Published on 2012/02/03

Are For-Profits Profiting The Rest Of Us?

Last week, the US News ran a pair of editorials—one by its editorial board and the other by Associate of Private Sector Colleges and Universities chairman Arthur Keiser and the other—debating the validity and role of for-profit higher education institutions.

Arguing in favor of the for-profit sector, Keiser channeled the opinion of the late Steve Jobs. Famously, the former CEO of Apple told President Obama that vocational schools must be relied on to train more Americans in order to keep up the with technology sector’s demand for skilled engineers.

Keiser says for-profit institutions provide career-focused education geared toward filling the current skills gap in a customer-friendly manner. While deriding “the one-size-fits-all approach of many public or non-profit higher education institutions,” he says the private sector offers more flexible schedules and online offerings as well as accelerated programs.

However, US News’ editorial board points out that for-profit institutions charge nearly double what public institutions do in tuition and asks how paying more money for tuition solves the problem of high tuition rates at public institutions. They argue that it’s because students at for-profits are spending loaned money on their tuition, meaning the for-profits have no reason to try to compete on cost, pointing out that 75% of revenue going to for-profit colleges comes from federal grants and loans.

They also point out that the amount of students defaulting on those loans is skyrocketing. The editorial board says 15% of students whose loans became due from 2009 had already defaulted by 2011. At public institutions, the default number was less than half—at 7.2%—and at non-profit private institutions the default rate was 4.6%.

With questions also being raised about graduation rates at for-profit institutions, the US News editorial board believes for-profit institutions do not solve the high-education-cost question.

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