Nobody Wins When We Regulate Out of Ignorance

By William Tierney and Guilbert Hentschke

For-profit higher education has become a political pinata. Three Senate hearings have produced evidence of deceitful recruitment practices, unsustainable student-debt burdens, fraudulent promises of future jobs and high dropout rates at for-profit colleges.

In response, Sen. Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee, plans to propose legislation after the mid-term elections to curb industry abuses. Some for-profit critics would even like the schools to go away.

Like it or not, we’re stuck with for-profit colleges. The roughly 3,000 for-profit colleges and universities now account for 12% of all post-secondary students, and they are closing in on serving 2 million students. Financially strapped public colleges and universities are in no position to absorb a rush of new students should for-profits start closing because of tougher regulation.

The problem, lost amid the heated charges of widespread fraud in the industry, is that we too little about for-profit colleges to devise a proper regulatory framework for them. Leaders of traditional and for-profit colleges, locked in a cold war atmosphere for years, have stymied comparative research because they feared that objective data would either illuminate the strengths or demonstrate the weaknesses of for-profit colleges.

That has produced some yawning gaps in our knowledge of the fastest-growing sector in higher education. Consider:

We have no reliable industry-wide data on how many of the nearly 2 million students who begin classes actually complete a degree or certificate program. What exists, at best, are scattered reports issued by various colleges or sweeping analyses of the entire sector, none of which yield reliable information.

More important, there is virtually no research that tells us how for-profits compare in terms of graduation rates with their public- and private-school peers. A 2010 study by the Parthenon Group, an independent research organization, is one of the few that examines this question. Using U.S. Department of Education data from 1996-2001 to look at students seeking two-year degrees or certificates, it found that 65% of the students attending for-profit colleges earned the associate degrees or certificates, compared to 44% at community colleges.

Even that data, while encouraging, is hardly sufficient to serve as the foundation of a new regulatory schema.

There is no systematic data on how effective for-profit colleges are in helping their graduates land meaningful jobs and on how well they are prepared for them. This question goes to the heart of the proposed "gainful-employment" standard, currently under review by the Department of Education, that would cut federal aid to for-profit schools – a major source of their profits — if student-loan repayment rates fell below a certain level. Draconian rules would no doubt put many for-profit colleges out of business. But the best information we have on the jobs/debt questions is no better than back-of-the-envelope projections.

We just don’t know how successful for-profit colleges are in overcoming the educational obstacles posed by students who need remedial classes in, say, math and English. If students are unable to correct their academic deficiencies, they will be unlikely to complete their studies. This is not only a problem in for-profit schools. More than two-thirds of all students in higher education require some remedial classes, but they are disproportionately represented in for-profit colleges, as well as community colleges. It is these students – older and poorer than their four-year public and private school counterparts – who overwhelmingly make up the new populations that must be tapped if we are to turn out more college graduates. They are also the same students most at risk of dropping out and defaulting on their loans.

There are some promising signs that the for-profit industry is opening its doors to research that will help fill in our knowledge gaps. Corinthian Colleges and the University of Phoenix have recently agreed to participate in research projects comparing their effectiveness against that of selected public institutions. The Career College Association, which represents 1,500 mostly for-profit colleges and universities, will host a major panel on comparative research at its annual convention next summer. And Kaplan University will share data on student performance with the chancellor’s office of the California Community Colleges.

Still, a plea for more research at a time when some critics have likened for-profits to subprime mortgage lenders and called for their extinction might seem quixotic. Yes, protect students from the industry’s worst abuses. But before we construct an ambitious regulatory framework, let’s see if the budding cooperative spirit between traditional colleges and for-profits produces research that could help us devise one based in reality.

It is not simply to the benefit of for-profit colleges that they succeed. By some estimates, we need to produce 22 million new degree-holders over the next eight years to meet the demands of our information-based economy. We cannot meet that goal if we over-regulate an industry out of ignorance.

William Tierney and Guilbert Hentschke, professors of education at the University of Southern California, are the co-authors of "New Players, Different Games: Understanding the Rise of For-Profit Colleges and Universities."


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