The debate continues about the academic efficacy and student adoption/retention practices associated with "private sector" colleges and universities. Also known as "proprietary" and "for-profit" education and sometimes referred to as the "career college" market, this is a growing segment within the higher education landscape both in terms of numbers of students and educational dollars. I've attempted an overview of the segment that includes the recent/ongoing political controversy as well as insights into their program design practices that, for some of these institutions, promise real educational reform and opportunity for otherwise neglected student populations.
I should start by saying that my employer, Harvard Business Publishing, has relationships with several of these institutions. We provide content used by some of their business programs and have invited members of some of these schools to sit on advisory boards related to initiatives we have concerning online education. And likewise we have been invited to sit on advisory boards, attend symposia and conferences, etc, related to this sector as it pertains to our business education market. As stated in the 'About' section of this blog, the views here represent my own and not necessarily those of my employer. Hopefully my experience working with some of these institutions adds a perspective that might otherwise go under-represented in the current media coverage.
I should also note that a large number of the links in this post can be attributed to the Inside Higher Ed website. This is a phenomenal news source for anybody interested in this or any topic concerning higher education policy in the U.S.
The trade association for this sector is Association for Private Sector Colleges and Universities (APSCU -- formerly the Career College Association). APSCU has over 1500 member schools, a number deceivingly large partly due to the fact that acquisition in this market leads to many umbrella corporations owning multiple chains of schools. According to APSCU, members are:
...postsecondary institution(s) that provide professional and technical, career-specific educational programs. Most private sector colleges or universities pay taxes yet receive no direct financial support from state governments, unlike public, not-for-profit institutions that receive state tax support or not-for-profit private colleges that pay no taxes...All APSCU members must be licensed by the state in which they are located and accredited by a national or regional accrediting body approved by the U.S. Department of Education.
Basically, these are companies (some private, some public) in the business of providing certificate and degree programs to students. (See 'The Controversy' section below for the implications of how tuition is tied to federal student loans.) While initially these schools were 'career' programs tailored to technical skills, many have evolved to include post-secondary and advanced degree programs. APSCU goes on to define the value proposition of these schools to learners and to the economy:
Private sector colleges and universities focus on the needs of both students and employers. Many offer online courses of study, flexible course schedules and accelerated completions to meet the needs of working adults juggling study, full time employment and personal commitments. Many private sector colleges and universities also have business advisory councils that help shape curricula and develop programs to meet growing and shifting workforce demands.
As adult, working students are the predominant audience, the community college was the initial primary non-profit competitor of these schools. APSCU claims that the private sector colleges & universities (PSCUs) maintain much higher graduation rates than their community college counterparts and can react more quickly to market (employer) needs. While sometimes referred in a derogatory sense as "diploma mills", the fact that these institutions are usually centrally managed means that the ones with effective program design actually have created scalable, effective learning platforms for their students (see the 'Learning and Reform' section below).
The market size of this sector is formidable. APSCU cites that "over three million students attended accredited private sector college or universities in 2008-2009, which represents about 12% of the total market of nearly 27.5 million students", a 46% increase over the five years prior.
The students are largely an 'underserved' population within traditional higher education, a point relevant to both proponents and opponents of the sector. APSCU describes the overall student body as 41% minorities with 3/4 of students defining themselves as "independent or self-supporting". 60% are over the age of 24 and 47% have dependent children. Almost 40% are employed full-time while enrolled.
This is an oversimplified summary of the concern regarding the sector: that they incent recruiters to admit students by misleading them with unfair expectations about earning potential and post-graduation job possibilities, etc, after which many students graduate and cannot find adequate employments and hence default on their student loans. And since the predominant form of payment for these students is federal student loans and grants, this amounts in opponent's eyes as an abuse on taxpayers. The New York Times reported that last year, for-profit colleges received $4 billion in federal grants and $20 billion in Department of Education loans. They also summarized the loan repayment climate:
Although the department issued no analysis or comparison of repayment rates by sector, outside advocacy groups that analyzed the data found that in 2009, repayment rates were 54 percent at public colleges and universities, 56 percent at private nonprofit institutions, and 36 percent at for-profit colleges.
In August Inside Higher Ed reported on a "Secret Shopper" campaign by the Government Accountability Office in which GAO employees posed as prospective students and were given very misleading information by some of the recruiting personnel at private sector institutions. Updated rules were implemented, including:
- Improved disclosure: "Establishing requirements for institutions to disclose on their Web site and in promotional materials to prospective students, the on-time completion rate, placement rate, median loan debt, program cost, and other information for programs that prepare students for gainful employment in recognized occupations."
- Elimination of safe harbors for incentive compensation: "For these reasons, we believe it is appropriate to remove the safe harbors and instead to require institutions to demonstrate that their admissions compensation practices do not provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid to any person or entity engaged in any student recruitment or admission activity or in making decisions regarding the award of title IV, HEA program funds."
One of the most controversial proposed rule changes related to "Gainful Employment", or graduates’ ability to repay student loan debt by achieving jobs (with commensurate salaries) in their field upon graduation. The rules seek to hold Gainful Employment as a reasonable indicator of whether private sector programs fulfill the mandate of Title IV of the Higher Education Act of 1965 in order to qualify for federal student aid: prepare students for "gainful employment in a recognized occupation". And in general the Department of Education has been crafting new rules aimed at curbing the abuses of admissions and financial aid officers at these institutions.
While Education Secretary Arne Duncan claimed that "the many good actors should be protected from being tainted or being tarnished" by the misdeeds of a small minority, the truth is that the regulations would have far reaching impact across the sector. Duncan elaborated: "These schools -- and their investors -- benefit from billions of dollars in subsidies from taxpayers, and in return, taxpayers have a right to know that these programs are providing solid preparation for a job." The Huffington Post summed up the growing comparison to the mortgage crisis with regard to the prototypical PSCU student borrower:
...the more you absorb the argument, the more it begins to sound like the same flavor of case that predatory mortgage lenders made in justifying the high-interest loans they actively focused on poor and minority communities across the country. You who might find fault with a working poor family signing off on a subprime loan: Are you suggesting that people who are not wealthy, who do not work in elite offices, don't deserve the American dream of homeownership?
Ultimately this led to Congressional hearings and what Inside Higher Ed called Shellacking the For-Profits. And that was only one aspect of the mounting criticism. The Education Trust released a critical report and The American Association of Community Colleges released a report clarifying the differences between community colleges and PSCUs. And professionals from non-profit competitors weighed in with stark criticism of the sector as a whole. Whistleblowers from sector schools came forth to allege fraud and 'guerrilla registration' techniques. Media pundits expressed concern over the Washington Post testifying on behalf of its most profitable unit, the Kaplan test preparation business and its newer Higher Education counterpart. Even individual states began investigations (here's a letter of allegations from Wisconsin's Educational Approval Board to the University of Phoenix). And PBS' Frontline released the television program College, Inc. and companion website.
The industry has responded to these allegations on a number of fronts. On the public relations front they have founded the Coalition for Educational Success to socialize their mission and value proposition. (And this site/organization takes a direct anti-government perspective, urging visitors to "Take Action! Prevent the government from limiting your access to higher education.") The Coalition frames the overall response to the Gainful Employment proposal (see slide deck summary): that these schools cater to unmet demand; that they successfully prepare students; that these standards are unfairly only targeted at their sector; that their education costs less in federal dollars than those channeled to community colleges (they claim 1/4 the cost); and that they cater to non-traditional, at-risk students who otherwise have few educational avenues open to them. The Parthenon Group also was contracted by members of the industry and produced a presentation as well.
The sector also did change tactics with regard to student recruitment and retention. For instnace, the University of Phoenix introduced a new student orientation program designed to provide a no-risk method for both school and student to assess the fit before committing to enrollment. But in general, at least according to what is readily available online, the response seemed weighted toward an increase in lobbying efforts to promote and clarify the value proposition of these schools.
Regarding response to the most damanging specific political blow -- the GAO sting operation -- the industry rebounded slightly thanks to a December 2010 revision by the GAO (reported here via the Washington Post). While the GAO upheld its overall claim that colleges had encouraged fraud and misled potential applicants, they had to soften several examples that had originally overemphasized the degree to which the infractions appeared to be widespread within the industry (as opposed to outlier incidents). See here for a side-by-side comparison of changes detailed by The Washington Post.
And others stepped up to give testimony -- a more positive view of the secret shopper experience, a sympathetic view to the for-profit mission, statements on the value to taxpayers, reminders that the non-profits have had their own student loan scandals, etc. Tuition costs are a huge issue across the entire landscape and many question the ROI for any higher education tuition, not just PSCUs. (I also came across some interesting tools that shed light on the cost issue -- a nifty tuition-over-time calculator posted by the Chronicle of Higher Education and a student debt by state calculator put out by the Project on Student Debt.)
The impact has clearly been felt already across the sector and may change more as the political landscape changes. The past several years have seen explosive growth in employees in this sector, but recently that trend may be shifting: schools like sector giant Univeristy of Phoenix (Apollo Group) were forced to cut hundreds of jobs. A potentially innovative partnership in California between community colleges and Kaplan University was scuttled (details and commentary). The Congressional shift of 2010 will also affect this (and as the Chronicle reported, this sector certainly sought to affect that election as well -- see donations to political party by for-profit company). Incoming Congressional leaders are already commenting on the Dept. of Education's proposals (early insights here and here). And perhaps most damaging and telling for an industry that relies on private sector investment dollars: investor reactions.
Learning and Reform
Clearly the marketing and recruitment anomalies uncovered by the original GAO investigation are major issues that warrant industry-wide self-examination and constructive reaction (rather than questioning the role or efficacy of the GAO, which is a ridiculous reaction that some of the lobbyists fell prey to). Also, the push to ensure that students understand the financial implications of loan repayment is a worthwhile endeavor in any higher education setting. These are real areas of concern that mandate responsible reform -- hopefully they will mark an evolution in the quality of the entire sector.
However, it's also worth noting that some players in this sector differentiate themselves with regard to pedagogical design, and do so in ways that demonstrate best practices in learning science. The gainful employment regulation even as it stands today affects the overall operation of many of these schools. This mandate causes the best of these schools to be extremely focused on identifying the skillsets and competencies necessary for success (thereby attracting employers to hire their graduates), mapping learning outcomes to those competencies, and developing curricula that achieve those learning outcomes. The superstructure necessary to deliver this kind of 'learning supply chain' -- careful program design, assessment, analysis of student performance metrics -- is a wish list of best practices desired across all of higher education. The fact that they are centrally-managed doesn't need to mean "diploma mill" -- it should only mean that the best of these schools can scale that innovative design and achieve consistency and impact across large numbers of students.
This outcomes-based "superstructure" is a foundation for many best practices that are constantly cited in higher education. The Center for College Affordability and Productivity released a report that basically calls for a more outcomes-based approach to the entire higher education accreditation process, specifically in light of tuition costs. That's just one example of an interesting contradiction to the current political sentiment: PSCUs might be considered to be employing the type of outcomes-based educational programs that ultimately are on the right side of the affordability issue. The National Education Technology Plan calls for "revolutionary transformation rather than evolutionary tinkering" and identifies problem's with today's educational system, many of which are addressed to various degrees by this industry: lack of a focus on 21st century skills (problem-solving, online interactions), confinement to traditional classrooms, lack of technological infrastructure, failure to incorporate innovations from business and culture, lack of assessment, etc.
At the very least, the non-profits of higher education can learn alot from the PSCUs. Joshua Kim of Dartmouth makes a good case for learning across at least 3 categories: course development and faculty training, course design and course technology, and learning outcomes and measurement. He adds that "the growth of the for-profit education sector, and the tension between for- and non-profits to claim resources and control the educational policy agenda, will be the defining theme of postsecondary education over the next 20 years." He goes on to invite exploration of themes common to both sectors, themes including quality of education, openness of content, cost of education, and provision of services to emerging (global) educational markets.
Lloyd Armstrong, University Professor and Provost Emeritus at the University of Southern California, wrote a fantastic consideration of the disruptive potential of for-profit education ('disruptive' in the Clay Christensen sense) in his excellent blog, Changing Higher Education. He begins by discussing the cost topic:
The sector has controlled costs while the rest of higher education has given at best lip service to the issue. Cost control has been at administrative, facilities, and instructional levels. In the last of these, new instructional approaches have been developed. Many of these institutions build new courses by involving subject matter specialists, learning specialists, and media experts in a real partnership of equals to create an approach that encourages learning – a costly approach compared to that followed in the non-profit world where the faculty member is expected to play all three roles while being trained only in the subject matter role. This approach, however, enables a variety of options in presentation that can greatly decrease overall costs.
He then outlines the basics of Christensen's theory of disruptive innovation and applies context to the theory by exploring traditional, non-profit education as a sector potentially ripe for disruption by the for-profits -- particularly as it relates to the exploration of online learning championed by many PSCUs:
Clayton Christensen’s classic management work The Innovators Dilemma describes what happens to industry leaders when an upstart brings a disruptive innovation into an industry...Christensen’s work shows that it is almost impossible for industry leaders to successfully adopt a disruptive innovation. Primary reasons for this failure include 1) a corporate mind set that refuses to acknowledge that the new approach brings a quality proposition that the customers will find more valuable than the traditional approach; 2) an infrastructure built to support the more expensive traditional approach prevents the new approach from being used in a cost- effective, competitive way; and 3) the new approach provides direct competition to the old product, and thus poaches customers away from the old product.
...All of the red flags raised by Christensen are present: 1)The faculty – who make up the academic management of traditional higher ed – are broadly and actively hostile to the for-profits and their approach. They generally are convinced that the education being offered is second class and the approach is simply wrong. Crafting courses in response to input from businesses is often viewed a violation of academic freedom. As a consequence they resist attempts by their institutions to consider the innovations emerging from the for-profit sector. 2)Where such innovations as online learning are implemented, they are simply grafted onto existing structures and approaches. This leads to the oft heard- and completely incorrect- statement that creating and teaching an online class is more expensive than a traditional classroom one. It only seems more expensive because we accept as our baseline the very expensive infrastructure underlying the traditional classroom course, e.g. physical classrooms built at high cost to signal the serious academic standing of the institution; expensive facilities poorly utilized because of a rigid academic calendar; and costly research faculty who teach only a few courses per year to a relatively small number of students. If we accept this baseline as necessary, then the marginal cost of producing another traditional course is certainly less than the marginal cost of producing an effective online class. However, to bring the disruption into the university, we must recognize that none of these costs and restrictions need apply to the new product if we start with a fresh approach. 3)There is an oft-articulated fear that “online education will draw students away from our traditional courses”. One response has been to price online courses higher than the traditional ones, which is hardly the way to create the market share necessary to compete with the innovators.
It's interesting that Armstrong brings up the online learning angle. The sector contains a mix of brick-and-mortar, hybrid, and fully online schools/programs. But it's true that for those focusing on online learning, they are figuring out what works and what doesn't in ways that are years ahead of traditional programs who have yet to fully experiment with the online format. Several PSCU institutions have been recognized in Blackboard's Exemplary Course Program. (Here's an interesting interview with Armstrong where he discusses several important topics in higher education including for-profits, disruption, and learning outcomes.)
Peter Smith, Kaplan University Senior VP of Academic Strategies and Development (and author of Harnessing America’s Wasted Talent: A New Ecology of Learning), had this to say in an interview with the LinkedIn Higher Education Management Group when asked if the "proprietary model" offered opportunities for innovation that are not available within non-profit institutions:
Absolutley. One of the main reasons that I chose to work at Kaplan was that I wanted to experience the culture of the “for profit” sector and see if they were any better at embedding and sustaining significant change and continuing innovation. Although businesses are subject to the same realities of organizational culture as any other organization, they are far more focused on the results, student learning and employment. So, employing teaching and learning practices that are known to be best practices characterizes the culture, not the infighting and autonomy that has come to characterize much of traditional higher education’s behavior.
This is no idle endoresement given Smith's pedigree -- check his bio summary at the conclusion of the interview. And I can say from firsthand experience that many of these institutions are managed by incredibly competent people who are passionate about education and their work on behalf of students in higher education.
If the industry reacts positively to enact real change in light of some of the real allegations, certain high-quality players in this space could provide models for real reform and realize the promise of disrupting traditional higher education providers. 2011 will be an interesting year to watch this space.
For more information:
- Inside Higher Ed blog - "In Focus" page on for-profits
- Changing Higher Education blog
- LinkedIn Higher Education Management Group blog
- Association for Private Sector Colleges and Universities