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Education at the Speed of Profit

ITT Technical Institute was hardly a fly-by-night operation. After 50 years in business as a for-profit technical school it was forced to close down after losing its accreditation and, shortly afterwards, eligibility for federal student loans. It’s merely the latest blow to the for-profit education market after the closing of Corinthian Colleges in 2015 and the dramatic paring back of the previously aggressive University of Phoenix.

Is there a future in for-profit education? Does the free market work, or should education be entirely run by and for the public?

Earning a BS in Debt.

Earning a BS in Debt.

First, a disclosure. I have a degree in Chemical Engineering from a private, for-profit school – Carnegie-Mellon, and I have worked under contract with online-only for-profit Capella University.

For-profit schools are under a lot of scrutiny for many good reasons. Most students finance their education, from any school, through as many grants and loans from the federal government as they can. Total student loan debt now tops $1.3 trillion, and is carried by 43 million Americans.

A lot of money has been cast around for education. While it is usually a good investment, you have to expect that it’s also a way of chumming the water for a lot of sharks.

Online Education is necessary for many students.

Online Education is necessary for many students.

That has been alleged on a broader scale in the ongoing threat to the Accrediting Council for Independent Colleges which is responsible for policing many of these schools. They are authorized by the Department of Education to give the thumbs-up on colleges of all kinds, but now face being shut down after a vote by an advisory panel. The Department of Education has until later this month to make its final decision.

Are for-profit schools, especially online-only ones, just a large scam to defraud taxpayers?

The short answer is that no, there are many good schools offering programs that meet the needs of their students very well. It’s a matter of verifying that this is indeed happening in real time with appropriate regulation. The system is based on an antiquated model of accreditation review every four years with various checks and balances. There are very few provisions for shutting down a school quickly and stopping the bleeding once problems are detected.

Until now, that is. The federal government is using its control of student loan money as a sledgehammer.

Most online education is run by traditional public universities.  Graph from US News & World Report.

Most online education is run by traditional public universities. Graph from US News & World Report.

This is one way to regulate the industry, but it’s not likely the best way. As a group, there are indeed many online options for education, most of which are run by more traditional public schools. They don’t necessarily respond quickly to changes in the needs of students. In a rapidly changing economy with new skills being developed every day a rapid turnaround is a great edge for anyone looking to stay current in their chosen career.

Education simply doesn’t typically move as fat as business – hence the idea of running education as a business.

If the only way it can be regulated is over the long term or with a sledgehammer of yanking public funding, however, the for-profit education industry, online and offline, has a problem. Students have to believe that the investment they are contemplating is worth the time and debt that it’s going to take to get a degree. One of the major complaints against ITT was that they inflated their statistics for employment after graduation – a stat most adult part-time students consider critical.

Forget time - money is what really flies

Forget time – money is what really flies

This is almost certainly a situation where more regulation, of the right kind, can only be good for the industry. Consumer confidence has to be high in order for the whole system to work. That’s true for any form of higher education, but especially true in the for-profit case. The value of the brand is made in part by the value of the whole experience across many brands.

As it stands, the ability to regulate for-profit schools has been demonstrated by the Department of Education – in a way that calls the entire industry into question. This helps to protect the public investment of grants, but it does not generate any confidence in the system. It calls into question whether or not any for-profit school should be eligible for federal grants or loans.

That’s a terrible shame because there is a place for education to change much more quickly in response to a changing job market. That’s not to say that anyone is really doing a good job of this now, but the principle is a good one. Appropriate regulation which can guarantee the education experience right now has to be developed for this industry to be able to bridge the terrible gap between immediate needs and long-term investment.

This may be impossible, of course. The goal of a workforce that is both skilled and flexible is a good one, however, and the process is certainly worth more consideration.

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11 thoughts on “Education at the Speed of Profit

  1. Surprised, somehow, to hear that IIT went down.

    I feel, though, that the mainstream of higher education in the US has essentially been using a for-profit model for a few decades. I can remember when one could take a course at the University of Delaware for $9/credit–in state rate–and frequently be taught by regular faculty, not exploited adjuncts or grad students. Now–I just looked–it costs $481in-state and $1,290 out-of-state. That is an increase of over fifty times in about fifty years. And I don’t want to hear that the University of Minnesota is not a for-profit operation. Or Penn State, or ….. It would be really interesting to go back and study the books for then-and-now to see what really happened. Point is, I suppose, that in talking about “education” we are too often discussing the business model rather than the performance. There is a Private College Council in Minnesota–the trade association–and I wonder what they lobby for…..?

    • The principle is that a for-profit model is more responsive and can give people the skills they need. That doesn’t work anywhere near as well as advertised and may be impossible given how these institutions have to be regulated.
      If there is a way out of it which demonstrates the value of for-profits I’m all for it. And I certainly value the education I received at Carnegie, although it was entirely paid for on scholarship.
      But as it stands now the only way we have to really regulate them is with a very blunt instrument. That doesn’t do anyone any good.

      • Yeah, I understand the argument. But if you look at industries that have a public sector component and also a for-profit component, and compare them for performance, it’s not so obvious that for-profit entities are necessarily more nimble. Electric utilities, say. Or higher education. There is plenty of bad management in both sectors.

        Equally, one can argue that if the game is education, as opposed to vocational training, trend-chasing may not be optimal.

      • I think that in this market, given the amount of structure, there is no way a for-profit will ever distinguish itself that much from a non-profit. Quality, sure, but that would be about the only way it could.
        I think the concept of a degree in “X” skillset is getting very silly. Certifications of some kind which are more flexible and quick make more sense – on top of a “Liberal Arts” kind of degree with maybe some general breakdown – eg, Engineering, Sciences, etc.
        A PhD in Chemistry I can handle. A BA/BS? I dunno.

  2. One of the problems is that we talk more and more about education and job training in the same sentence as if they are the same thing. Corporate America wants to shift their training and development on to the backs of taxpayers, and Corporate America is fickle. Education should not be about training…it should be about thinking and preparing students to develop a problem-solving mindset and abilities. Then, Corporate America should be responsible for training to the specific jobs they need. As with most things, Corporate America doesn’t want to invest in their business. They want government to subsidize them by training their workers, providing them research and development grants, allow them to not have employees but rather temporary independent contractors so they don’t have to pay benefits, provide favorable legislation so they can make it very difficult to form workers’ unions, and, on top of it all, providing them sweetheart tax deals so they don’t have to pay for any of these benefits. The more we equate education to job training, the worse our education system will become. And, by the way, your disclosure of attending Carnegie Mellon implies an equivalency between them and ITT Tech…puh-leeze….

    • Start with the last part – Hey, I had to disclose! It didn’t seem good without it up front!

      OK, as for the rest of it. Yes! The model we use is that everything falls on the worker. So we get some of that to be picked up by the government but where is the On the Job Training? I’ve written about this before and feel that it simply HAS to make a come-back.
      Looking at this news item strictly in isolation, however, we can see why. The model that implies skills are acquired from an educational institution which responds to the market really doesn’t work.
      It may work if we start talking about certifications rather than actual degrees, but as it stands now the model is broken no matter how you look at it.
      I’m not against private for-profit education. But I will admit that it’s not living up to a major part of its promise when it comes to what ITT was offering.
      If you think such schools should be closed I’ll tell you this – the free market is about to close them because consumer confidence is waning fast. The industry has to nearly re-invent itself if it’s going to remain – and it really does need more regulation, or at least better regulation, if it’s going to restore confidence.
      Is there a role for purely vocational education? I’d say yes, there is. Not as a centerpiece of all education, but there is a role for it. Is this the best way to do it? Doesn’t look like it is now.

  3. I don’t see that for-profit education adds anything to the system that can’t be done by public schools. There is no reason a state college or technical school can’t be held accountable to provide the education people need. They can also tie into the job bank information to make sure everyone has a job waiting. They should be able to respond better to the job market then the private sector!

    • A very good point. We can devise a whole system that also recruits students from the unemployment rolls. I’m not saying that would work for everyone, but it could work for a lot of people. It would work especially well for a 4-6 week certification program – basically, pass this and you have a job.

  4. If these companies can provide the skills people need then they have a role to play. If they lied about the number of jobs people got then they should be shut down. I don’t see how this is controversial. Even with student loans its not like people don’t have to pay them back so they must have selected this school for a reason.

    • If they do provide an important service I agree with you. I think Capella does, for one. But the whole industry could benefit from more regulation which makes consumers more aware of what they are getting into and builds confidence.

  5. Pingback: Great Article about Student Loan Debt written by Erik Hare! – Dad Tax

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