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.