By Richard Vedder
The unsustainable rise in the relative cost of higher education opens the doors for new approaches introduced by for-profit entrepreneurs. The for-profits have flourished outside the core 18-24 year old market, but now they are taking hold there, as well.
I spent an hour talking last night with Andrew Clark, the young, smart and energetic CEO of Bridgepoint Education, one of the more successful new private equity financed for-profit companies. All told, Bridgepoint serves 18,000 or so students, up exponentially in recent years. But most intriguing, they run a 500 student traditional liberal arts college (Ashford University) in Northeastern Iowa, charge $8,000 tuition and, they tell me, are breaking even or making a profit. Three cheers for them. This is sort of an empirical verification of what our friend Vance Fried of Oklahoma State University is telling us --you can offer a good quality education for a very affordable price (we are going to be publishing a study by Vance outlining his ideas in detail very shortly).
As entrepreneurs like Andrew Clark, Randy Best, and the established entrepreneurs at places like the University of Phoenix continue to gain market share, they will force the traditional highly subsidized legacy schools to consider changing their ways. To be sure, some of those traditional schools compete in another segment of the market --the high-end market led by the Harvards, Yales, Princetons and Wilherst's (Wllliams + Amherst = Wilherst) of the world. Maybe soon one of the for-profits will open a yuppie university, part country club, part first class liberal arts institution, to compete with the legacy schools. We will have the Ashfords of the world being the Targets or Best Buy of higher education --offering good service at low prices, but we may have other for-profit privates being the academic equivalent of Neiman Marcus, Nordstrom or Bergdorf Goodman.
Yesterday, a prominent individual speaking of higher education said the following in a speech:
"Financing has become chaotic, compromised and unsustainable, based on ever higher fees burden and a dangerous over-reliance on cross subsidization.... A bewildering array of student financing arrangements has been put in place; each change adds another layer on top of past mistakes..."
Who said this? Charles Miller (Spellings Commission chair)? Margaret Spellings (U.S. Secretary of Education)? Myself? No --but anyone of us could have done it. Rather, it was Julia Gillan, Minister of Education for Australia. I hope other countries are not blindly emulating the American model --with all its flaws.