NCPA - National Center for Policy Analysis


December 9, 2009

Today, for-profit colleges enroll 9 percent of all students, many of them in online programs.  It's safe to assume they'll soon have many more.  President Obama has called for America to have the world's highest percentage of college graduates by 2020, and for-profits are the only sector significantly expanding enrollment -- up 17 percent since the start of the recession in 2008. 

Emerging from its scandal-plagued "diploma mill" rep, the industry consolidated in the past decade under a handful of publicly traded names, including Kaplan (part of the Washington Post Co.), DeVry, and the University of Phoenix, which with 420,000 students is the largest university in North America.  These companies, which depend on tuition revenues backed by federal student grants and loans, have been strong performers for stockholders, says Fast Company magazine.

While private colleges have taken huge hits to their endowments, and public universities weather historic cutbacks, for-profits keep costs down with innovative use of technology, publish metrics like job placements, and are open to any high-school graduate:

  • They target under-served markets like first-generation students and working adults with convenience and a customer-service ethic.
  • Tuition and fees, which tend to be higher than public institutions' for on-campus programs, are comparable for online -- $687.50 per credit for undergrads on campus at Grand Canyon and $415 for online, for example, compared to $476 for the public University of Arizona.

But questions about quality linger, says Fast Company.  Despite the traditional campus trappings, many schools tend to have a vocational focus, such as health care administration (L.A. College); only Grand Canyon and Crichton College have any liberal-arts programs.

Since there are no generally accepted measurements of learning in traditional higher education, the proxy for the value of a diploma on the job market is prestige.  Rankings like those of U.S. News & World Report depend on reputation; spending per student, including spending on research; and selectivity -- a measure of inputs, not outputs.  On all these measures, for-profits come up short, says Fast Company.

Source: Anya Kamenetz, "For-Profit Universities Want Some Respect," Fast Company, December 1, 2009.

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