Thinking Again About For-Profit Colleges

The Obama Administration has waged a campaign against the for-profit higher education sector. Indeed, the Department of Education has achieved many of its goals; some of the largest for-profits, such as Phoenix and DeVry, closed dozens of brick-and-mortar campuses and their numbers of enrolled students have fallen. Some for-profit colleges closed. Profit margins were squeezed down. Tuitions fell.

Not all of these outcomes were bad. Some for-profits deserved to be shut down. No doubt, certain for-profits had misleading recruiting practices and did not deliver value. The Obama Administration, by increasing Pell Grants for low-income students, attracted some people who were not prepared for higher education and not committed enough to upgrade their skill levels but were accepted at for-profits. However, the baby was thrown out with the bath water as many students in the demographic who attended for-profits lost access to higher education as a result of the Department of Education’s crackdown. These students were and are largely adults, with a median age in their mid­20s, working at part-time jobs, moving in and out of labor markets and are often first-generation higher education enrollees. Many are minorities.

For-profit colleges attract such students because they provide a curriculum highly relevant to labor market needs and they pioneered the development of online courses so that working students could be accommodated. True, today community colleges and some not-for-profit four-year schools have moved towards meeting the needs for online education. But they, too, frequently have low graduation rates. Of course, students leave community colleges with less debt because those colleges have no capital costs and receive public subsides.

One can click on the Department of Education’s website and see their “College Scorecard” for graduation rates, student debt and tuition costs at various colleges and universities. It is good that the Obama Administration gave up their initial idea of putting out a scorecard ranking colleges and universities, especially given the Department of Education’s record of having poor data. If one does look at the scorecard it becomes clear that many not-for-profit schools often have graduation rates lower than many for-profits.

A fair number of not-for-profits could not pass the “gainful employment” standard that the Department of Education imposed on the for-profits. That regulation requires students at for-profit colleges to achieve a certain salary level to “pay enough to cover one’s major expenses, including student loans.” In effect, they have imposed a debt-to-salary ratio. Whether the debt is for tuition payments or borrowing for childcare or an auto loan is ignored. “Gainful employment” also ignores the particular business cycle at time of graduation even though business cycles affect employment opportunities. It ignores also that students invest in their education for a lifetime stream of earnings, not a salary, say, three years after leaving college. These regulations have forced colleges to eliminate programs whose graduates might go to relatively low-paying jobs, such as pharmacy technicians, even though such jobs are useful and require trained people.

Colleges now do data analysis to assess risk and cease to enroll riskier students who are likely to graduate at lower rates. Maybe this is a good outcome in terms of debt repayment but access to higher education has been curtailed for people who, with decent remedial programs, might make the grade.

So what’s next for the for-profits?

Let’s recall the postsecondary context. High school graduation rates in large city school districts are still low, often under 70 percent. Students who do graduate from high school show college preparedness levels of under 25 percent! Yet our country has many unfulfilled labor needs. Can the for-profit sector help meet labor force needs? It still has over 12 percent of the higher education market. And I believe that the for-profit sector, which has pioneered the creation of access for working adults and tried to bring efficiency to higher education, still has a lot to offer.

For-profits can partner with corporations directly to meet specific labor force requirements. At Rasmussen College, whose board I chair, we are moving ahead with competency-based education (CBE) and flex choice models for students. CBE is an emerging model that is gaining significant interest nationwide as a flexible system of instruction and assessment based on student demonstration of learning instead of a traditional time-based model. The idea is that students can go at their own pace and demonstrate what they have learned through a problem-focused output that can be assessed. Flex choice combines traditional teaching with a CBE approach. Hopefully, Title IV funds will be provided for students who want a flexible learning platform that allows them to demonstrate competency for the specific jobs to which they aspire. The for-profits are experimenting in combining old and new modes for higher education.

Let us move beyond ideology to face the educational needs of millions of students who require training for the jobs of the future. The Department of Education can do this by implementing intelligent regulations based on better data and an appreciation of the value of different kinds of institutions of post­secondary education.