Editorial: For-Profit Colleges are No Answer to High Tuition

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January 29, 2012

Out on the campaign trail, Mitt Romney is recommending for-profit colleges as an answer to rising tuition. At least once he has lauded a particular institution, Florida-based Full Sail University, which is run by a major campaign donor.

A closer look at the record of for-profit universities suggests that Romney needs to go back to school on the issue. The industry is plagued by institutions with low graduation rates and high loan default rates. As for costs, the average student at a for-profit college spends $30,900 per year for tuition and living expenses, according to the Education Department. That's almost twice the $15,600 that students at public colleges spend, and considerably more than the $26,600 that students at private, non-profit colleges spend. How can the answer to expensive public and private education be another category that costs even more?

The reason for-profit colleges won't hold down higher education costs is similar to the reason that health care costs keep soaring, even though the medical industry is dominated by for-profit hospitals, for-profit drug companies, for-profit medical practices and for-profit insurance companies. In both education and health care, many customers are largely spending others people's money, negating the usual effects of competition.

A pharmaceutical company, for example, can sell a lot more of a drug, and charge much higher prices for it, if the cost to the customer is a small fraction of the total cost. Similarly, a doctor has a much easier time selling a patient on an expensive procedure if the patient only has a modest deductible or co-pay.

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USA TODAY