Looking Beyond the Student Loan Fiasco

By Richard Vedder

Returning from a vacation for a week that took me away from the news, I note that we now put the private student loan providers out of business in the name of efficiency, and greater student educational equality. That is bad, for reasons I explain in a new posting for Minding The Campus.

Yet there is some good news out there. I spent four hours yesterday meeting with top officials at Kaplan Higher Education, the jewel in the crown of the Washington Post Company. It is a division that, along with test preparation services, makes all of that company's profits and then some. I met with CEO Andy Rosen the most, but also Kaplan University President Wade Dyke, with top academic officer Peter Smith (an ex-congressman,university president, and high ranking UNESCO official), author of the interesting Harnessing America's Wasted Talent, and with others as well. This was part of research funded by the Lumina Foundation into the proprietary higher education industry in the United States, to be published shortly as a CCAP study.

Several things stood out. Much more than with traditional schools, the emphasis is on pleasing the customer, defined not only as the student but the employer who hires the student. What can we do to make students learn more? I have had two hour conversations with traditional university presidents where the actual discussion of how much students are learning and what we can do to improve it was either non-existent or secondary. The for profit schools, or at least Kaplan, think much more about the student and his/her needs. It is the key to market acceptance and profitability --but it is also what universities should be thinking about first.

Second, as a general rule Kaplan, like most other for-profits, does things quite differently than traditional universities. They teach mostly on-line, while traditional schools teach mostly using old lecture-discussion approaches. They lease their facilities rather than buy them. Andy Rosen pointed out to me that in a dymanic industry like his, physical plant needs are constantly changing, and it makes little sense to make huge long term financial investments in fixed quantities of real estate. Besides, Kaplan knows the education business better than the real estate one (Kaplan's Fort Lauderdale facilities were very attractive and user friendly, but not grostequely so as is sometimes the case with today's country club-like traditional schools).

Moreover, as Wade and Andy continually emphasized, at a time of limited public availability of funds for universiy investment, the for profit sector has the means and the desire to fund university expansion. Andy said to me, in effect, "do you think the State of California is going to fund eight new University of California campuses?" It is not going to happen. Yet Kaplan and Phoenix and other providers can educate another, say, 150,000 Californians, if need be, over the next few decades.

Andy seemed much more open than most traditional university officials I know to new ideas for service delivery, such as the three year bachelor's degree and the move towards a ceritfication-by-examination approach that some social scientists like Charles Murray have advocated.

All in all, I am impressed with Kaplan and its leadership, as I have been with other leaders in the industry --the innovative Randy Best and the very shrewd Andrew Clark of Bridgepoint Education come immediately to mind, as does financier-innovator Michael Clifford. So amidst the gloom of dubious federal public policy, there are some bright spots. The Obama Administration seems hostile to this sector, which is a shame, because it is expanding access to the very minorities and adult learners that the Administration professes it wants to serve.