PBS Frontline Story on For Profits-Showed on 3/1/11

The private proprietary (for-profit) sector versus the public (non-profit) sector in education is no different that any other private vs. public sector. You seem to echo the sentiment of those who wish for the public sector (i.e. government) to take over all private businesses, since making a profit is, according to some, a bad thing to do.

Yes, unaccredited diploma mills allow you to buy a degree that you did not earn and transcripts for courses that you did not take. We are talking about accredited colleges and universities that do not do this.

You are certainly entitled to that opinion. For some, only a university that follows their religious tradition or one classified as ivy league is the only way to go. What a wonderful place in which we live that offers over 6,000 non-profit and for-profit post-secondary options, allowing one to find the best program to meet one' needs.

Actually, comparing the two is absolutely valid, since the Parthenon Group's study revealed that the cost to educate students for two years is about the same for non-profit and for-profit colleges. The difference is that the vast majority of the cost of the for-profit education must be borne by tuition (for which many students take out loans), while the vast majority of the cost of community colleges is paid for by state and local tax payer funds (paid by you and me). The tuition costs are lower and these students borrow less Title IV federal loans ONLY because you and I are paying the rest of the costs. Students at the for-profits are responsible for paying back all of their costs, while the student at the community college gets a gift of funds from us (that does not need to be repaid) and has to pay only a small tuition and loan cost.

You are very welcome. If more people were aware of studies like Parthnon's, we could engaged in much more robust conversations based on data, rather than opinion and prejudice.

 

Actually, it is significantly different because the for-profit sector in education is highly dependent on federal money for revenue. If Title IV funds were removed, the sector would collapse overnight. Publicly-traded for-profits essentially admit this in their disclosure statements to shareholders. Funneling federal dollars through a for-profit entity to give profits to shareholders and executives when they would otherwise be unable to operate is far from a purely capitalist model, despite the insinuations of socialism above.

The profit motive isn't inherently wrong, but the way the system has been set up leads to dramatic abuses. Do I think that federal dollars should be used liberally to prop up for-profit universities? Absolutely not. I think they should be available but with major restrictions designed to protect the student. For-profit universities that can provide quality education at a reasonable price have a place in the educational realm, but the system as is doesn't offer sufficient protections.

Even in this environment, some for-profits are responsible actors. The problem is that we have mega-universities like UOP and ridiculously expensive trade schools that taint the reputation of the sector.

The concept of funding by tuition vs. funding by tax dollars isn't as clear cut as you indicate. It would be, if the default rates were reasonable. However, default rates at for-profit institutions are significantly higher than default rates at other institutions. The government bears the cost of these defaults.

 

Stefan,

You make some very important points here. One of the biggest flaws in the whole Non-profit/for-profit debate is that only one source of taxpayer funding (Federal Title IV loans) is considered, while other sources, such as local and state tax payer funding, is ignored. It is a bit like stating that the entire cost of an automobile is comprised only of the original purchase price, ignoring the costs of taxes, licensing, insurance, gasoline, oil and other fluids, replacement tires, etc.

To illustrate, let me demonstrate how your argument works by substituting "taxpayer" for "federal," "public" for "non-profit" (ad a couple of others).

Actually, it is significantly different because the public college and university sector in education is highly dependent on taxpayer money for revenue. If taxpayer funds were removed, the sector would collapse overnight. Funneling taxpayer dollars through a public college or university to give profits to presidents, vice presidents, coaches, faculty and staff when they would otherwise be unable to operate is far from a purely capitalist model, despite the insinuations of socialism above.

The profit motive isn't inherently wrong, but the way the system has been set up leads to dramatic abuses. Do I think that taxpayer dollars should be used liberally to prop up public universities? Absolutely not. I think they should be available but with major restrictions designed to protect the student. Non-profit universities that can provide quality education at a reasonable price have a place in the educational realm, but the system as is doesn't offer sufficient protections.

Actually, the U.S. is a late bloomer in the mega university sector. The Open University of the UK, the University of South Africa, Andalou University (Turkey), University of Delhi, University of Buenos Aires and many others have been around a lot longer than Phoenix. Since only a few of the 3,000+ for profit schools (the vast majority of which are not publicly traded corporations) have been identified as "bad actors," it would be more accurate to say that "some are NOT responsible actors." The same would be true of non-profit schools. In fact, if you take out schools owned by Apollo (e.g. University of Phoenix) and Kaplan, can you name a significant number of "bad actors"?

As far as "ridiculously expensive trade schools," I would whole-heartedly agree with you. There are a number of schools that charge what I would deem overly expensive tuition for barbering, cosmetology and a number of other trades. On the other hand, in the list of 100 most expensive schools (costing over $50,000 per year) there are no for-profits.

This, again, is the flaw of only considering one source of tax funding while ignoring the others. Here is the lie: If a student defaults on a Federal loan, the government bears the cost. Nonsense. That is just like saying that if someone fails to pay his federal taxes, the government bears to cost. I know people who have defaulted on their student loans. The government does not say "Oh well, I guess we'll have to pay it off for you." Their wages are garnished, they are ineligible for other loans and must suffer other penalties. Rest assured, the government has plenty of ways to get its money back.

Now, what happens to the student who goes to a community college, only paying a couple thousand dollars a year, while the other 9,000 is paid for by federal and state tax funds. If that student drops out and does not earn the degree that we are paying them to earn, how much of that investment gets paid back to us taxpayers? $0. So, in which case is the government bearing the greater cost?

Whether the taxpayer money is given freely to the student in the form of subsidized tuition and fees, free grant money, or loans that must be repaid (yes, even of the student initially defaults), it is still taxpayer funding that comes out or your pocket and mine. That community college student is taking more of your taxes than the student at the for-profit who takes out a Title IV loan.

 

The difference between a default and a failure to pay taxes is the disbursement of the money. With defaults, the money has already been disbursed. Sure there are ways of recovery, but that assumes there is an income source from which to draw.

Another factor to consider is the disproprtionate amount of lower income students at for-profits. Pell Grant utilization is much higher in the for-profit sector. This money is not recovered.

I will admit that corporate taxes do even out the funding to a certain degree.

My issue, however, is primarily student-focused. I have no problem with funding going to a responsible for-profit. I do not, however, want tax funds going to a school that simply exploits. There must be ways to address the bad actors without harming the responsible ones.

 

Of course, Title IV is the lifeblood of most institutions.

You have a good point regarding some of the minor players in the market, but all of the major players in terms of market capitalization would crash. I would think that would constitute a sector "collapse." I did not intend to imply that all schools would go out of business.

 

You make an excellent point. However, during our last visit with officials from the U.S. Dept. of Ed., they referred to both as "our money," meaning the Dept. of Ed's money (which took me back a bit). So, apparently, the government considers both sources equally.

Actually, those exact figures, by institution and institution type, are available from the U.s. Dept. of Ed. The non-profit sector received over $22 billion in Pell disbursements last year. The for-profit sector received less than 1/3 of that, so the idea that Pell Grant utilization is higher in the for-profit sector is not supported by the USDOE's data. It is true, however, that, on average, a student at a for-profit would receive more in Title IV student loans.

Somewhat. The sector pays, I believe, about 3 billion in income taxes that non-profits do not.

I couldn't agree with you more. I cannot defend the illegal and immoral actions that we have seen occurring from the bad actors. Encouraging people to falsify their financial aid applications, quoting completely unrealistic graduate starting salaries, etc., is indefensible and those who do so should be punished. But you do not punish an entire sector for those few bad players, any more than you punish all community colleges because Compton College loses its accreditation and has to be taken over by another institution.

Like so many aspects of our government, the laws and regulations already exist, it's the enforcement that is the problem. Rather than adding poorly conceived regulations, we need to enforce those already on the books. Unfortunately, the U.S. DOE has too much on its plate already and cannot adequately monitor 6,000+ higher education institutions. Perhaps an overhaul of the accreditation system is in order.

 

I was glad I ran across it. This was new information for me. I've been looking into an online degree completion program and I was a little taken aback by the pressure I'm getting from enrollment advisors until I saw this program. The recruiting practices are unbelievable.

 

After reading what I cited earlier, I'll admit I came off a bit harsh. I have never held for-profits in the highest regard overall, but understand that the blanket statement I made earlier was made out of anger. Please understand that I have many friends who attended for-profit colleges and got taken advantage of; $30-40K in debt for an associates degree that wasn't worth the paper it was written. All of them were stuck with a huge bill and NO job prospects, because no employer would accept their degree, and this was when the economy was in much better shape.

So from the very start, I have never held for-profits in a high regard and I'll admit I'm biased. And after watching College, Inc I got fired up and made an unfair statement based on the misfortune of my friends and their experiences with for-profits.

 

I can understand that but also realize that there are many affordable for-profits. The classes at Trident (now a for-profit) is only $250 a credit or $1,000 a class. When I attended Touro (when it was a private non-profit) it was $750 per 4 credit class in 2003/2004. The point - still a fair price with little increase over 7 years.

I would think my graduate classes at a "for-profit" are the same price or cheaper then your "non-profit" undergraduate classes.

 

While I agree with you that something has to be done to weed out the bad apples out of the system, lumping all for-profits together is not fair. There are for-profits that do charge less than non-profits. Lets take your undergrad university, Union Institute & University for example, and compare its tuition against three of of the largest for-profit universities around, Walden University, Trident University, and Capella University.

All of these figures were obtained from each university's website, comparison was done on undergrad tuition only, since that is what you are working on.

Union Institute & University's tuition cost:

BS (Bachelor of Science)
Tuition $459 / credit hour

WaldenSchool of Management University:

B.S. in Business Administration
Courses 181 total quarter credit hours $260 per quarter credit hour

Capella University:

BS or BA $345 per credit hour


Trident University:

Bachelor’s Level:

* The tuition is US $295 per semester credit hour for the Bachelor’s program (100, 200, 300, and 400 level courses).
* TUI courses are four (4) semester credits costing US $1,180 per course.

As you can see, your school is charging more per credit hour than these well-known for-profits. However, this does not mean that Union is a rip-off, or that they are taking you to the cleaners, each school is different, it is up to the student to make financial decisions as to which school will serve him or her better.

 

That is $55K for a BS degree is you start from nothing. I am sure there are better deals - for-profit or non-profit.

 

I did not mean that the for-profit sector gets more in "real dollars." I mean that they received a disproportionate amount.

http://harkin.senate.gov/documents/pdf/4c23515814dca.pdf As the report linked indicates, in 2008, for-profits only enrolled 9.2% of college students in the U.S. If nearly a third goes to a pool of 9.2%, that's pretty disproportionate.

 

The private sector includes both for-profit and not-for-profit organizations. The private sector education is therefore not synonymous with for-profit education. The article in the hyperlink that you provided pertains to private sector education. For-profit was just mentioned only once in the article (on the last page). The article is not really a research on for-profit education.

 

Someone mentioned that if government funding was discontinued then many state universities and NFP will be out of operations. That should be expected because education is a public good. It many countries education is free. The problem is that for profit universities will also go out of business if public funding was discontinued; the economists here will have to correct me, but isn’t this economics freeloading by for profit universities.
Underlying for profit university’s model is that for profit can deliver a better product at a better cost and still make a profits without relying on government financing. What is true is the profit making; the other variables are debatable? I disagree that default by students who defaulted attending state schools are the same as defaulting for a for profit schools. Students are more likely to default at for profit with higher level of debt with diminished opportunities to get out of debt.
Students who attended for Profits University, loses (pay) the government subsidy and they pay additional for the profit motives. For profits have a lower cost structure; except those for profits that operates like state university; campuses, library, tenure professors etc. The lower cost is not pass on to students but distributed in dividend
My advice to students is to not attend for profits unless you have a high-risk tolerance. I am a professional student who is looking convenience and reasonable cost. At present, I am looking at APU mater of psychology, very affordable at $12K. I do not follow my own advice. Long live for profits.

 

My understanding of private sector education is the combined NFP and for profit; everything except state education. Is this correct?

 

Actually, the private sector, as opposed to the public sector, is generally understood as the part of the economy that is not controlled by the government. Non-profits are part of the voluntary sector, not the private sector. Private sector education is synonynous with the for-profit education sector. An indication of this is that the name of the major organization associated with the for-profit sector was changed from the Career College Association to the Association of Private Sector Colleges and Universities.

The Parthenon study compared the outcomes, graduation rates, cost, etc. of two year programs at public community colleges and private for-profit colleges. No private non-profit two year colleges were included in the study. The narrative of the study make the intention of the study clear. It would have served no purpose to lump private non-profit two year colleges (there are not that many of them) with private sector for-profit colleges.

 

No, private sector includes only for-profits. Please see my response to Dr. Okonkwo.

 

I earned a BA, MPA, and soon to be DPA from RA public universities for less than this combined.

 

I completed my MCSE classes, an AA, two BS, three masters (one class short of the third), a graduate certificate, and a PhD for just over the $55K