The Leading Edge of Corporatization in Higher Ed: For-Profit Colleges

A number of years ago in a meeting with Benno Schmidt, former President of Yale University and current Chair of the City University of New York Board of Trustees, I, as a member of the executive committee of the CUNY Faculty Senate, argued that a certain decision was not wise because it moved the university in a corporate direction. Chair Schmidt's answer, "Oh, Susan, if only CUNY could be more corporate."

Since the spectacular increase in the number of students in for-profit colleges over the last ten years, student debt has skyrocketed (student loan debt exceeded $1 trillion in 2011), the dropout rate at for-profits has increased—the 6-year completion rate for B.A. students at Phoenix University is 9% (Howard Hotson, "Short Cuts," London Review of Books, June 2, 2011), and faculty autonomy in higher education has decreased. Many more faculty serve at the will of their employers, not just at for-profits, but at public and private colleges as well: in other words, without tenure, job security, shared governance, unions, or academic freedom. Increasingly curriculum decisions, driven by the market, are made by administrations and implemented by hired teachers. In for-profit colleges faculty are told that they are the servants of the students, who are told that they rule because they cause profit to be made.

The primary purpose of for-profit colleges is to make money for partners (in a privately held company) or for shareholders (in a publicly held corporation). Right now, they do that chiefly by securing federal grants or loans for student tuition, funded by taxpayers' money, and promising their indebted students quick college degrees and good jobs. Education, if it occurs, is a by-product and not the reason for the existence of for-profit colleges ("Education Is the Last Thing on Their Minds," New York Times Editorial, May 5, 2011). Eighty-seven percent of revenue for the 14 largest for-profit colleges is from the GI Bill, Pell Grants, Tuition Assistance Program, and other government-backed loans paid for by taxpayers. One-third of the GI Bill goes to for-profits. This is a disproportionate share of federal student aid, given that for-profits enroll only 12% of college students (Joe Nocera, "How to Improve on an F," New York Times Magazine, September 16, 2011). GI Bill loans are especially sought after because they are not part of Title IV education funds, and (according to the 1988 version of the Higher Education Act) for-profit colleges must obtain at least 10 % of their revenue from sources other than Title IV education funds. Hence there is the scramble to recruit veterans, whatever their readiness for college.

According to the College Board, full-time annual tuition at for-profit colleges in 2010 averaged about $14,000 per student. Tuition, however, varies widely, depending on the kind of program, with 2-year associate degrees in fields like technology and computers charging roughly $40,000 (Peter S. Goodman, "In Hard Times, Lured into Trade School and Debt," New York Times, March 13, 2010). In comparison average tuition not including room and board at a public 4-year college in 2011-2012 was $16,140, and $36,993 at a private 4-year college (Almanac of Higher Education 2011-2012). The average figure at public community colleges is about $3700, although it is increasing rapidly.

But for-profits spend much less money per student than do public universities: about $3,069 at the University of Phoenix, for instance, compared to an average of $7,534 at public and $15,215 at private universities (Christopher R. Beha, "Leveling the Field," Harper's, October 2011).

To look at it from another angle, a very large share of the budget of an average non-profit goes to the recruitment of students. Bridgepoint Education, one of the largest, spends $2,700 on average, to recruit a student, and just $700 to educate him or her; profits per student at Bridgepoint are $1,500 (Tamar Lewin, "Hearing Sees Financial Success and Education Failures of For-Profit College," New York...