The Future of Higher Education: Non-Profit or For-Profit?

As American higher education continues its jog from public to private, a fierce battled has gripped Washington that could accelerate or slow the pace.

Last year, the U.S. General Accounting Office (GAO) issued a blistering report that found many for-profit institutions have misled students during the recruiting process, encouraged students to falsify financial aid applications to maximize aid, and made empty, unachievable promises of career advancement.  In response, the Department of Education (DOE) imposed a series of regulations to curtail the seemingly rampant exploitation of students.  The Association of Private Colleges and Universities (APSCU) filed a lawsuit and for-profit education companies spent $5.5 million in the first three-quarters of 2010 lobbying Congress against the regulations.

The focus of the for-profit education industry’s lobbying and legal efforts has been directed towards a proposed rule that has not yet been implemented.  Termed the “gainful employment” rule, it would rescind funding from programs that graduate students with high default rates or have a certain disproportionate amount of debt compared to their earnings—meaning they are not gainfully employed.  The rule would deal a blow to this industry, as some for-profit schools receive more than 80 percent of its revenues from government financial aid.

However, the facts are clear.

The average tuition at these schools are nearly twice that of in-state public colleges and more than five times the cost of community colleges, according to a 2010 Senate report titled, “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education.”  The DOE found recently that the number of students at for-profit institutions defaulting on their federal student loans within three years was twice the rate of students at non-profit schools.  Even though for-profit students comprise less than 15 percent of the national college enrollment, they make up nearly half of the student loan default rates. 

Furthermore, according to figures released by The College Board, the median student loan debt in 2007-2008 at profit four-year colleges was $32,653, which was $10,000 more than private four-year colleges and almost half for students from public four-year colleges.  The College Board figures surprisingly showed too that students earning a for-profit associate degree are more in debt than those at public four-year colleges.

Despite these ominous revelations, a bipartisan group of House lawmakers introduced a budget amendment that will remove funds for DOE enforcement capabilities of the gainful employment rule and begin the rolling back of all of its regulations.  Lobbyists, business, and politicians bankrolled by this industry are saying that the regulations deny access to millions of students and of course the age-old adage that regulations are inhibiting the “free market.”

Interestingly, the access argument, while seemingly valid on the surface, actually contradicts for-profit education officials’ purported notions of the free market. 

If Congress increased regulations on cash advance businesses forcing the most egregious exploiters with double-digit interest rates to close their doors, some people would have less access to funds.  But other businesses would rise in their stead with lower interest rates to claim that market.  Similarly, if the gainful employment measure is funded and the other regulations are kept in place and some for-profit schools go under, then other schools will attract that unattached body of student-consumers (I did not like that term, but it must be used these days).  Is that not the essence of free enterprise?

The for-profit industry knows this.  This is about using whatever means and rhetoric to increase its capital flow and allotment of the higher education market.  They understand that every single regulation imposed on the for-profit industry is like a brake that slows accumulation; that can and sometimes does slow the industry’s move from public to private, non-profit to for-profit.

It does not matter to them that as more students are wooed to for-profit schools, as the industry as a whole jogs in that direction, that higher education is becoming more expensive, that more career promises are being made with less jobs available, that the line between teaching and commerce is rapidly being erased, that the notion of student as customer is overt.

The House is set to vote this week on whether to bankroll the gainful employment rule. It will be interesting to see what it decides because it will provide another indication as to the intended future of American higher education.

Dr. Ibram H. Rogers is a postdoctoral fellow at Rutgers University. He is on leave as an assistant professor of African-American history at SUNY College at Oneonta.