Despite scandal, for-profit education offers valuable model

By Steven Pearlstein
Wednesday, August 11, 2010

Last week's revelations about the high prices, uneven performance and shady marketing practices of for-profit universities have now cast a dark cloud over what had been the fastest-growing segment of higher education.

Giant companies that pay big bonuses and use high-pressure sales tactics to foist overpriced services on unsophisticated consumers who take on more debt than they can handle -- tell me if this doesn't sound like the educational equivalent of the subprime mortgage scandal.

I have two reasons to care about this. The first is that one of the biggest for-profits, Kaplan University, is part of The Washington Post Co., to which it has provided the handsome profits that have helped to cover this newspaper's operating losses. Although we in the Post newsroom have nothing to do with Kaplan, we've all benefited from its financial success.

The more important reason is that these revelations are a setback for the only serious challenge to a hidebound higher education establishment caught up in a self-destructive arms race for students, faculty, athletes, research funding and charitable gifts -- a competition that has driven up costs at twice the rate of everything else even as schools lag in meeting the educational needs of students and society.

These revelations provide a wake-up call to a heterogeneous industry that can't be categorized as all-good or all-bad, but that in general has grown too fast. It would be a huge mistake if the misdeeds of some for-profits were used as an excuse to snuff out badly needed competition from new business models, which offer the only way to make cost-effective higher education more widely available.

The key distinction isn't between selfish for-profits and selfless nonprofits. There is certainly something fishy about a for-profit spending 30 percent of its budget on marketing, but maybe that is because state governments allow community colleges to spend so little on recruitment, leaving large swaths of the population unserved.

Surely it's unacceptable when fewer than half of the students at for-profit schools graduate, but how much better do we feel that completion rates in the bottom half of the nonprofit sector average 45 percent?

Rapacious for-profit universities set their prices at what the market will bear. So do elite nonprofit schools, which despite wide variations in costs and endowments somehow manage to charge roughly the same tuition each year. Andrew Hacker, a professor at Queens College, and Claudia Dreifus, a science writer at the New York Times, lay out the indictment of the nonprofit establishment in their eye-opening new book, "Higher Education?"

Hacker and Dreifus document what many of us have long suspected -- namely that big-time research and athletic programs may bring prestige and excitement to a university, but in most cases don't generate any income to support the core educational mission. And they show that, over the past two decades, those tuition increases went toward doubling the size of administrative staffs, building better athletic facilities and increasing faculty pay while reducing teaching course loads.

Indeed, the real potential of for-profit schools is their focus on teaching and learning. Unlike traditional universities, they have been aggressive in finding ways to use technology to cut costs and achieve economies of scale. They make extensive use of videotaped lectures and online interactive tests. Classes often "meet" online, as well as in classrooms, and there are teaching assistants available 24/7 to help students with homework. All of this works particularly well for introductory courses, as well as for those that are part of professional training and certification.

There is no reason that these cost-effective new ways of teaching and learning couldn't be used effectively at traditional universities other than that they would disrupt just about everything -- routines, hierarchies, to say nothing of the incomes and job security of the tenured faculty. That pretty much explains why the higher education establishment has been reluctant to embrace new technology and methods. The usual explanation is that education is not a commodity, that the process of learning and teaching is too nuanced, that the quality will suffer.

The problem with this argument is that it's made by people who have resisted the introduction of objective metrics to gauge educational outcomes. Because there is so little use of nationalized tests of knowledge or skills, it is not possible to know what, if anything, is actually learned. For most schools, there is no place to find clear and comprehensive data about completion rates, the pay and debt load of graduates, and the sources and uses of funds.

So it's a good thing that Congress and the administration are now demanding just such information from for-profit schools, with the idea that those that fail to measure up will no longer be eligible for federal monies. The same level of transparency, however, needs to be demanded from nonprofit universities, which effectively gave the stiff arm to such an effort the last time it was tried, during the Bush administration.

Just as important, says Kevin Carey of the reformist think tank, Education Sector, the process of accrediting university programs needs closer government supervision. Right now, that process is firmly controlled by the establishment, which uses it to thwart disruptive innovation and preserve the preeminence of schools with highly credentialed tenured faculties, formal research programs, and large physical plants and administrations -- all the things that ensure that a college degree remains more expensive than it needs to be.

In the end, I suspect, the most effective model will prove to be one that combines the efficiency and accountability of on-line learning with the collegiality and interactive experiences of a traditional college campus. The surest way to get there is through the rigors of market competition -- the kind of competition that, up to now, only for-profit universities have been willing to provide.

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