The Agenda

The War on For-Profit Higher Education is Heating Up

It’s that time again. You will be shocked to learn that non-profit higher education institutions are waging war on for-profit competitors. As the for-profit sector has mushroomed, it has experienced serious problems, including dismal borrowing-to-credential ratios. This is a serious issue that should be addressed by reforming the formulas the federal government uses to support less-affluent college students, regardless of whether they attend for-profits or non-profits. Yet somehow that obvious proviso — treat all schools equally — is getting lost in the shuffle, possibly because non-profits have a large and powerful lobby that is not defined as a lobby: the hundreds of thousands of articulate, politically-active people who depend on non-profit higher education to make a comfortable living. 

Matthew Denhart summarizes the Vance Fried argument: 

In a new policy analysis released last week by the CATO Institute, CCAP Faculty Fellow Vance H. Fried argues that non-profit higher education institutions actually turn considerable profits off the backs of undergraduate students. How can a non-profit be profitable? Fried explains that the profits are not overt, but rather are realized when the revenues gained from providing an undergraduate education exceed the costs associated with providing that service. The profits are not paid to investors, but rather take the form of unnecessary expenses “on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding.”

The difference isn’t that one sector generates profits while the other does not. Rather, it’s about whether the profits are explicit or not. 

I recommend reading Rick Hess on this subject. His focus on the needs of nontraditional students is particularly important. 

This is one of those perfect storm issues: the kind of people who disproportionately drive ideological formation in this country are also the kind of people who either work for (and profit from) or have a sentimental attachment to traditional non-profit higher education. This makes the fight against the incumbent protection racket in this domain an even steeper climb than it is everywhere else. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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