Friday, July 02, 2010
Taxi Medallions and Midwestern Zombies
As this story from IHE notes, several for-profit companies have built a wildly lucrative business model on treating regional accreditation as a taxi medallion. I don’t know if the taxi system still works this way, but for a long time New York City rationed the number of taxis, requiring a medallion issued by the City as a condition of operation. Medallions could be openly traded, and often went for six figures. The City didn’t especially care who had them; it only cared about the overall number. In that setting, the system made a degree of sense. (One could always argue about the morality of limiting the overall number, but that’s a separate issue.)
For reasons I won’t pretend to understand, some regional accreditors have chosen to treat accreditation the same way. When a tiny, struggling, traditional college gets bought by an entrepreneur and immediately transmogrified into an online behemoth, it gets to carry over the accreditation as if nothing happened. An accreditation saying that it had resources and processes sufficient for 350 students on a nonprofit basis gets used to educate 30,000 students on the internet for profit, as if it were still the same thing.
The incentive for the investors is that getting a new accreditation for a new institution is time-consuming and expensive. Buying a ‘used’ one is much faster and cheaper, and gets you immediate access to Federal (and usually state) financial aid. That gives you the operating income for rapid expansion and double-digit profits.
If the only purpose of accreditation were to limit the overall number of colleges, the outright sale of accreditation medallions could make sense. But to the extent that accreditation is supposed to attest to a certain level of quality, their outright sale is absurd. It would be like me selling my Ph.D.
Several commenters to the IHE story raised the spectre of some struggling colleges dying, and of the rationality of a college changing its strategy when its current one doesn’t work anymore. But those both miss the point.
Under the rule change, colleges can still change strategies, and they can still sell themselves to for-profits. The only change is that sale to a new owner will trigger a new review of the accreditation. If they pass the new review, they’re good to go. Nobody is blocked from making changes; they just don’t get a rubber stamp saying they’re still the same institution afterwards.
Of course, having to prove that the new college is worthy of accreditation would take time and money, and would therefore reduce the economic appeal of struggling colleges to investors. But that strikes me as reasonable. Their economic appeal now is based on what amounts to fraud.
Will some colleges die on the vine? Yes. Frankly, there’s no way around that. If anything, I think there’s a perfectly reasonable argument for letting some die, rather than letting them walk among us as bloated, hollow, undead shells of their former selves, wielding unearned stamps of approval as talismans against sunlight. I say kill the zombies, and make room for the new kids.
Bravo, North Central. I hope the other regional accreditors do the same thing.
Several people I know who are only interested in higher education when they or their family members want to enroll watched it and have made thoughtful comments about it.
They found it especially interesting that some for-profit colleges completely reduce the value of the education to the point that graduates cannot be hired in "their fields" without going back to school and doing it over, while at the same time encouraging students to take out loans they will almost certainly default on because they won't be employable.
I was thrilled to see this discussion happening outside of the usual groups of people I know who are interested in tertiary education.
Yes, NYC taxi medallions are still traded freely like that. The reason it works for taxis is that there are extremely strict rules the govern every single aspect of taxi operation and 100% uniform pricing. As a practical matter, this means that every single taxi is functionally identical, and so the use of medallions simply to set the total number of taxis in existence works perfectly fine.
To use a system like this for universities is deranged, as every university is functionally different, charges different prices, etcgn.
Well, here's hoping that whatever emerges from the ashes is half as decent as "leave it up to the tremendous professionalism of tenured academics." That used to work, you know. It even used to work well. Then it was discovered that one could make money from looting it, and, well, this is America. We loot here.