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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