A Philosopher's Blog

For Profit College, Again

Posted in Ethics, Philosophy, Politics, Universities & Colleges by Michael LaBossiere on October 21, 2013
For-Profit Education

For-Profit Education (Photo credit: Truthout.org)

While state support for United States public higher education dropped 25% from 2000 to 2010, for profit colleges have enjoyed an ever larger slice of public funds. Part of this is due to the increase in enrollment for the for-profit schools: in 1990 only 2% of undergraduate college students were enrolled in such schools, but in 2008-2009 it increased to 11.8%.

However, the for-profit schools get a disproportionate amount of state money in the form of federal money. While having 10% of the students in higher education, they received almost 25% of the Pell Grant money and 25% of the federal student loans.

The for-profit schools are also beneficiaries of the GI Bill: in 2010-2011 $1 billion of the $4.4 billion disbursed by the Department of Veterans Affairs went to just eight such schools. Overall, 37% of the GI Bill money went to for-profit schools.

As such, the for-profit schools are receiving state funds that are disproportionate to their actual enrollments at a time when public schools are having their state support cut. To use the rhetoric of the Tea Party and Republicans, this would seem to be socialism: the state just dumping taxpayer money to benefit a few takers. Moving away from the rhetoric, it does seem to be a point of concern that state money is being moved away from public institutions so as to enable for-profit institutions to profit. Shockingly enough, the Republicans (and most Democrats) are not outraged by this “socialism.”

This state money is the main revenue stream for the for-profits, so they are truly state-supported businesses. They are also successful at making money in this manner: they enjoy an average profit margin of 19%. This enables them to engage in advertising and thus gain more students who enable them to tap ever more into that sweet taxpayer largesse.

The obvious reply is to contend that the for-profit colleges earn these profits while state schools flounder in financial woes. This, it might be claimed, is proof that the for-profit approach is superior to the inherently inferior public approach. However, there are two replies to this.

The first, and most blindingly obvious, is that the for-profit colleges get most of their revenue from the state, thus their success depends on siphoning off taxpayer money into their coffers.

The second is that the for-profit schools often turn out to be disasters for their students, especially when compared to public schools.

While student debt is a serious problem, it is far worse for those who attend for-profit schools. 54% of the students who graduate with a BA from a for-profit school end up with over $30,000 in debt. In contrast, only 12% of public college graduates end up in that dire situation.

The for-profit schools also do poorly in actually placing students in jobs—the public schools do much better. As such, it is hardly a surprise that although students who attended for-profit colleges make up a fraction of the total college student population, they made up 48% of those who defaulted on student loans in 2010.

Given their rhetoric regarding government spending, socialism and people “taking” from the government, one would think that the Republicans would be leading a charge against the for-profit schools. After all, these schools are receiving large sums of public money and doing a poor job. As a faculty member at a public university I can attest to the Republican obsession with making public institutions prove that they are providing a return on the state money they get. I serve on various committees that exist primarily to collect and process assessment data to prove to the state legislature and governor that we are getting results for every penny we receive and our funding is tied to this data. Also not surprisingly, there is also a push to have private sector companies provide expensive tests at the taxpayers’ expense to, somewhat ironically, make sure the taxpayers’ money is being well spent.

However, this does not seem to be the case. Instead, the push by Republicans (and many Democrats) is for even more for-profit education that is funded by the taxpayer. This indicates that the opposition is to “socialism” of the sort where public money goes to  public colleges. The “socialism” that involves redistributing wealth from the taxpayers to the problematic for-profit colleges is apparently just fine.


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11 Responses

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  1. T. J. Babson said, on October 21, 2013 at 8:16 am

    So why are students going deep in debt for an inferior product? This doesn’t sound very rational.

    • Michael LaBossiere said, on October 22, 2013 at 3:14 pm

      It is not. A likely factor is that the for-profits spend a significant chunk of their budget on advertising. Non-profit schools do some advertising, but they do not seem to match the for-profits. People tend to go with what they hear about. To use an analogy, think about how people who get on the talk shows or into the news are often able to sell a lot of books or whatever just because people hear about it. Even if the product is awful. Or, better yet, think about the crap they sell on late night infomercials-no one should buy that crap, yet they do.

      I wrote an early essay noting the predatory practices of some of these schools. Holly Petraeus spoke out against these schools a while back and she seems to have been dead on.

      Objectively, most for-profit schools are a bad idea for the typical student: the student will pay more than at a public or non-profit private school and will get less from it. I think private, non-profit schools are a good idea-I went to one and got a great education for the money. I’d even be in favor of a for-profit school that could deliver a quality education at a lower cost than the non-profit/public schools. I do think there is a place for such schools-filling in the gaps left by the traditional schools, etc. If a corporation could automate or eliminate the massive administrative fat and provide quality classes with competent faculty for a lower price than traditional schools, that would be a good business model and good education. Unfortunately, the for-profit model of today seems to be just about profit and not about providing the students with an education that will get them into a job.

  2. magus71 said, on October 21, 2013 at 9:26 am

    “The for-profit schools are also beneficiaries of the GI Bill: in 2010-2011 $1 billion of the $4.4 billion disbursed by the Department of Veterans Affairs went to just eight such schools. Overall, 37% of the GI Bill money went to for-profit schools.”

    Most for-profit schools offer better online opportunities and flexibility. Since soldiers using the tuition assistance program in the military mostly take courses online, they likely continue using the GI Bill when they get out in the same school they used while they were in. I’m working toward my Master’s in Intelligence Operations at American Military University, a for-profit. I see no reason I should leave if I get out of the Army.

  3. ajmacdonaldjr said, on October 21, 2013 at 10:43 am

    Everything is being privatized. There will soon be no public anything. No public highways, no public courts, no public prisons, no public police forces, no public military, no public governments, and no public education.

    • WTP said, on October 21, 2013 at 3:31 pm

      Slippery slope argument. Mike doesn’t believe in them. Disappear into a puff of Mike Logic(tm).

  4. WTP said, on October 21, 2013 at 3:30 pm

    And again…


    The default rate for student loans at US colleges and universities, courtesy of the US Department of Education. Perhaps this should be an indicator of the value of an education at these schools. Of course much depends on what one chooses to study.


    Some sample data, e.g. default rates for various institutions:

    Harvard 1
    Yale 1.4
    University of Miami 2.7
    University of Florida 3
    Florida State 5.2
    Ohio State 5.6
    University of Maine 7
    Webster University 8.2
    Full Sail University 11.8
    Webber College 18
    FAMU 18.3
    University of Phoenix 26.4

    Upon re-review, I didn’t see anything for American Military University.

    • magus71 said, on October 22, 2013 at 3:19 am

      AMU falls under the American Public University System, so maybe you can find something on that.

      • WTP said, on October 22, 2013 at 7:50 am

        They were in there at 11.9%. Similar to Mike’s nemesis Full Sail.

  5. T. J. Babson said, on October 21, 2013 at 4:01 pm

    Isn’t every academic who publishes an expensive textbook a for-profit educator?

    • T. J. Babson said, on October 21, 2013 at 4:01 pm

      And let’s not even get started on ETS.

  6. WTP said, on October 22, 2013 at 12:44 pm

    The “socialism” that involves redistributing wealth from the taxpayers to the problematic for-profit colleges is apparently just fine.

    More sophistry. Public education policy is based on giving the money to the students to study subjects that will make them successful in life. Socialism would be limiting their options to spending that money on public universities only. And again, I point you to the student load default rate of Webster University and Full Sail University vs. FAMU. Not to slam the FAMU STEM programs, many graduates of which I have worked with and found to be good engineers who got jobs where they can pay off their student loans. I’m sure the default rate is significantly higher for the journalism or graphic communications majors.

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