophy from a terminal MA program. My experience was the following: the for-profit wanted to start an Associate of Arts degree program. To get an accredited AA, the State of New York required them to add humanities courses to the degree program. They needed ethics, logic, and critical thinking instructors with at least an MA qualification. Unfortunately, they treat their "adjuncts" as minimum wage employees rather than academics. There was no control over textbook choice. There was a centralized "system" office which selected the text (which was really a glossy, image/photo dense, almost content-free magazine rather than anything approaching a worthwhile text). Exams, and assignments, were also centralized. Additionally lesson plans had to be made and filed in advance for each meeting of the course. The for-profit had a website that was impossible to access. "Deans" were not available to be contacted and did not return calls, emails to adjuncts were sent without standard salutations and closing, and were otherwise brusk and unprofessional in tone. The final straw for me was the pay they offered. Less than four days before the course was set to begin, I finally got a copy of the contract (after asking about pay many times and being told that my credentials were still being examined), and they were only paying 1400 USD for a full 16 week course. This at least 1000 short of the average salary for adjunct professors across the region and nearly 2000 less than the typical adjunct salary in the regions larger institutions (I've taught as an adjunct for 2 schools in the region, one large one small, and of course I have colleagues and friends working at nearly every school in the region, and we do talk) . Furthermore, After taxes and travel expenses, it would have left only about 900 in take home pay for a 16 week course. Given the lack of academic freedom, and the myopic, wage-slave, treatment the for-profit was indulging in, I thought the better of the arrangement and turned down their contract offer.

    Reply
  4. Brady Smith

    This seems to be an increasingly controversial topic in discussions about higher ed in America, and rightly so. Margaret Soltan, of University Diaries fame, blogs constantly about it; there's a piece at chronicle.com about a senate investigation into the practices of these institutions (they derive the vast majority of their revenue from federal student loans); and the New York Times a few weeks ago had a story about questionable for-profit recruiting practices and the hedge funds who have been publicizing abuses (via intermediaries, of course) in hopes of shorting the market. Defenders always say that they offer education and livelihoods to people who would otherwise go without. In reality, though, it seems to be a bastion of sleazy practices all around.

    Reply
  5. Anon

    I teach about 30 sections (mostly comp but also intro ethics or bus com or lit) a year at multiple FPs. As far as my own career goes it feels like treading water. If I'm still slogging it after I turn 30 I'd be displeased with myself.

    I'm in the classroom 18 hours per week and paid 25$ an hour for 36 hours per week – and while it's not a ton of dough it puts me at about the median wage and I don't have to sweat much to earn my bread. I feel, on balance, much less exploited than other workers (in other sectors). Sometimes my bosses encourage us and will stand up against plagiarism, make sensible decisions and promote our academic freedom – one boss of mine, for example, reads Marc Bousquet's books. Academic Freedom is, however, just a code for "what goes on in your classroom is of so little significance we could care less what you're doing."

    Many other faculty at these places are treated much worse – imagine working a split shift all week for 37,000 (and never being home in the evenings). The people really being exploited are the students.

    The FP schools do not invest in their students. Many many of my students have conditions in their lives that hinder their success (regardless of the effect higher ed may have on them) – they have criminal records, severe maladies of the organs or teeth, are depressives, are super busy single mothers (almost 50% of them), have children with severe problems, etc etc.
    These people are being bilked of their one guaranteed source of support (fed loans) in a system that offers them the minimum level of service to keep accreditation.

    I'm regularly offered 1200 to teach a class of 15-20 (or more) – each student pays 1200 plus the margin on the books to take the class. It's very hard to see how those resources trickle back to the students in any significant way. All this means, for me, that I have to spread myself pretty thin to try to offer service at all to my students – many of who have severe mental and physical deficits.

    On a philosophical note (I have a phil background) I taught a short Intro to Ethics course and one of Richard DeGeorge's articles which was, true to form, an apologetic piece for the abuses of Multinational Corporations, was featured prominently in the text. Clearly, that kind of rationalizing has to be pretty prominent in the way these FP schools operate – while it is clear from my point of view they are bloodsuckers (on me, my city, my students) they have their own PR and apologetics that they use to justify their existence (in true sophist tradition). DeGeorge is a former professor of mine, and those of us critical of him refer to this kind of rationalizing as "DeGeorging" something – which, as we know, one can be very well paid for (a PR employee at one of my schools is paid 400,000 (even more than DeGeorge himself!)

    Lederman, the guy who wrote the original article, said he was going to chat with me…I'd love to give him the scoop on what I've seen.

    Reply
  6. Pablo Zavala

    Just a minor correction to Tim's comment: the Frontline episode actually states that the University of Phoenix enrolls more than all the Ivy League schools and the University of California, not the University of Texas, system combined. According to their website (http://www.universityofcalifornia.edu/students/welcome.html), the UC system enrolls about 222,000 students, which is more than the UT system. The University of Phoenix, on the other hand, enrolls close to a half million students and is one of the world's largest "universities."

    I do agree though; it's a shame that the for-profit colleges prey on people's lack of opportunities and shove exorbitant loan amounts down their throats.

    Reply
  7. Aldo Antonelli

    With demand for higher education so high and public universities strapped for cash, these for profits are taking off big time. They survive the same way as sub-prime lenders, by pushing loans onto students that they won't be able to pay back. Except that student loans are guaranteed by the federal government. It's free money, no risk to the for profits. It's been big news here in Cal that Richard Blum, former Chair of UC's Board of Regents and current member of the Board (and also known as "Mr. Diane Feinstein") is heavily invested in Corinthian Colleges, and has pushed UC to invest in Corinthian as well. The conflict of interest could not be more glaring.

    However, some think that the bubble is about to burst, just like in the sub-prime case. In order to be eligible for the federal guarantee, the colleges must make sure that their students stay below a certain default rate on their loan. And these students are defaulting big time, because their degrees are not worth the paper they are printed on, and so they can't find a decent job. The students have been swindled. And without the federally-backed loans, the for-profit business model is dead in the water.

    In fact, the smart money is going short on the for profits (see, e.g., http://chronicle.com/article/Short-Sellers-Are-New-Foe-of/66289/).

    Reply
  8. mark lovas

    For two years at the start of the century, I taught Philosophy at an American university in central Europe. I can't say if it was explicitly for profit or not. I can say that I learned by hard experience that while the administration made a lot of noise about cracking down on plagiarism, when I found a student who had undoubtedly downloaded a few pages from the internet and turned them in as her own work, no punitive action followed. Gossip among "instructors" (as we were called) was that the administration did not want to do anything that might threaten tuition money.

    Recently I came across something I'd written at the time. In it I noted that we had been explicitly told not to discuss anything possibly controversial in the classroom–including religion and politics.

    I should add that while the institution calls itself a "university", it had some difficulty gaining accreditation from the local authorities. The objections were that too many instructors were only there temporarily, that instructors did not do research, and that the institution offered only one course of study (Business Management). This information was provided to new employees by the local top administrator at an orientation session. During the time I was there, these three problems did not go away, but the institution had been granted accreditation.

    Another curious feature of this institution was that some students took summer jobs in the United States to earn tuition money. So, once they had paid tuition the money returned to the US. This was about eight years ago, so I cannot say whether this practice continues today.

    (Keith, perhaps this only indirectly relates to your query, and would have been more directly relevant to an earlier discussion about US institutions abroad. I leave it to your discretion to judge its relevance.)

    Reply
  9. Dan Dennis

    The Economist recently had an article on for-profit colleges, entitled 'Monsters in the making?'

    http://www.economist.com/node/16643333?story_id=16643333

    Reply
  10. Reginald Williams

    When the title of the top administrator of your local ‘university’ is ‘manager’, this pretty much says it all. In all honesty, we need a new word for these positions: one that perfectly combines the sense of ‘manager’ and ‘principal’. For these hack ‘schools’ are a perfect amalgam of business at close to its worst and high school ‘education’.

    I could write on this topic for days, living in a city with about five of these lamentable institutions. But for one of countless examples, I know people with Master’s who have taken work at ‘Phoenix’ and been told to dumb down their courses because they otherwise wouldn’t be providing their ‘students’ with what they’re ‘paying for’. Sadly, this is pretty much true because students at these institutions are paying for a piece of paper that indicates little learning. But, of course, it is ridiculous to think that ‘students’ who’ve not even taken an intro course in a field should decide how someone with a graduate degree in the field should teach the subject. Thankfully we haven’t quite stooped as a society to having ‘hospitals of Phoenix’. If we did, the patients would be deciding the care that doctors provide. And if such patients were ‘Phoenix’ educated, I fear they would just be requesting more and more OxyContin.

    I personally recommend the creation of bumper stickers that read: ‘University of Feenicks Alumni’ and ‘My 8-year-old was student of the month at University of Phoenix’. Anyone serious about education should have such a sticker on his or her car. Such ‘universities’ need to be exposed for what they are.

    Reply
  11. Richard Baron

    Private, for-profit colleges are springing up in the UK too. Not surprisingly, they concentrate on vocational courses (law, accountancy, information technology and the like), and very few have degree-awarding powers. Another important point is that their students cannot, as a rule, use the taxpayer-backed student loan system. They may get loans from other sources, but there won't be a taxpayer guarantee. That takes away the incentive to hike fees and encourage students to take out loans that they will not repay.

    If you remove perverse financial incentives, and if you have a non-corrupt accreditation system to allocate degree-awarding powers, can there be any reason to object to for-profit colleges? I find it hard to see one. Yes, they may offer poor working conditions and sell poor-quality products, but so can any kind of business. If you don't like it, don't work there, or enrol there, and tell all your friends so they don't either. I don't think one could argue that because professors in not-for-profit universities (whether public or private) have academic freedom, time to do research, and so on, everyone teaching at the same level should have the same.

    There is a point to be made about quality, of course. On average, you get better tuition from professors who are active in research and who do have academic freedom. And professors like that keep their discipline alive, rather than letting it become a fossil in which future generations will take only an antiquarian interest. But I don't think that those points would justify placing any obstacles in the way of the free market in educational services.

    Reply
  12. K.C. Hamann

    It's sad to see how ignorant people are in regards to the value proposition for-profits like Apollo provide. The Frontline piece was a slanderous mix of selective facts that left any viewer previously unfamiliar with the industry with a warped view of the value for-profits provide to our society.

    In regards to Aldo Anotonelli's comment that the students have been swindled, consider the fact that close to a third of the students who enroll at for-profits do so based on referrals from current and former students. Clearly a fair portion of students have a good experience. Also, Aldo mentions that the degrees are, "not worth the paper they are printed on." Either Aldo doesn't know much about this industry or can't accept facts.

    The National Center for Education Statistics (NCES) conducted a longitudinal study that followed 19,000 student from both public and private (private being for-profit) schools over the course of five years. The study is called the Beginning Post-Secondary survey and you can look it up if you'd like. The survey found that students who enrolled in 2-year (or shorter) institutions realized average annual income gains of $7,900 at for-profits and only $7,300 at public schools. Do you recognize the increase in life-time earnings that equates to? Clearly the marketplace values these degrees.

    Furthermore, in an August 2009 report on for-profits published by the Government Accountability Office, the GAO found default rates correlate strongest to the demographics of the borrower, specifically older students who are independent, in a low income bracket, who grew up in a home where the parents didn't go to college. These are the students who attend for-profits, and they do so because of the flexibility for-profits provide (weekly starts, night and weekend classes, on-line learning, etc.). Many of these students have responsibilities outside of school, i.e. other jobs, children, and many are single mothers. Traditional schools and community colleges can't meet their needs so if they want an education, for-profits are their only choice.(Note California estimates their community colleges turned away over 140,000 students last year, so there simply isn't enough capacity, and for-profits provide the seats demanded by this underserved population.)

    Aldo, do you advocate we say, "Tough luck. We aren't going to provide you with a loan, a loan that students at traditional and community colleges have access to, because you are at high risk of defaulting?" We could do that, but the actual nominal value of the defaults is minimal and in some cases taxpayers earn a return on the investment, so doing that wouldn't make any sense.

    In a July 26, 2010 report published by The Department of Education, the Department found that based on historical collections, the net present value of defaulted loans in 2009 was $1 billion. If you add up the taxes paid by the following publicly traded for-profits (LINC, BPI, ESI, CECO, APOL, EDMC, UTI, DV, CAST, APEI, CPLA, STRA, and COCO), you will find they paid $1,084.9 billion in taxes in 2009, and they are only a handful of for-profits in our country! Therefore, taxpayers not only gained $84.9 million dollars just based on the taxes these thirteen institutions paid, but they also improved our society by education hundreds of thousands of people, people who's children will be raised in homes of parents with a post-secondary education, and therefore be at lower risk of defaulting when they go to school.

    The existence of for-profits improve the lives of thousands of people every year, and improve our society as a whole. It is wrong to bash an industry you know nothing about and which provides educational access to hundreds of thousands of disadvantaged and minority citizens.

    Reply
  13. curious

    It appears that these four profit colleges are doing what community colleges do, but doing it very very badly.

    So why do students go to them, instead of the local CC?

    Reply
  14. Tim

    Funny, K.C. Hamann, I seem to remember the "we were just trying to give poor people the loans they need" line from somewhere. (Remember, you can always blame it on them when this whole thing blows up.)

    Also, the most damning bits of the Frontline episode that I recall weren't the facts they provided, but the interviews with actual and former employees of the for-profits. Maybe those were selective too?

    Also, what about the other two-thirds of students? Care to explain how you "recruit" them?

    Finally, what is your role in all this? Are you an educator? Professional spokesman? Do you make a profit from any of these places?

    I'll leave it to others to discuss the numbers you provide (billions? millions? trillions?).

    Reply
  15. Aldo Antonelli

    In reply to K.C. Hamann: I certainly agree that there is room, and a role, in our system of higher education for the for-profits, and I am aware that they are not all the same, and many deliver a useful product to their customers.

    But I do object to the business model that so heavily relies on federally guaranteed loans, and the distorted incentives that this brings with it. There is certainly nothing wrong in delivering a product in order to obtain a profit, but to the extent that there is risk in the enterprise, they should be doing so with their own money, not the taxpayer's.

    The fact that one third of students enroll based on referrals proves nothing, as you said, these institutions serve underprivileged and non-traditional students. At a time when public institutions are seeing their enrollment capacity slashed by declining budgets, it's natural that people start looking around for any alternative, from any source they available.

    I most certainly do not advocate cutting off access to loans to students at for profits. But if these institutions are going to use public money in this way, there should quality controls, accreditation board oversight, etc. And the high default rates need to be explained. It seems plausible default rates correlate with demographics, but is the demographics at for-profits different than at the CC down the street? Probably not.

    Reply
  16. Anon

    Lets just see who is selectively using facts/statistics here. Consider a student in a professional field like nursing.

    Tuition in the nursing field at University of Phoenix is $365 per credit hour. Tuition at my local community college is $83 per credit hour. Assuming 68 credit hours for the completion of an associate’s degree, that comes to $24,820 at the for-profit and $5644 at the public institution. Assuming others fees are the same, that makes the difference in cost $19,176. K. C. Hamann claims that graduates of for-profit institutions have, on average, a $600 annual salary advantage on graduates of public institutions. If the students took out no loans and paid cash on the barrel, it would still take 31.96 years of working to make up the difference in initial cost of the education.

    Federal Direct Loans have a fixed APR of 6.8% for graduate and professional degrees. Assuming a 15 year average repayment, the for-profit graduate with Federal Direct Loans will pay $14,838.17 in interest over that period of time while the graduate of the public will pay $3,374.16. That makes the difference in cost for such a student $30,640.01. It will take the for-profit graduate over 51 years in the workforce to make up for this difference in cost with her $600 annual salary advantage.

    K. C. was right. The facts don’t lie on this one. Lets just make sure they are all on the table.

    Reply
  17. JT

    K.C. Hamann says it is a fact “that close to a third of the students who enroll at for-profits do so based on referrals from current and former students.” S/he then erroneously assumes that such a fact (if it is even a fact at all) indicates that the referring students have had good experiences at their for-profit colleges. But what Hamann neglects to mention is that many for-profit colleges operate student referral programs. These schools offer everything from money to jewelry for referrals. At UOP, a referral can even score you a small appliance.

    http://www.thephoenixexpress.com/2009/12/referral-program/

    These same schools then turn around and boast about their high referral rates in their marketing literature.

    Reply
  18. Eric

    JT's point about the referral program is excellent, but even assuming that for-profit schools don't offer a referral bonus, I wonder how a referral could even be indicative of the quality of the education provided at the school. The students who attend for profit schools tend to be students who do not have as many academic options as others, for various reasons, and those students tend to have similar peer groups. If a low-achieving student 'gets in' to a for-profit school (are students ever denied entry to for-profit schools, by the way?), chances are that she will recommend it simply because it's the best (or only!) available option for similar members of her peer group.

    I mentioned this discussion, in passing, to a friend who works in Human Resources at a large urban hospital. Her experience (and it is merely anecdotal, but she hires hundreds of new nurses each year) is the students who graduate from for-profit schools are considerably less prepared ('woefully' was the term she used) than those who graduate with an Associate's Degree in Nursing from a 2-year college.

    Reply
  19. Maureen

    "Finally, what is your role in all this? Are you an educator? Professional spokesman? Do you make a profit from any of these places?"

    (*Pssst* Tim: Google K. C. Hamann and quickly you'll be lead to sites like these http://westport.patch.com/listings/post-road-capital-management and http://www.northstarpartnersinc.com/ . Of course, it could be a different K.C. Hamann. You know how it is.)

    Reply
  20. anonymous

    "The National Center for Education Statistics (NCES) conducted a longitudinal study that followed 19,000 student from both public and private (private being for-profit) schools over the course of five years. The study is called the Beginning Post-Secondary survey and you can look it up if you'd like."

    There are different kinds of private schools in the study, not all of which are for-profit. (See, e.g., the page numbered 1 in this document: http://nces.ed.gov/pubs2007/2007164rev.pdf if you like.) I can't find the numbers K.C. Hamann mentions, but I'm willing to bet he's including private but not-for-profit 2 year schools, e.g., junior colleges, among private schools, and probably inflating the numbers in favor of for-profits by doing that.

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