A Philosopher's Blog

Philosophical Essays on Many Subjects

For-profit school

For Profit Colleges

by 7 Comments

While the ideal of higher education is supposed to be above the concerns of mere money, there is nothing inherently wrong with for-profit colleges. Unless, of course, there is something inherently wrong with for-profit operations in general. As such, it should not be uncritically assumed that a for-profit college must be bad, ripping students off, or providing useless degrees.  That said, the poor reputation of the for-profit colleges is well earned.

One rather tempting argument against for-profit colleges is that by being for-profit they must always charge students more or offer less than comparable non-profit colleges.  After all, as the argument would go, a for-profit college would need to do all that a non-profit does and still make a profit. This would need to be done by charging more or offering less for the same money. However, this need not be the case.

Non-profit and public colleges are generally top-heavy in terms of administrators and administrative salaries. They also often expend considerable funds for amenities, sports teams and such. These “bloaters” are things that a well-run for-profit college could cut while still offering the core service of a college, namely education. For students who do not want the extras or who would rather not help fund a massive administration, this can be a win-win scenario: the student gets the education they want for less than they would pay elsewhere while the for-profit makes a profit by being efficient with its money. This is, obviously enough, the dreamy ideal of capitalism.

Sadly, the actual world sees this dream often transformed into a nightmare: for profit schools, in general, turn out to be as the Marxists that supposedly rule academia would expect: predatory and terrible. One main reason for this is that these entities are focused on making as much profit as possible and this consistently leads to the bad behavior endemic to the for-profit system. While regulation is supposed to keep the bad behavior in check, Betsy DeVos has curtailed oversight of these colleges. As a specific example, her department has stopped cooperating with New Jersey on the fraudulent activities of for-profit colleges. If the state neglects to check bad behavior, such as crossing borders illegally or welfare fraud, then people are limited only by their own values. While that can work in some cases, it is generally a bad idea to leave important matters up to the individual conscience. For example, it would be foolish for the state to just hand out welfare by simply trusting people and never verifying their claims. Likewise, it would be foolish to allow for-profit colleges to do as they wish without proper oversight.

Embed from Getty Images

As should be expected, I have consistently been against these terrible for-profit colleges. I also extend my opposition to terrible non-profits and public colleges: what I am against is the terrible part, not the profit part. As with much bad behavior that harms others, the most plausible solution is to have and enforce laws against that bad behavior. As noted above, those who are concerned about welfare fraud are not content to rely on the conscience of the recipients nor are they willing to simply allow an invisible hand to ensure that things work out properly. They, obviously enough, favor the creation and enforcement of laws to prevent people from committing this fraud. By parity of reasoning, for-profit colleges cannot be expected to operate virtuously with only the conscience of their owners as their guide. The invisible hand can also not be counted on to ensure that they do not engage in fraud and other misdeeds. What is needed, obviously enough, is the enforcement of the laws designed to protect taxpayers and students from being defrauded by the unscrupulous.

It could be argued that while the invisible hand and conscience cannot work in the case of, for example, welfare cheats, they work just fine in the context of business. In the case of for-profit schools, one might argue, they will fail if they do not behave well and the free market will sort things out. The easy and obvious reply is to agree that the bad colleges do fail, the problem is that they do a great deal of damage to the students and taxpayers in the process. This is a bit like arguing that society in general does not need laws, since eventually vigilantes might take care of any thieves, murderers and other threats. As Hobbes noted, the state of nature does not work terribly well.

This is not to say that I believe for-profits should be strangled by red-tape. Rather, the laws and enforcement need to focus on preventing harms like fraud. If a business model cannot succeed without including fraud and other misdeeds, then there is clearly a problem with that model.

 

My Amazon Author Page

My Paizo Page

My DriveThru RPG Page

My Dungeon Masters Guild Page

Follow Me on Twitter

Everest College & For Profit Education

by 3 Comments

English: Table 3 from the August 4, 2010 GAO r...
(Photo credit: Wikipedia)

One not uncommon article of faith is that the for-profit private sector can always do things better and cheaper than the public sector. This same faith based approach has been applied by some to education, however the evidence shows that the for-profit schools have consistently been worse and more expensive than public colleges and universities. These schools have also fared poorly in comparison with the traditional private institutions.

While it might be tempting for some to launch an ad hominem attack against me on the grounds that I teach at a public university, such an attack would have no logical merit. While my position might conceivably bias me, the fact is that the for-profit schools are no threat to my employment. My main concern is not with the fact that they are for-profit (I am fine with making money-after all, I go to work and sell my books to get money and the more the better). Rather, what concerns me is the fact that they cost so much more than public and private schools and have consistently done a poor job in terms of education and job placement. That is, I am criticizing them because they are generally doing a bad job at being colleges. They are, however, generally making money for the shareholders-at the expense of the students and the tax-payers.

Everest College, which was located in Milwaukee before it closed, provides another example of the unfortunate reality of many for-profit colleges.  While the college was strongly opposed, it opened for business in October 2010 and then its parent company, Corinthian, said it was closing the school down.  The school had a rather dismal record, which helps explain it being shut down.

First, about half of the students dropped out. Second, the school had placed only 25% of its graduates into jobs. In comparison, the Wisconsin Technical College System has a 88% job placement rate, thus providing yet another example of how the public college system is still superior to the for-profit schools in regards to education. Private colleges also do quite well in placement-perhaps because they are educational institutions rather than for-profit money making systems.

One common claim is that the for-profit sector can deliver better services at lower prices. As has been noted, the for-profit schools have a rather poor track record in terms of the quality of services. In terms of cost, Everest was generally even more expensive than usual (for-profits typically charge an average of four times as much as public community colleges).  For example, the Milwaukee Area Technical College tuition for a dental assistant is $2,102 wile Everest tuition was $15,803. A paralegal would pay $10,216 at MATC while paying $33,600 at Everest. a medical assistant would pay $4.335 at MATC and $18,841 at Everest.  The medical administrative assistant programs had the closest tuition costs: MATC charged $11,145 while Everest charged $15,803.

Charging more for inferior results is certainly not anything to praise.

Given the importance of having a degree in getting a job (which can be considered a problem) and the value of education, I am certainly for expanding the available education options. I would certainly like to see high quality education being offered at affordable prices and I think that the private sector could have an important role to play here (I certainly would not mind being paid like a corporate executive). Unfortunately, the current for-profit system delivers far less at a much higher cost than the public and private education systems. As such, it would simply be a bad business decision for a student to chose the typical for-profit school over a public or traditional private institution.

Enhanced by Zemanta

Full Sail for Profit

by 14 Comments

Money
Money (Photo credit: 401(K) 2012)

Across the United States, public education has been under consistent assault. K-20 budgets have been cut, teachers’ unions have been attacked, political agendas have been pushed onto education, and educators have been vilified. One reason for this assault is to open up the education “market” to allow opportunities for profit. As such, the rise of for-profit schools is hardly surprising.

It is important to distinguish between the traditional private school, such as Marietta College, and the for-profit schools. While for-profit schools are privately owned, they are operated rather differently than the traditional private schools. The most obvious difference is that their main focus is profit.

There is, of course, the beloved myth that the profit motivated private sector can out-perform the allegedly inefficient and bloated public sector. However, an examination of the facts shows that when it comes to education, the for-profit schools often stack up poorly against public schools (and traditional private schools).

Thanks to Mitt Romney, one for-profit school, Full Sail University, has become somewhat well known. While Romney praised this Florida school (whose chief executive is a major campaign contributor) while in New Hampshire, a look at the facts will show that the school and other for-profits are not a good choice for students. For example, people who graduated from some Full Sail programs are defaulting on their college loans at a rate of up to 60-75%. The government has pushed for for-profit schools to achieve a graduate loan repayment rate of 35%, which is hardly an onerous requirement. As for why Full Sail graduates have a relatively poor repayment percentage, the average debt of a graduate is 300% to 800% of her income. To be fair to Full Sail, students at public schools are also graduating with significant debt, which provides an excellent reason to be critical of the cost of education in general.

The Obama administration has attempted to set regulations for repayment benchmarks and income-to-debt ratios for for-profit schools. Schools that could not meet these would no longer be eligible for federal funds. However, these regulations were struck down in July of 2012. Interestingly enough, public schools are often being subject to intense scrutiny from state legislatures. For example, Florida public universities have gotten considerable attention from Governor Rick Scott and the legislature. The professed reason is, of course, to ensure that education funds are being well spent. It is, of course, a point of concern that public schools are being subject to intense scrutiny while for-profit schools seem to be held to standards that are rather lower.

One obvious reply is that for-profit schools are privately owned and hence should not be subject to such government regulation. After all, one might argue, the market should decide (via the invisible hand) what education should cost and what jobs should pay. As such, if students have debts that far exceed their income, then that is just how the market works.

While this does have some appeal, the easy and obvious response is that these for-profit schools get over $30 billion a year in taxpayer funds. Interestingly, the 15 publicly traded for-profit college companies get 86% of their revenues from public money. This includes federal financial aid, the Post-9/11 GI Bill and the Department of Defense Tuition Assistance money. As such, these private companies are mostly public funded. This would certainly serve to justify the right of the state to regulate these schools. After all, they are effectively public funded institutions. This also certainly helps explain the attack on public education—the for-profits are competing with public universities for the same money and every dollar that goes to a public school is a dollar that a for-profit school does not get. Naturally, the for-profit schools also compete with traditional private schools. However, the traditional private schools are far less vulnerable to the machinations of those serving the interests of those who seek a profit focused education system.

There is also a myth that the private sector can provide better services at a lower cost. In the case of the for-profit schools, their B.A. degrees average 19% more than the cost of a B.A. at a top public university. The for-profit schools also compare unfavorably in the area of 2 year degrees—they charge 400% more than public non-profit schools. Given that the cost of public education has increased significantly (in part because of budget cuts to these schools), the for-profit schools are certainly very expensive.

Because of the greater cost, the public money that goes to for-profits yields less return than the same money spent on a public institution. Ironically, while public education has been accused of being costly, it is a far better deal than a for-profit education. Interestingly, if free-market forces were actually operating as they are alleged to operate, the for-profit schools should go out of business, given that they cost considerably more than public education. Of course, the mythical free-market is not operating here.

It might be replied that for-profit schools charge more but that they are providing more for the money relative to public schools. However, a look at how the money going into for-profit schools will reveal that this does not seem to be the case.

Based on a 2009 study of 30 for-profit companies, 22.4% of their income goes to marketing, advertising, recruiting and admission staffing. 19.4% goes to profit, which is rather impressive. In contrast, 17.7% goes to actual instruction. As such, the schools charge a great deal more than public schools and spend a great deal less on actual education. This would certainly indicate that they are not providing students with a good value for their money.

While top public university administrators are well paid (for example, the former president of Florida A&M University made $330,000 a year plus a guaranteed bonus), the CEOs of the for-profit schools have an average salary of $7.3 million, despite the fact that by objective measures they deliver an inferior product at a higher price than public schools.

The above facts show a fundamental problem in the United States. Our education system is under concerted attack with the clear purpose of redistributing public funds from high quality public and private schools to the objectively inferior for-profit schools. It is indeed ironic that Obama was attacked in September, 2012 for his 1998 remarks about redistribution. After all, the for-profit schools are the recipients of a $30 billion dollar redistribution. It is also ironic that Mitt Romney, the man who accused the 47% of Americans who do not pay taxes of being irresponsible dependents of the state has praised the for-profit schools. After all, they are growing fat on public money.

This reality is concealed under deceitful rhetoric that is used to mislead the public and garner support for what is actually an attack on the bedrock of a democratic state, namely an effective system of affordable and accessible public education.

Ironically, the way to counter the problems presented by the for-profit schools is to apply conservative principles to them. To specific, they need to be removed from public welfare, they need to be held responsible, and they need to be forced to compete in a free market (one in which their allies do not use the state to impede their competition). This situation nicely exposes the lie of some conservatives: they are exactly what they profess to hate, only on a much bigger scale.

My Amazon author page.

Enhanced by Zemanta

Educating for Profit

by 20 Comments

Official photo of General David Howell Petraeu...
Image via Wikipedia

In the face of the economic mess, American states and the federal government have been cutting education spending. In some cases, this is no doubt a matter of legitimate necessity. In other cases the economic woes have been used as a cover to “justify” certain policy changes. Regardless of the cause, American public schools are experiencing serious budget woes. Interestingly, college enrollment is up and this makes things even worse since schools must do ever more with ever less money for the actual process of education. As might be suspected, the administrative side of most schools is generally doing great in terms of numbers employed and salaries.

In contrast to the woeful state of public funded schools, the new for-profit schools have been doing quite well. For example, 20 for-profit schools saw their income from military benefits alone (acquired by taking military personnel as students) increase 683% over four years (from $66 million to $521 million). These for-profit schools also get a significant percentage of their income from public money, namely federal student aid.

Given that for-profit schools are making profits off public funding, one might wonder why public schools are suffering budget cuts and are thus less able to serve the public good by providing high quality education to students. After all, it does not seem to make any sense to funnel public money away from public institutions so that for-profit schools can make a profit at the expense of taxpayers.

Of course, one can try to counter this sort of concern by the stock mantra of the private sector proponents: the private sector is better than the public sector. That is, the for-profit schools are doing a better job and hence it makes more sense to turn public dollars into private profits rather than turning public dollars into public education.

If the for-profit schools were doing a better job, this would make at least some sense. After all, if the goal is to get the most education bang for the public buck and private schools delivered a bigger bang, then perhaps they should get the bucks. However, this is not the case. The average graduation rate for the for-profits is around 28% and this is about half that of the nation average. The big state schools often have excellent graduation rates. Also of concern are the facts that those who graduate from the for-profit schools seem to have a much harder time securing employment and graduate with far more debt than students at traditional schools (half of all student loan defaults are from students who attended for-profit schools). As such, the for-profit schools cannot claim that they are providing a better return on public dollars than public schools. In fact, they are doing far worse.

The United States congress recently focused its attention on the severe problems with the for-profit schools. However, intense lobbying on the part of the for-profits succeeded in watering down legislation intended to make such schools more accountable for their effectiveness in order to continue to siphon public money into their coffers. This has apparently been a bi-partisan effort with Republicans and Democrats answering the call of the lobbyists.

One particular egregious practice of the for-profits has been targeting  military veterans. Holly Petraeus, wife of General David Petraeus, has written that veterans are “under siege” by the for-profit colleges. These colleges have even been accused of targeting veterans who have brain injuries, which is particularly reprehensible.

Veterans are a very desirable commodity for the for-profits. As noted above, there is a lot of money available from military benefits and these can spell major profits for schools. More importantly, there is a “90/10” rule for these schools: at least 10% of the revenue for a for-profit must not come from federal financial aid funds. Coincidentally, military benefits do not count as federal financial aid funds, so this money can count as the 10%. This entails that for every military student enrolled by a for-profit, they can have 9 other students who are paying 100% using federal funds. In short, with the right number of military students, a for-profit can get 100% of its revenue from federal funds.

This, as might be imagined, bodes ill for higher education in America. First, federal funds will continue to be diverted from public education to the for-profits. This means that the public schools will continue to suffer. To give a concrete example, enrollment at my university has increased significantly while our budget has dropped significantly. Faculty salaries have stagnated, class sizes have increased dramatically, financial aid has been significantly reduced, and so on. In short, public schools such as my own will see underpaid faculty teaching oversize classes packed with students who often must struggle to pay for their education. Meanwhile, the politically connected for-profits will be making profits on public dollars. Second, while a for-profit education need not be inferior to a traditional public or private college education, it (as a matter of actual fact) has been markedly inferior in terms of graduation rates, job placement and the debt students graduate with. As such, it seems reasonable to conclude that federal funding is being misdirected in ways that are not conducive to providing students with the best education, the best chance of graduating, the best chance of getting a job, and the lowest debt upon graduation.

Unfortunately, the for-profit schools for profit model means that they have plenty of money for lobbying and hence they seem to have been able to get their way in Washington. As such, it seems likely that education will continue to decline in the United States. But, at least some folks (including lobbyists and politicians) will be making some sweet profits. That is what really matters, right?

Enhanced by Zemanta
%d bloggers like this: