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The Secrets Behind Their Success

The Secrets Behind Their Success

Attracting and graduating minorities in large numbers, for-profit universities offer access, convenience and some risk.

By Paul Ruffins

In June, Robert L. Johnson, the billionaire founder of Black Entertainment Television, gave the commencement address for one of the largest predominantly Black colleges in the greater Washington, D.C., area. Johnson told his overwhelmingly minority audience that they had accomplished more than the average graduate.

“You’ve done everything every student has done, but you did it while working, while taking care of your kids, while going to church programs, while being part of the community, serving in the military, being a single parent, having to deal with elderly parents, having to take care of extended family,” he said.

Johnson’s message concerned the virtues of entrepreneurship — that people work harder when they are working for themselves. But he wasn’t speaking to graduates of Howard University or the University of the District of Columbia.

His words were directed towards graduates of Strayer University. Founded in 1892, it is a for-profit university experiencing fast growth, and Johnson sits on the Strayer Education Inc.’s board of directors.

For-profit schools have a long history of embracing new technologies and underserved populations. In the 1850s, they opened doors to women — who were largely banned from traditional colleges — and taught the use of newly developed writing devices called typewriters.

In Chicago in 1931, Dr. Herman DeVry opened a trade school focused on electronics, motion pictures and radio. During World War II, the Army Air Corps sent students to DeVry to learn the new skills critical for national defense.

It became one of the first schools approved for government aid under the G.I. Bill.

Between WWII and the 1980s, for-profit colleges made up a small but stable segment of postsecondary education. Thousands of local, family-owned institutions taught skills like cosmetology, photography and truck driving. National chains like ITT Tech and Lincoln Tech offered electronics, heating and refrigeration and automotive repair.

However, in the 1990s, for-profits were revolutionized by the mounting demand for computer skills and a massive infusion of investment capital. Today, approximately 400,000 students attend for-profit schools in California alone, and about 2 million are enrolled nationwide.

The Benefits
Strayer’s tuition of around $12,000 a year is about half that of a private university. But other educational options are cheaper still. For example, in the nation’s capital region, students can attend UDC, Northern Virginia Community College or Prince George’s Community College for about a third of Strayer’s cost.

But for the graduate students in Dr. Elile G. Awa’s required class on introductory research methodology, Strayer is a perfect fit. The university’s Washington, D.C., campus is an office building convenient to several Metro stations. Many classes start at 5:45 p.m., right after work.
Awa is warm, lively and engaging, but she did not write any of the course materials. Many for-profits use software packages, curriculums and accompanying textbooks created by major publishers. This allows proven educational materials to be presented in a uniform (and economical) manner. Awa discusses the same materials a student would use taking the class online, and students can turn in assignments and take tests over the Internet.

The class is small — about 14 students — all Black or Asian. They actively participate, and none indicated that the quality seemed any different than what they had experienced at schools like UDC, West Virginia State University or the University of Maryland. 

According to Margaret Weusi, who is pursuing a master’s degree in public administration while working for the federal government, what Strayer really offers her is access, convenience and a minimum of administrative hassles.  

“I took classes at UDC, and I spent a lot of time standing in lines,” she says.

Another woman in the class agreed.

“I applied to another master’s program, but they required taking the GRE, which wasn’t being given for three more months,” she said. “At Strayer, I could start right away.”

To understand the ramifications of for-profits’ success, consider the educational and financial situations in New York City and Washington. New York’s public universities have traditionally been
famous for meeting the needs of working-class students and working adults.

However, demand for degrees has far outstripped the space available in
public institutions.

“Public colleges are in a slow-growth holding pattern,” says Dr. Sam Johnson, a psychology professor and former vice president of student affairs at the City University of New York’s Bernard M. Baruch College. “The number of seats in community colleges has been stagnant for decades. CUNY’s undergraduate colleges have dropped open admissions, and getting into a four-year college now requires SATs and advanced courses in high school.

As a result, many Black and Latino students are literally being forced into for-profit schools.” 

How could for-profit colleges expand when traditional universities faced
lagging state and federal support?

The current gold standard is the University of Phoenix, founded in 1976 by economist John Sperling. Unlike Strayer and DeVry, which spent decades evolving from being trade or secretarial schools, U of P was specifically created to deliver academic degrees. Sperling understood the powerful advantage of becoming a publicly traded corporation to attract expansion capital.

U of P became a Wall Street phenomenon, consistently returning 20 percent to 30 percent while becoming America’s largest university. During the 2005-2006 academic year, U of P’s more than 300,000 students received more than  $2 billion in federal student aid.

The Competition U of P has inspired many competitors, even though not all have survived.

The student loan scandals of the 1980s drove approximately 1,500 of the country’s 4,000 for-profit schools out of business. Many survivors were bought up and, today, nearly 50 percent are owned by four or five large conglomerates.

Unfortunately, Wall Street funding can be a double-edged sword. Interboro Institute, a for-profit business school, has served working-class students since 1888. However, in 2000, it was sold to EVCI, which provided a major infusion of capital. Between 1999 and 2004, when New York colleges only grew by 15 percent, Interboro expanded by 265 percent. Part of this was due to its aggressive advertising. In May of 2005, its advertising agency won a major award for Interboro’s $1 million campaign, “I want to start. Now.”

EVCI brought relentless pressure for greater profits. By December 2005, an undercover investigation by the New York State Education Department found widespread fraud among EVCI’s admission officers. The New York Board of Regents placed Interboro on probation and restricted any further growth.

In 2004, a U.S. Department of Education report on U of P included testimony that it also pressured and intimidated recruiters to put “asses in the classes,” often by enrolling unqualified students. Graduation rates in some of its California campuses were alleged to be as low as 4 percent, and the school was fined $9.8 million. In April, the U.S. Supreme Court refused to throw out a fraud lawsuit that could require the university to pay back billions of dollars in federal loan funds. Other publicly traded for-profit education companies, including Career Education Corp., Corinthian Colleges and ITT Education services have similar problems. The Education Department found that for-profit colleges made up more than 75 percent of the investigations for fraudulent student loans. Nevertheless, their future seems secure.

In addition to ample financing, they have strong political support. One advocate is Richard Vetter of the American Enterprise Institute, who President Bush has appointed to the Education Department’s committee to study the future of higher education. Vetter has argued that too many traditional universities have become bloated bureaucracies that raise tuitions faster than inflation because public funding and academic tenure protect them from the discipline of the marketplace. He and others have fought to increase for-profit institutions’ access to more types of federal funding. This has caused fierce lobbying battles on Capitol Hill.

“When the president of a community college enrolls another student, the tuition money helps support an institution that is answerable to the local community. When the president of a for-profit school enrolls another student, it means that he and the stockholders can enjoy another bottle of expensive wine,” says David Baime, vice president for government relations for the American Association of Community Colleges.

Randi S. Reich, Strayer’s senior vice president of academic administration, says that attitude is unfair.

“When a good for-profit enrolls another student, that individual gets the chance to earn an affordable, quality degree, and the community gains a taxpayer who is more educated and productive,” she says.

Strayer’s stock has done well, but Reich, who holds a MBA from Harvard University, says important structural factors help Strayer offer quality classes and avoid the problems dogging the University of Phoenix or Interboro. While Strayer Education Inc. has a corporate board of directors, the university itself is run by a separate board of trustees whose fiduciary obligation is to assure the school’s academic integrity. About half of Strayer’s instructors are full-time, and many of its part-time faculty members also teach at traditional four-year colleges and universities. It is overseen by The Middle States Commission on Higher Education, which accredits Georgetown University, Princeton University and other top schools.

The greatest impact that for-profits have made in the educational landscape might be that traditional universities are changing to meet the competition. In the Washington area, the University of Maryland’s new advertising campaign markets itself as an educational solution for working adults. With no need to take the SAT, students can start classes right away. As they say, imitation is the sincerest form of flattery.

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