Friday, June 06, 2008

For Profits: Part of the Solution

By Richard Vedder

The American Enterprise Institute had a nice conference this morning dealing mainly with for profit education. I left the room feeling that these schools are more a part of the solution than the problem. In a related vein, Jim Coleman and I have a new study out on For-Profit Education in the United States: A Primer.

One thing that struck me at the conference was the general willingness of the for profits (specifically, Corinthian Colleges, Kaplan, and Yorktown University)to accept outcomes-based indicators of performance, such as the value added during the learning experience, a concept fiercely fought by most not-for-profit schools. The proprietary schools think they will show up well, and can use comparative data to improve their market share.

One participant, Richard Bishirjian, President of Yorktown, says that accreditation is a major barrier to entry. He said that it, in effect, cost him $1.2 million to obtain, a healthy sum for schools just starting business. The bigger firms were more positive about accreditation, but I am convinced that it remains a barrier to entry and probably innovation.

Vance Fried of Oklahoma State gave a fascinating talk describing how a quality residential undergraduate education can be offered for under $8,000 a student (for tuition),and that for profits can make good profits charging around $11,000 tuition. Vance's work will shortly be published by CCAP. Daniel Levy of SUNY Albany presented truly astonishing evidence on the rapid, even extraordinary growth, of private higher education globally, much of it for profit schools. And I made the point that the mission creep and downplaying of the teaching mission at traditional schools, along with stagnant state government support, opens up the traditional 18-24 year old market for the for profits, suggesting their growth can continue at a fast pace for many years to come.
A not-for-profit but nontraditional institution, Western Governors University, has reached a milestone: passing 10,000 students. What is interesting is that this on line institution operates without public support, is quite affordable, and seems to be of high quality. Congratulations to the school and its able president, Bob Mendenhall.

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