Published on 2014/09/08
Co-Written with Constance Iloh | PhD Candidate and Research Associate at the Pullias Center for Higher Education, University of Southern California

A Marriage of Convenience:For-Profit Higher Education in Brazil
The American higher education industry could learn some lessons from the way for-profit postsecondary education has been designed in Brazil.

Whether one agrees with the criticism or not, it’s fair to say over the last several years, the for-profit higher education industry in the United States has been under withering attack. The charges have come from multiple angles — the federal government, state governments, newspapers, think tanks, accrediting agencies and disgruntled consumers.

The criticism largely focuses on three issues. First, some argue the for-profit industry uses predatory practices and recruits customers duped into thinking they’re getting a quality education at a low cost. A second related criticism is that students accumulate debt and they’re unable to pay it back. The third criticism is that if students graduate they frequently cannot find jobs. Underlying much of this criticism is a philosophical concern that making a profit in education is wrong.

Such is not the case in Brazil. In this country of approximately 200 million, a tolerance — if not begrudging respect — for for-profit institutions has grown over the last decade as enrollment for the entire sector has doubled to seven million students, 75 percent of whom attend private institutions (non-profit and for-profit). Less than 20 percent of Brazilians aged 18 to 24 are in college and that percentage lags behind at least 10 of its Latin American counterparts. The government wants to increase participation rates to 33 percent in less than a decade, which has created an enormous opportunity for the for-profit industry.

The criticism for-profit colleges have faced in the United States has largely been avoided in Brazil because the government acknowledges it has severe capacity constraints in the public sector, and the citizenry want a university education regardless of institutional type. The result is that the 10 largest for-profits now educate about two million postsecondary students and account for over a third of Brazil’s students. Recently, Kroton (Brazil’s largest for-profit provider) bought Anhanguera, the second largest, with a stock market value of more than $8 billion and a clientele of one million.

Brazil’s best institutions are public universities and free. However, there aren’t enough seats in public institutions for everyone who wants to attend even with the creation of several new federal public universities. The result is the public universities largely have wealthier, whiter students who score better on standardized entrance tests because they overwhelmingly attend more elite private secondary schools. The government is trying to enable poorer students and students of color to increase their representation in the public universities through positive action measures, but capacity constraints remain. Since the cost of expanding higher education appeared prohibitive by normal measures — building campuses — for-profit institutions were a viable alternative even for Brazil’s two most recent leftist presidents and the governing Workers’ Party.

In the United States, the narrative is that flim-flam artists entered to make a quick profit as the postsecondary expansion began, but the government has stepped in to begin to regulate the industry. In Brazil, students are admitted to institutions based on standardized exams of questionable validity but great utility. Grades for courses get published and if the students in the courses don’t do well on the exams, the government will not provide subsidies for students to take that course again. Initial findings are that the for-profits now do better than expected on the exams. The reason is that the institutions have an incentive to admit qualified students, whereas in the United States if an accredited institution admits a student, the student can access federal and state grants and loans regardless of their performance.

The for-profits in Brazil follow a business model not unlike what some ed-tech startups are trying to do in the United States; their clientele is so large the provider can negotiate lower costs for goods such as textbooks. Further, the government regulates subsidies so students will not incur the huge debt load students in the United States carry. When the government oversees how much support a student will get based on the quality of the institution (as defined by a standardized exam) the for-profits have an incentive to admit qualified students and not to open the admissions floodgates.

Obvious similarities exist between the United States and Brazil. A college degree gives the individual the opportunity to earn more money. The public sector, for a variety of reasons, faces capacity constraints. Too many students drop out of college without finishing. Individuals have legitimate concerns that for-profit providers will focus on short-term fiscal gain in lieu of long-term educational quality. And yet, for-profit providers have been more adept than others at offering courses at times and locations that are convenient to the student.

What differs between Brazil and the United States is that the left-wing government sees for-profit higher education as a viable way to increase access to higher education, whereas in the United States there’s considerable concern not only about the for-profits’ practices, but their very existence in an arena that was once defined as a public good. The Brazilian marriage may not be perfect, but it seems to be working for everyone — the government, the for-profit providers and the students.

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Readers Comments

Kathleen Simmons 2014/09/08 at 3:58 pm

This is interesting! What’s scary, though, is the idea of moving to standardized testing as a mechanism to define quality. Standardized testing has decimated K12 education in this country… how can we think it will help the postsecondary space?

Mike H 2014/09/08 at 4:31 pm

I think for-profit universities should only be allowed to provide degrees that lead to jobs. Leave postsecondary liberal arts education, and more high-end vocational programs like engineering, to the publics. That kind of education is the public good that leads to an educated citizenry and highly-paid employees. Business, marketing, communications, journalism, all these kinds of programs should be from for-profits. Then we could assess their success through job placements.

    Jason H. 2014/09/08 at 4:40 pm

    I agree if you are willing to accept that those publics and private nonprofits providing career education be held to the same standard as for-profit career programs. Shouldn’t a career program at a community college lead to a career too?

Jason H. 2014/09/08 at 4:38 pm

This is a very nice look at how models work in different environments. The problem in the US is that the national dialogue has moved to a place of demonizing for-profits as opposed to finding a way to improve them and fit their model into the higher ed system. The US higher ed framework is archaic too. Change in higher ed moves at a snails pace. Tip of the hat to Brazil for finding a new way to do things after the publics became incapable of managing student demand.

WA Anderson 2014/09/09 at 9:25 am

No. Time to move away from the for-profit model. It’s fallen on its face and the students are paying.

Dr. Antony Parker 2014/09/09 at 11:12 am

Like it or not, for-profit institutions are here to stay in the United States. The key to making the higher ed system work is having some type of oversight (be it from government or another body) of all institutions, like they do in Brazil. I agree with what the government there is doing. Standardized testing comes with its own challenges, but the fact that there’s commonly understood and accepted criteria for assessing student performance helps ensure all institutions adhere to a standard.

S. Penskies 2014/09/09 at 12:50 pm

Interesting piece on the for-profit and public mix in Brazilian higher education. It seems like a case where for-profits were allowed to operate widely as a “necessary evil” but then brought in as equal to the public institutions when it was determined that there could be some type of government oversight of their performance. This is something we could perhaps give thought to in the United States.

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