Charlotte Allen at Minding the Campus responded to my post on her post about for-profits:
As someone who believes in the free market, I’d like to see for-profit education flourish and even provide models for delivering high-quality higher education efficiently. Those models have yet to emerge, as far as I can see.
The reason, in my opinion, is the corrupting influence of federal money.
Yes, Phoenix has been around for years, but it’s also changed its business model in order to maximize enrollments. It started out focusing on people who already had pretty good jobs but needed college degrees in order to qualify for promotion to better jobs at their companies. This was undoubted a fairly mature and highly motivated group and far less dependent on federal aid.
Now, Phoenix is essentially in competition with community colleges for low-income, poorly prepared, easily distractible students who aren’t the best prospects for graduating from anywhere. Pell grants are notorious as predictors of student failure — and the vast majority of students at for-profits have Pells. The easy money has also led to the same tuition inflation as has plagued the non-profits, maybe not at Phoenix but elsewhere. I read about a beauty school that charges $16,000 for its one-year course, with something like 75 percent of its student body on Pell grants. $16,000 a year for beauty school! And since when is beauty school “higher education”?
The point of my piece is that wherever you have free money, you have rent-seeking — and also disincentives to provide quality services when you can coast along on mediocre services.