The Important Difference Between For-profit and Nonprofit Colleges

Career College Central Summary:

  • Robert Shireman: I am sympathetic to the instinct to ignore the question of whether a college is accountable to owners (for-profit), or, alternatively, is answerable to a financially disinterested board (nonprofit or public). While there is a higher incidence of problematic behavior at for-profit colleges, there are also nonprofit and public institutions that don't do right by students and the public interest.
  • The term nonprofit creates the wrong impression about the restrictions that come with the moniker. The key difference is the prohibition on personal profiteering by institutional decision-makers, known as the non-distribution constraint.
  • The non-distribution constraint does not ensure that nonprofit and public colleges are great, but it does explain the differences we see in the decisions and behaviors of the sectors.
  • Because for-profit colleges have chosen to operate without the non-distribution constraint, they have a stronger drive toward efficiency and growth. At the same time they have a greater tendency to shortcut quality and engage in unscrupulous marketing. Unfortunately it's a package deal.
  • In a thoughtful response to my paper, Jorge Klor de Alva, former president of the University of Phoenix, says that for-profits can deliver if they can somehow be restrained from the short-term temptations that plague them. Financial aid expert Mark Kantrowitz told me something similar a couple of years ago: "The problem with for-profit colleges is that when the company sacrifices long-term success for short-term gains, they are also sacrificing students… So the key question is how to restructure the entire industry so that long-term success is never sacrificed for short-term gains." He added that the gainful employment regulation "is a step in that direction, but it's not a complete solution."

Click through to read the full article.


Leave a Reply

Be the First to Comment!

Notify of