Wednesday, May 05, 2010


First Thoughts on "Frontline"

Last night "Frontline" did a show on for-profit higher education.

It was a disappointing episode in many ways.

First, and most obviously, it created clear good guys and bad guys. Investor Michael Clifford was clearly intended to be the bad guy, mixing "money, management, and marketing" with a druggy past and a born-again Christianity that I couldn't quite square with his Del Mar beachfront home. (I don't know if the correspondent quite caught the New Testament overtones of Clifford's story of converting prostitutes into students, but it would have made for a fascinating conversation.) The mostly absent traditional colleges were supposed to be the good guys, though the only significant talking head I caught from a traditional college was LaGuardia's Gail Mellow. (For the record, I'm a fan of hers.) Although the show didn't mention it, Mellow is in a unique position to comment on for-profit higher ed. Fun internet exercise: go into your favorite maps program, and navigate a path from the main campus of LaGuardia to the New York City campus of DeVry. Go ahead. I'll wait.

Things that make you go hmm...

Second, the episode was terribly sloppy in what it attacked. It conflated 'online' with 'for-profit,' which is simply false. There are plenty of nonprofit colleges, both public and private, running online classes, and it isn't hard to find for-profits with classrooms. The former Phoenix exec who spoke dismissively of tenure was taken as shocking, even though tenure has been waning in traditional higher ed for the last forty years. A discussion of the connection between regional accreditation and financial aid eligibility led quickly to stories of financial aid fraud at a college that didn't have regional accreditation, leaving the viewer to wonder exactly what point was being made, if any.

Third, despite a glancing reference to a lack of measures of instructional quality across all of higher ed, it approvingly fell back on arguments from "ineffability." I guess that's all you have when you don't actually have evidence, but it really doesn't resemble an argument. Is the quality of instruction in, say, Business Management at a Phoenix better, worse, or similar to the quality of instruction in Business Management at Compass Direction State? I don't know how to answer that, and neither did the show. In the absence of an answer, it's hard to get terribly worked up either way.

But most fundamentally, it failed to get to the 'why.' Why are for-profits growing?

At a really basic level, the for-profits' advantage is that they put (more than) the entire cost of their operations on the students. That means that growth more than pays for itself. They don't have subsidy income, endowment income, or philanthropic income. It all comes directly from operations. The reason that their students consume a disproportionate amount of federal financial aid -- and they do -- is that unlike the private nonprofit colleges (whose tuition is often higher), there's no offsetting revenue stream.

The publics, on the other hand, set tuition deliberately lower than the cost of operations, using subsidies and (a little) philanthropy to make up the difference. When those subsidies lag, growth becomes a cost.

To recap: for the for-profits, growth more than pays for itself. For the publics, growth is a cost. Now which do you suppose will grow faster?

If you really want to change the equation, you have to do several things.

First, as the show clearly indicated, stop the outright sale of regional accreditations. Any transfer of ownership of a college should automatically trigger a new evaluation by the accreditor. That's just basic. I have to give the show credit on this one.

Second, adopt some of the reforms that the for-profits have shown clearly work. Drop the agrarian calendar as an absurd holdover from a bygone era. Help students navigate the financial aid process. Abandon the ridiculous "tenure or adjunct" model in favor of something closer to regular employment. And for the love of all that is holy and good, abandon the credit hour and go to outcomes-based measures. Until you do that, you'll be stuck in a productivity trap and its resultant cost spiral forever, by definition.

Third, set subsidy levels high enough -- and tie them closely enough to enrollment -- that growth will more than pay for itself for the publics. Until you do that, the various institutions will simply follow their own imperatives: for-profits will grow, and publics will cut.

When I refer to subsidy levels, I'm not referring to financial aid. Financial aid ties money to individual students, which is exactly the for-profit model. I'm talking about operating subsidies that go directly into institutional operating budgets. The more we shift costs from institutional budgets to students directly, the less will differentiate the two sectors. If you want the publics to add enough capacity to compete more effectively with the for-profits, you have to give the publics the resources directly. Given the choice between a college getting infusions of private capital and a college taking significant budget cuts, which would you choose?

I found myself agreeing quite a bit with Arne Duncan, who argued that the issue isn't some sort of moral purity about keeping education separate from money, but that it's really about the rules of the game. If you're serious about changing the game, change the rules. I just wouldn't expect that all of the changes will be on one side.

I'm curious to see how others reacted to the show. Wise and worldly watchers -- what did you make of it?

I wish I had seen the Frontline episode - I will go look for it onliny. DD, you make some good points regarding what for-profits can show us, in terms of being more effective and efficient. However, it is easy to see how they make money on the same courses where we lose money; they pay their faculty less than half of what we pay our adjuncts! We all know that nobody got rich being a full-time CC faculty, much less an adjunct, but even an adjunct faculty member at my school earns full benefits if s/he works at least half time, and it is possible to earn a living wage (albeit with an overload schedule).

It does not appear to me to be possible for faculty at the FPs around here to actually make a living. They therefore teach a couple of courses as an (truly) adjunct to their 'real' job, or they do it as a way to stay off the streets until a better job shows up. Yes, tenure has outlived its purpose, but lets compare the 'residence time' of the average public or private non-profit faculty member, to that of the for-profit faculty member. I don't have those stats, but I bet that the former is an order of magnitude larger.

Sure, any business can turn a profit by producing goods (or services) by under-paying their employees. The real tragedy is that there is such a surplus of wanna-be faculty that the FPs have a steady supply of supplicants.
I watched the show last night and disappointed with some of your postive attitude towards what profits can public institutions. Their financial structure is so completely different and the last thing I want is some risky investor from Wall Street telling me how to run my class. I worked for a huge for-profit that was not featured last night. Currently I work at a State 4-year and have worked at two state community colleges, so I am speaking from experience at both.

The last thing we need is to remove tenure and follow regular employment like for-profits. First, they have no academic standards for hiring except when forced by accrediting desires. They pit faculty against faculty for salary and are militant in squashing any word of unionizing. It is every man for himself in for-profit.

The idea that they spend more on a student than other colleges is laughable based on my experience. The fact that they spend more on advertising and admissions (sales) tells you something about the quality of their school - it can not hold up on its own and students have to be convinced to attend there. They prey on people who are at an economic and educational disadvantage.

I thought one of the points in the show was the abuse of federal grants/loans for students at for-profits. The government should disperse more of that money to other colleges, private and public. The financial aid advisors at for-profits know how to work the system and it stuns me that taxpayer money is going right to wall street in the disguise of a positive thing as education. I wish the reporter would have contacted Andrew Cuomo, who investigated the abuses. I was severely disappointed at Obama's education rep., he is sitting on his hands and allowing the abuse to go on. On a side note I find a lot of his cabinet too relaxed in their repsonses to issues, particularly Janet Napolitano.

The second point I think was made is that these for-profits try to buy regional accredidation. Thankfully this still seems to be set to high standards.

The solution to the need for more colleges is not for-profit, it is building more community and vocational colleges. These for-profits do not serve a public need if their educational programs do not have accredidation or proper structure to place students in jobs of their field of study. There is very little oversight of that since many for-profits play around with placement numbers. They count any job placement, not a job placement in the field of study. Meaning if a student studied nursing and gets a job as a insurance agent, that is positive job placement.
I meant: I watched the show last night and am disappointed with some of your postive attitude towards what profits can teach public institutions.
What's going unsaid here is what I see at the root of the problem.

40 years ago (give-or-take), the level of public--and political--support for higher education was exteemely srong. States funded their colleges and universities, and expanded them. (One factoid...enrollment at Indiana University Bloomington rose from about 5,400 in 1940 to about 30,000 in 1970, as the stat's population rose from about 3.4 million to 5.2 million. In the succeeding 40 years, IUB's enrollment has grown by only 11,000, while the state's population has grown by about 1 million.) My parenthetical comment understates the importance of the growth of state support in those earlier years. Indiana, for example, also expanded access to higher education by developing additional campuses. And per-student funding fairly well kept pace with the rising (nominal) costa of higher education.

But in the last (call it) 20 years, things have reversed. Support for higher education is not any longer as high a priority for state governments. While it's still the case that in-state tuition remains relatively low, compared with private not-for-profit or for-profit institutions (and compared with out-of-state tuition), public niversity tuition has increased at a rate more than double the overall rate of inflation for the past 20+ years. (I would argue this is because of declining levels of state-government support.)

So while I agree that a revolution (or, perhaps, a restoration) of state support would make a hugh difference, I'm not staying awake nights hoping for it.

In 1970 IUB had just under 6000 places per 1 million of population. Since then population has grown by 1 million - but the number of places has grown by nearly twice 6,000. That's hardly evidence of lack of investment.

Of course, if expansion is happening slower than in other states, you'd have a point.
"But most fundamentally, it failed to get to the 'why.' Why are for-profits growing?

At a really basic level, the for-profits' advantage is that they put (more than) the entire cost of their operations on the students."

Nope -- the real question is: why are students falling for this? You're conflating a demand-side discussion with a supply-side discussion. We know that for-profits charge a higher price. What we don't know is why students are willing to pay that higher price.
What does not help is the right-wing conservative attack on public higher ed. I do not not blame all the lack of support on higher ed on right wing media pundits, but a general lack of support is a troubling sign in an era that knowledge is the way of the present and future. In these tough economic times I would think support would increase especially by the public's realization that college dreams blow up when one can not take an home equity loan to pay for private college.
After watching Frontline I think that the for-profits should be legally required to explain the risks of federal loans to students. What they are doing is very predatory.
@ PunditusMaximus
When I worked at a for-profit I always asked the students why they chose the school. Basically, they liked being hand-held through the admissions process. They had no prior knowledge or experience of the college application process. Aside from taking a simple exam, the admissions rep and financial aid advisor did all the work. A lot the students came from low-income families with no higher education.

The real shocker was when they went to transfer or apply for another degree. There were real requirements and work to be done for admittance. Some are willing to pay for such a hand-holding service, while others are completely clueless. Also, just like those who buy into corporate advertising promises, they bought into for-profit ad campaigns. Have you ever seen a for-profit ad, it is usually on during Jerry Springer reruns, late at night and advertises how easy it is to be educated. I had students shocked that they had to do homework. Admissions reps did all sorts of lying. How after graduating after 22 months they would make $60,000 as an art director. The government really needs to send people undercover and study these institutions long-term.
PunditusMaximus, you ask why students are willing to pay the higher costs to attend a for-profit institution. That's a great question will pretty straightforward answrs which have already been mentioned in these comments.

I currently work for two of the large for-profit online companies (the life of an adjunct, eh?) and ask my students about their enrollment. Many of them don't realize they have to pay back the financial aid money they receive. They fall head over heels for the recruiting spiel. As an instructor, I've been trained to encourage this thinking. This isn't explicit training, but I'm supposed to emphasize the benefits of completing their program, the convenience of the courses, etc. One of the major reasons that people go to these institutions (I just can't bring myself to type 'colleges'!) is because they fall for the recruiting message.

The second reason is, as Urbanartiste explains, that the for-profit companies make it easy. If you want to get a degree without expending any effort, these institutions are your dream. They do all the work to get you started with classes. They plan your schedule. They do your financial aid paperwork. They handhold throughout the entire educational process, including the coursework.

Consider the target market of for-profit institutions: low-income, first generation college students with no previous experience in secondary education. These students don't have the resources to navigate the secondary education system on their own, and the for-profits come in with a strong, targeted marketing spiel.

The real question, then, becomes how can public and private colleges help students navigate the complex maze of admissions/financial aid/scheduling/etc? How can we make this process more approachable and transparent?
"Doc" asked two separate questions. JohnInCambridge partly addressed the one about whether a particular university was serving its state, but didn't comment on the difference between the three eras mentioned in the original statistics: GI Bill, Baby Boom, and the current Echo.

Thanks to a comment by Dictyranger in a thread last year about a rapid increase in college graduation, I pulled together the US Census stats on college completion and put them in this article. Take a look.

There was a massive jump in the number of young men with degrees (from 5% to over 15%) in just a decade, where tuition and expenses were paid by the GI Bill. After a (draft induced?) peak, male grads leveled off at 25% (or less). The third period is characterized by continuing growth in female degree recipients, to about 35% of young adults. Even with that change, the percentage of that population that is earning degrees has increased only modestly.

Expansion actually ended 40 years ago, when the peak of the Boom was graduating from high school. As the graph I constructed shows, there was no demand for more seats until fairly recently when the daughters in the Boomer Echo came to college. With less need for capital investment, universities had been cheap to run for about 20 years and that capital went elsewhere in state budgets.
"Doc" raised a second question that really should be discredited every time it is asserted without data to back it up.

I have shown very clearly (look at the second main section, about half way through the article) that only a tiny fraction of the tuition increase at one state university can be attributed to cuts in state funding. Between 1970 and 2009 (the period Doc referred to), tuition went up $7000 above inflation and state funds were cut by $1400 after inflation is accounted for.

This is the difference between paying less than $5000 per year in tuition (to make up for state cuts) and paying more than $10000 per year! Tuition levels did need to increase because of state cuts, but not by nearly as much as they have actually increased.

Feel free to do the same analysis for your favorite university.

I'll leave it to someone else to look at budgets and see where the increase has gone.
CCPhysicist -- I would be extremely interested to see where the money has gone; what are your preferred sources for budgetary data of this type?
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