For-Profit Colleges Hardly Have a Monopoly on Student Exploitation

Posted: September 24, 2010 in Commentary
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In recent months, a number of media outlets have launched bazooka on bumblebee smack-downs of the for-profit education industry. PBS’s Frontline recently aired College, Inc., and Bloomberg BusinessWeek has reported on the for-profit industry’s recruitment of the homeless.

But with only about 7% of all students attending for-profit colleges, are they really worthy of all the bad press?

Relax: I come to bury the for-profit colleges, not to praise them. As I’ve written before, I don’t believe that anyone should attend a for-profit college for undergraduate education. Even if they have the best of intentions (and most don’t), they’re at a significant competitive disadvantage to their non-profit peers: they have to pay taxes, don’t benefit from rich endowments and donations, and generally don’t own millions of dollars worth of real estate free and clear: their cost of capital is far, far higher than non-profits. These obstacles make it nearly impossible for for-profits to compete with non-profits on a value basis — even before you take into account the profits they pay out to shareholders. That they are able to compete as well as they do is actually a testament to just how poorly-run non-profit colleges are.

The issue here — and the reason I’m getting sick of all the for-profit trashing — is that for-profit institutions hardly have a monopoly on exploiting undergraduates to fund projects that don’t benefit them. The University of Phoenix charges inflated fees to fund dividends and executive bonuses. The University of Florida charges inflated fees to pay basketball coach Bill Donovan $3.3 million per year and MIT spends $200,000 per bed on a vanity project dorm. Colleges across the country dole out massive salaries to high-profile faculty who conduct their own research and teach few classes.

And what of the claim that for-profits are shamelessly taking money from students who are unlikely to graduate and benefit from higher education. Bad news: non-profits do the exact same thing. As education expert Marty Nemko has reported, “[A]mong college freshmen who graduated in the bottom 40 percent of their high school class, 76 of 100 won’t earn a diploma, even if given 8 1/2 years. Yet colleges admit and take the money from hundreds of thousands of such students each year!”

There’s certainly a distinction between for-profits and non-profits — but it hardly seems like one that the non-profits can use to claim some sort of moral high ground. It’s time for the media to lay off the greedy capitalists who are exploiting 7% of college students and take a long, hard look at the greedy bureaucracies that are exploiting the other 93%.

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