Assessing for-profit higher education: a good business proposition?

One of the key developments over recent years in the higher education landscape has been the phenomenal growth of for-profit higher education. It is important to distinguish between private universities and for-profit institutions: private not-for-profit universities include some of the most respected names globally, such as Harvard, Yale, Stanford and the other Ivy League institutions. While for-profit institutions have not tended to appear in global rankings, they have had a big impact in the education scene more generally. Examples include the online provider University of Phoenix; the new venture announced recently in England by philosopher Anthony Grayling; and in Ireland institutions like Griffith College and the Dublin Business School.

The latter institution – the Dublin Business School – is now the largest private provider of higher education in Ireland, and has student numbers comparable with some of the universities. It is interesting for another reason: it is a subsidiary of Kaplan Inc, itself a subsidiary of the Washington Post newspaper. Kaplan, with its flagship Kaplan University, has become major source of revenue for the Washington Post, and in fact has provided by far the largest proportion of the company’s profits. With a set of values that would be seen as compatible with some traditional providers of higher education, its performance might be said to have suggested that for-profit higher education is a good business proposition. Indeed the idea that there is a sound public policy basis both in the business model and in the educational mission of private for-profit higher education has clearly been motivating the British government in its recent policy pronouncements.

If for-profit providers become major players in higher education, this could change the face of the sector, including its publicly funded parts. One possible consequence could be to remove research activity from all but a handful of institutions. But then again, that is based on the assumption that the business model is a good one; and here the jury may actually still be out. The US government has recently decided to introduce a tighter regulatory framework for such institutions, and one immediate consequence of this has been a fairly dramatic drop in enrolments. Kaplan has recently announced a major drop in profits – by 67 per cent – as a result.

Maybe the question needs to be answered now what kind of business, and then what kind of educational organisation, for-profit institutions are intending to be. Some of them have a distinctly swashbuckling approach, while others appear to attach more importance to educational and scholarly values. Some need to be tested to see whether their statements of values is reflected in pedagogical and scholarship practice.

For myself, I find it hard to believe that a profit model, in which corporate directors are bound by law to consider the financial interests of shareholders before anything else, is appropriate in higher education.  But I am interested in the discussion.

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11 Comments on “Assessing for-profit higher education: a good business proposition?”

  1. Jilly Says:

    Heres something which has been puzzling me for a while: DBS claims on its website that it has over 9000 students, which as you say makes it as large as some of our smaller universities. And yet their physical structure/s appear to be about the size of an IT with approx. 2000 students, and at a guess about 10% the size of even the smallest university campus. So where do they put all those students? How do they teach them all in buildings that size? It does raise some questions about day-to-day business at DBS.

    • Well, they do have several premises around the city, including a stretch along the Grand Canal in what used to be Portobello College. But I agree that even when you add all that together it is small compared with universities with similar student numbers. But I know some members of staff of DBS are occasional readers here, and may be able to elaborate.

      • Perry Share Says:

        As far as I know when DBS bought Portobello College it shifted its operations into Aungier Street/Sth Great George’s Street. The old Portobello College site (the former canal hotel and neighbouring buildings) have been vacant for a time but have recently (June 2011) reportedly been sold to the Rayat Bahra Group, a major Indian private education provider. So it will be interesting to see what happens – or if anyone else out there knows what is happening.

  2. Don Says:

    The word ‘profit’ is obviously the key here, so it really depends on what is meant by profit, and Ferdinand nails it in his last paragraph. The ‘profit’ is a financial term for the direct benefit of shareholders, and in this education scenario profit is to be despised. However, let’s not get carried away by the apparent noble standing of the US Ivy League unis either (and OxBridge). The term ‘not-for-profit’ is somewhat misleading here. These unis all have substantial endowments (aka investments) in the capitalist economy and someone is making money, somewhere… If the unis make and keep (reinvest) their profits then is that a wise and more noble profit methodology for them? Profit is not a dirty word, but it can get dirty when education/knowledge becomes merely a marketable commodity, thus benefitting the few and disenfranchising the many….

  3. “For myself, I find it hard to believe that a profit model, in which corporate directors are bound by law to consider the financial interests of shareholders before anything else, is appropriate in higher education. But I am interested in the discussion.”

    Why do you find this hard to believe? Remember that the ideal of competition is based on the idea that the provider who does the best for the customer will survive and this will drive improvements in quality and price. Why should this not work in education? In addition, it is admitted that in selling sophisticated products to the public they should be protected by good regulation. Is this not possible?

    Are the egotistical motivations of professors who want to be published a better driver for undergraduate education?

    Why should undergraduate education subsidise research?

    Let’s stop criticising without evidence. Why don’t we just suck it and see. The system we have is so expensive it is denying people education. Let the dept. of education contract out some of what is provided by the public institutions and see if can be provided more cheaply and at a similar quality (assuming they are competent at assessing the quality). If there are problems, let’s see if we can fix them and if we can’t then we’ll know it doesn’t work.

    • Wendymr Says:

      Why should it not work in education? Well, look at the evidence.

      In North America, there are many private for-profit third-level education institutes. Some of them are career colleges and have franchises all over the continent: Medix, Trios and deVry are among their numbers. They offer vocational programs in health, business and information technology in particular, and focus only on taught courses, not research. If you do find student reviews of these colleges anywhere online – hard to find, as the colleges aggressively search these out and have them deleted – the reviews are almost all negative, based on teaching standards, perceptions of false advertising and overall student experience. For the most part, in Ontario, the qualifications offered in these colleges are not respected by employers, and very few are recognised by regulatory bodies where the relevant occupation is regulated. Many graduates end up in minimum-wage jobs as opposed to the occupations they hoped to enter.

      As for the University of Phoenix, I only have anecdotal evidence to offer, but I know people who enrolled in degree programs at that institution and eventually withdrew due to frustration at poor teaching standards – and then attempted to transfer credits to other higher education institutions. One individual was offered less than half the credits she had accumulated in order to transfer into a similar program at a state university.

      When for-profit educational institutions start showing the same standards of student experience, teaching quality and employment outcomes as the non-profit sector, then I’ll agree that for-profit can work in education. Until then, not so much.

  4. It sounds like you are describing a poorly regulated industry. We all know what happened with poor regulation in the banking sector. You also refer to unregulated colleges.In regards to acceptance of credits, US academics tell me that in their public universities there are difficulties accepting credits from other campuses not to mention other public universities.

    As for the quality of the learning experience at public institutions, I went to one and I did not notice it. In fact the appalling quality of teaching in that institution has coloured my views on public education since them (I am a public educator). Add to this the waste that I witness first-hand within the system and I’m not sure that we give the public the value for money they deserve.

    • Wendymr Says:

      If you’re replying to me – it’s not clear as your post is not in the thread – none of the colleges I refer to is unregulated. In Ontario, career colleges are licensed by the provincial Ministry for Training, Colleges and Universities.

      Poor regulation? Certainly. And these colleges charge more than twice the amount of a publicly-funded college for their programs, and students end up with a diploma employers have no faith in, and in many cases (regulated occupations such as social service worker, early childhood educator) doesn’t get them the licence to practice. Yet the colleges keep offering the programs, in full knowledge that graduates’ credentials won’t be recognised. In whose interests is this?

  5. Private colleges tend to have a very large proportion of part-time students, some doing very short courses. I would suspect that if the numbers were calculated as Full-time Equivalent (FTE) they would not be so high.

    An article on a “LawProf” blogger in the US claiming anonymously from the inside that law schools are scams. There are counter claims, of course, but is it partially true? And more importantly what can be done to check whether or not it is true in our higher education and to change it if it is.

  7. Aodh MacHaicead Says:

    Education, like commerce, is ultimately driven by the need and desire of the individual. Given the proliferation of private education companies across the world, it is clear that there is an unfulfilled demand for third-level education. If this demand cannot be met by traditional means, and the sector is regulated, whats the problem? As I see it, the multiple barriers to entry in Irish universities create such a demand. These barriers to entry are driven by cost, expectations and an archaic system of achievement that fails to prepare students for the third-level.

    If universities are not willing to look at themselves as institutions that prepare people to live, work and survive in an faster, more connected social and economic environment, perhaps it is time for a new model.

    Companies like Kaplan and UP may be maligned, but look at their students. Largely immigrants, older age profile, mainly studying higher end services that add to their skill base. If the west is survive as a service based economy, it is vital that every strand of society understands the need to improve its skill base and open up to new means of learning, working, and yes, making profit.

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