Enrollment in for-profit schools—like The Art Institutes and University of Phoenix—has skyrocketed in the past ten years, growing by 21 percent from 2008 to 2009 alone. The increase in popularity and increased competition with traditional tax-funded universities has gotten a lot of attention from politicians quick to call for regulation. But is the extra attention on for profit colleges warranted, or is it an attack on both capitalism and the only higher educational opportunity for the disadvantaged?
Last year, following an error-laden GAO report, Congress and the Obama administration began the witch-hunt by endorsing a series of regulations on student lending practices that apply only to for-profit schools. Among the proposed regulations is one that would assess the likelihood that graduates will be gainfully employed and able to repay debt. While the exact language of this regulation is forthcoming, it carries the very real threat of removing for-profit colleges from loan eligibility; and making college-level programs completely unaffordable to the populations in the most trouble.
Government officials seem to have missed the memo on for profit colleges. While some for-profit institutions compete in the same space with direct tax-funded traditional schools, most do not. Programs are often designed for full-time employees, disadvantaged students, or students unlikely to find a home in the state-sponsored schools. According to the Government Accountability Office, the average for-profit higher education student has a household income at just 60.1-percent of his or her peer in public college.
Minority students at for-profit colleges are nearly 3 times more likely to graduate than their peers in traditional schools. The Reverend Jesse Jackson argues that discriminating against for-profit colleges is discrimination of a different sort as well. “The department’s proposed approach will hinder the access of minority students to higher education,” pleaded Jackson, “and will make it even more difficult to realize President (Barack) Obama’s goal of leading the world in the percentage of college graduates by 2020.”
While loan default rates are higher among for-profit colleges, traditional non-profit colleges and universities put a much greater strain on taxpayers. These public universities subsidize their operating costs, and student’s tuition, with grants from local, state, and federal government. The average traditional college receives almost $20,000 in subsidies per student that are not afforded to for-profit students. Politicians complain about marginally higher loan default rates in for-profit colleges, but the public never hears about the billions of dollars simply given away to public universities.
If the shake-down of for-profit schools is really rooted in economic reality, perhaps it should consider applying the same new regulations to all school lending. Research from the Center for College Affordability and Productivity finds for-profits received, on average, just “$11,130 in revenues per student in 2008–2009, while public universities collected $18,922 per student and private nonprofit colleges received a staggering $37,869 per student.”
Add to this revenue disparity, the tax-dollars per pupil cost of each institution, and for-profits begin to look angelic compared to their money-guzzling peers, at the same time affording atypical students, minority students, and those less interested in academia another path to success.