Damning Study of For-Profit Colleges

It is probably a little self-serving for me to criticize for-profit colleges, but the report put out by the Senate’s Health, Labor, and Education committee is withering.  Among the findings:

Well over 50% of the students who begin an associates or bachelor’s degree curriculum withdraw without receiving a degree.

For-profit colleges average a 19.2% profit on their revenue, spend 22.7% of their revenue on marketing, and only 17.2% on instruction.  Notable, the figures for publicly-traded schools were worse than privately held for-profit colleges.

A big driver: Federal aid.

Credit: Paso Robles Winery

In 2009-2010 alone, fully a quarter of Department of Education funding (which only discriminated between colleges on the basis of accreditation) went to for-profit colleges.  For-profit schools, unlike community colleges, have substantial financial aid offices that are adept at matching eligible students with federal student aid. The inquiry had been running for two years now, yielding testimony to extensive fraud and an industry that consistently places profit above education and student outcomes.

For me there are two key take-aways. First, for-profit colleges are profitable because they are serving a huge portion of the underrepresented, economically disadvantaged, and minority students who are eligible for various federal aid programs. It would be tremendously valuable public service if they did this while providing a solid education and finished degrees (and the committee singled out schools like Strayer, Walden, and National American University that are doing just that).

Second, the findings should amplify criticism of the trend to model higher-ed’s administrative structures on corporate governance. For-profit colleges should be seen as a test case for whether market forces and the profit motive can serve the public good more efficiently. The committee has found repeatedly that raises in tuition are considered with a view toward profit rather than the cost of instruction. Right now, the primary service of for-profit colleges is to siphon federal funding to shareholders while burying disadvantaged citizens under mountains of debt.


MLA Statement on Student Debt

I’m glad the MLA Executive Council has issued a formal statement addressing the problem of student debt. Nothing could be more timely. They suggest three main avenues of address: adjusting financial aid to reduce the proportion of loans, holding tuition in check, and decreasing time to degree. I wonder how much impact we can have if we focus on working within departments and even institutions to address these problems; an increasingly competitive job market combined with uncertain job prospects outside academia both serve to increase pressure to stave off graduation and lengthen time on the market and, as a result, increase long-term debt.

More generally, it is at least as important that we broaden our focus beyond the university and even state legislatures. As I mention in a previous post, increases in tuition and an increased reliance on student loans have been shaped by a long-term shift in federal priorities away from direct funding to the state and toward federal subsidy of student loans. This encourages states to spend more money on medical care (which triggers federal matching funds) and less on education, at the same time that slack is taken up by student debt that is federally financed. The net effect is that federal money that used to indirectly subsidize universities through the states is now indirectly subsidizing education through student loans. This hardly seems like an optimal solution

Both the increase in student debt and the increase of the costs of higher education in general put particular pressure on the Humanities. Many of the recommendations advanced by the MLA were put forward last year by Peter Conn (a colleague here at Penn), in a lengthy and detailed editorial for the Chronicle. In addition to making specific recommendations to reduce the number of graduate students enrolled in Ph.D. programs, Peter emphasizes what is perhaps the core challenge, to communicate that the humanities “are not merely ornamental and dispensable. They lie near the heart of mankind’s restless efforts to make sense of the world.” As MLA Pres. Berman notes in a letter that accompanies the MLA’s statement:

[T]he liberal arts celebration of an education not linked to professional preparation has existed alongside the promise that higher education would open the door to a fulfilling career. This gap between the appeal of the liberal arts, on the one hand, and the dismal job market, on the other, persists and puts pressure on the MLA’s mission: promoting the study of language and literature.

I still think that we need concrete ways to define the value of a liberal arts degree in the face of a weak economy. Even our intuitions regarding the economics of the liberal arts are often wrong. To take two examples:

(1) Yale University released a report last year that analyzed the cost of graduate programs and found that graduate students in the humanities were far more expensive that those in the sciences; the net cost of a six-year humanities Ph.D. was $143,000 compared to $17,000 for the natural sciences. At the same time, the calculation only includes the cost of grants, benefits, and teaching fees that are paid to those graduate students — not the course tuition that is paid by the students they teach. In other words, the core financial value that humanities graduate students return to the university, their teaching, was excluded (at the same time that the study subtracted grant money supporting graduate students in the sciences). At a school like Rutgers, where I earned my Ph.D., the number of students we taught over the course of six years was considerable (I estimate I taught approximately 150 students in stand-alone courses, excluding TAships that supported other faculty). Even taking this into account, I’m willing to assume that a humanities graduate student is more expensive that a graduate student in the sciences.

(2) But this imbalance stands in an inverse relationship to the value of undergraduate tuition in both fields. I was talking yesterday to a member of the science faculty who attended a lecture, presented by Penn’s financial team to the science faculty, which explained that tuition for science coursework does not cover the expenses of establishing science labs — which are in fact subsidized by humanities courses. This confirms what I’ve read and heard elsewhere about the cost versus value calculations that universities use for the sciences and humanities. I would even be tempted to link these two observations, by suggesting that the increased cost of humanities graduate students is in part a product of their greater teaching value to the university.