Thoughts on the For-Profit Crackdown

For-profit colleges are having a rough go of it these days.  Just this week, Everest College (a branch of Corinthian Colleges) was forced to shut down operations in Milwaukee after only two years, during which it burned through two presidents.  In my own state, Attorney General Coakley has announced a broader investigation into various for-profit providers in the wake of the abrupt closure of American Career Institutes.   

Unfortunately, much of the debate on for-profits has been ideologically driven.  Republicans in Congress treat for-profit higher ed as a necessary bulwark against the tenured radicals they assume have taken over the public sector.  And traditional academics largely assume that for-profit higher ed is a form of naked exploitation, preying on the poor and the naive.  The “gainful employment” regulations that Congress passed, and that are in some sort of judicial limbo, have hit community colleges hard too, even though community colleges are the lowest cost providers of higher education for most people.

I’ve worked in both for-profit and public higher education, so I’ve seen both from the inside.  This may be why I find the current debate so unhelpful.  I’ll propose something different.

Allow for-profit higher ed to grow, and even prosper, but regulate the product.  Restrict the realm of competition to actual quality.  If a differently-organized college can get equivalent or better results for its students, acting ethically, then bring it on; that’s healthy competition.  But if it’s offering a watered-down product, shut it down.  

In other words, use student learning outcomes to measure the effectiveness of instruction.  Compete on quality.

If we went in this direction, I’d expect to see for-profit higher education bifurcate.  At the “low” end of the spectrum, it could continue to offer the programs that the publics don’t.  (I’m thinking here of the classic bartending or truck-driving schools, but specifics will vary by location.)  But I could also imagine a new focus on the high end.  If they have to charge more than the publics and the MOOCs -- which they would, since they’re taxed and unsubsidized -- then they’d have to offer some kind of value beyond what the publics and MOOCs do.  A for-profit that chose to specialize in one or two programs could conceivably do a very good job with them.  I could even imagine special cases in which a given community college might cede a particular program to a for-profit provider that does a particularly good job with it.  

Even better, this approach would provide a framework for simultaneously dealing with MOOCs and whatever the next big tech breakthrough will be.  Rather than either circling the wagons against the future -- a losing strategy if ever there were one -- or uncritically embracing The Next Big Thing, I’d rather see us compare its actual results to what we’ve been doing.  I’m confident that we’re doing a good job, by and large, and that a fair test would show that.  But confidence and knowledge are not the same thing.  

Instead, most of the dialogue has focused on student loans, placement rates, and advertising.  Those are symptoms.  The underlying issue is quality.  Most of us would accept the proposition that a premium product could legitimately command a premium price.  Since there’s often a serious information asymmetry in the market -- many prospective students have no reliable way of judging quality -- it’s possible for a provider to substitute sizzle for steak and do well for itself for a while.  But the information asymmetry strikes me as largely curable.  And if it is, and prospective students get the benefit of various institutions competing on quality, I see everyone being better off.

Our politics is poisoned, because we pretend that “the market” and “regulation” are somehow opposed.  Good regulation enables a functioning market.  Let’s try it.