Tuesday, May 06, 2014

Competing with For-Profits

The news of SNHU’s College for America getting approval to offer bachelor’s degrees got me thinking.

What would happen if community colleges were to take as an explicit goal competing with for-profits?

We already do, in many ways, but it’s mostly incidental.  We happen to go after some of the same populations, and offer some of the same programs.  But it hasn’t been a distinct purpose.

I could see a strong public policy justification for doing it.  As a group, for-profits saddle students with far more debt than public colleges (and particularly community colleges) do. While quality within each sector varies, many for-profits are not regionally accredited, so their credits mostly don’t transfer.  (A few large ones, such as Phoenix and DeVry, are regionally accredited.)  To the extent that many for-profits leave students worse off than they found them, I can see a public good being served by making a more aggressive effort to provide a visible public alternative.

Of course, there’s also an easily imagined ideological objection.  Why should the government sponsor competition with private enterprise?  I’d find that objection much more compelling if the private enterprise in question weren’t almost entirely dependent on government-sponsored financial aid.

More to the point, though, what would a frontal competitive assault on for-profits look like?

Before we do anything else, we’d have to look seriously at what makes for-profits successful.  (In politics, they call it “opposition research.”)  They’re quite good at certain things; if they weren’t, they’d go out of business.  For example:

- They understand the salience of short-term barriers to applying.  As Tressie McMillan Cottom has pointed out, to a student who’s really up against it economically, a twenty thousand dollar student loan due years in the future might as well be monopoly money, but a fifty dollar application fee is a real barrier.  Admissions counselors in for-profits will go out of their way to track down transcripts, for example, to give expedited decisions on transfer credits, which tend to be generous.  (They understand the concept of a “loss leader.”)  

- They provide concierge-level service in areas like financial aid and admissions.  When I was at DeVry, the local on-campus enrollment peaked at about 4,000.  (This was around 1999-2000.)  It had an admissions staff of probably fifteen to twenty.  When I went to CCM, it had double the enrollment, with less than half the admissions staff.  To a prospective student who’s on the fence, the difference between being actively courted and being left alone may be enough to tip a balance.

- They advertise specific programs.  For reasons I’ve never entirely understood, public colleges tend not to do that.  They tend to focus on the overall brand, leaving it to the prospective student to find out whether a given college teaches, say, HVAC.  Most for-profits offer a much narrower range of majors than most community colleges do, by design.  That narrow range offers a clear and easily explained identity.  A college with a hundred majors, that doesn’t specifically advertise any of them, comes across as more of a black box.  

That doesn’t matter for students who already know what’s there, whether through family connections, friends, or just a general sense of higher ed.  But for students who don’t have those connections or contexts, it makes a difference.  

- They barely do remediation, if they do it at all.  They understand its impact on student retention and success.  Remember, from a business perspective, a retained student is a repeat customer.  And it’s much cheaper to retain a customer than to attract a new one.

It’s possible for non-profits to learn from these.  SNHU’s College for America, for example, is doing a spectacular job of offering a non-profit alternative by actually working with large employers to become the in-house education option.  It has a narrow range of majors, a low upfront cost, a built-in support system, and regional accreditation.  Now, it’s even offering bachelor’s degrees.  (It also has a competency-based model, helping it get around Baumol’s cost disease.)  I’m consistently impressed by what CfA is doing, and I hope that community colleges can learn from it.  It’s possible to build an effective, ethical competitor that meets the same needs as for-profits, but for a higher purpose.  In our own way, we could do something similar.

Culturally, we don’t have a history of taking on specific competitors.  But the world is changing.  I’m thinking it may be time that we address the competition head-on.