The ideological battle over higher education that emerged with the development of for-profit colleges has been dramatically altered by the announcement that Strayer University will reach into its deep pockets and start offering scholarships for qualified students. Strayer University, which holds a highly-regarded regional accreditation, offers career-focused college degrees through both its brick-and-mortar campuses and online programs, and recently acquired the Jack Welch Management Institute, through which it offers MBA degrees. With an average tuition of $18,000 per year, Strayer’s costs for the student are more than double the average cost of tuition at a public college or university, which is a little over $8000 per year. The new scholarships at Strayer can amount to up to a 30% discount off of the standard tuition, representing a substantial reduction in cost that will greatly benefit its students.
Some view Strayer’s new scholarships as a direct response to the criticisms of for-profit colleges over the past few years. These concerns include the industry’s low graduation rates and high student debt ratios, which co-exist alongside the large profits that accrue for its stockholders. For example, “for the second calendar quarter of 2012, the company reported net income of $21.2 million from total revenue of $146.3 million,” and CEO Robert S. Silberman earned $41.5 million dollars in 2009 alone, from a combination of his annual salary and restricted stock grants.
This is the kind of economics that led to the congressional investigations of for-profits and new regulations by the U.S. Department of Education. According to Paul Fain on Inside Higher Ed, the new forms of financial aid and scholarships that are now starting at for-profit colleges are an attempt to address those criticisms by refocusing on student success:
“For-profits have several reasons to consider discounting, observers said. They have been battered by steep enrollment declines, and scholarships can help get students in the door (or online). Some aid programs are also structured to encourage students to get to graduation, which can boost the industry’s much-maligned retention rates.”
In the case of Strayer University, enrollment declines and high rates of withdrawal are at the center of the new scholarship program. Academic quality does not seem to be an issue because student complaints about the university seem to focus mostly on the financial issues related to enrollment, not academics, because the university is clearly more successful at stewarding students through to graduation than most for-profit colleges. However, Strayer still has a drop-out rate of about 1 in every 3 students. These students leave school with substantial student loan debt, which is the exact problem with for-profit universities highlighted in the congressional investigation. The hope of the school’s administration is that scholarship availability will make enrollment a more attractive choice to more high-achieving students, who will be able to complete their degrees.
But the move is not all about student success: economic gain is still part of the university’s modus operandi. As Fain explained, Silberman recently justified the new scholarships to shareholders by arguing that the program will provide an “ancillary benefit” because “the university can earn more tuition from a student who stays enrolled, and avoid having to spend money recruiting one who might’ve dropped out.”
How Does This Change the Debate?
Until now, most of the debate over the validity of for-profit higher education has centered on a somewhat moral argument that for-profit education is wrong because it exploits a basic human right, the right to education. As William G. Tierney explained last week on The Huffington Post:
“Education has never been simply a “service.” Correctly or not, the citizenry always has seen it as one of the things that ties the fabric of the country together. Public education is not only a right for everyone, but it also creates more commonalities than differences. The Harkin report implies that the profit motive doesn’t belong in such a noble enterprise. Its treatment of for-profit executive-compensation packages is more accusation than straightforward reporting. The CEO of American Career College, for example, reportedly made $18 million last year. That much profit, the report implies, is somehow wrong.”
On the other side of the argument, Tierney explains that supporters of for-profit colleges argue that the basic economics of such institutions, in which quality is based on consumer demand, ensures that the for-profit school must offer high-quality programs if it is to survive. This leads to the creation of more educational resources and options at for-profit schools than at their nonprofit competitors. Tierney adds that in the current crisis, in which public enrollments have increased so much that colleges and universities cannot meet the demand, for-profit schools address an important need. He argues that “they are essential to the country’s welfare. We need more people participating in postsecondary education, and our public institutions simply do not have the capacity or wherewithal to grow.”
The increase in economic support for students at for-profit colleges through programs other than loans, which has occurred at other prominent schools such as Capella, has the potential to alter the moral component of the debate, because tuition at non-profits will not solely be supported by loans that shareholders pocket in profit. For-profit colleges and universities will be investing in their students rather than students investing in the school’s net financial gain.
Without the moral component of the argument, what is left is academic quality-which should be the focus of every debate about higher education. Rather than be sidetracked by often valid concerns about economic exploitation such as occur at diploma mills, once the economic field is leveled between for-profit and non-profit schools, we can get back to the discussion of the most important aspect of higher education: do our schools provide high quality education at the college level that is not dumbed down to the lowest common denominator? Hopefully, the new direction of for-profit higher education will help reduce other concerns about the enterprise, so that we can all get back to focusing on what is really important.