For-Profit Colleges Just Got a New Lease on Life. They Should Be Careful...

Higher Education

For-Profit Colleges Just Got a New Lease on Life. They Should Be Careful Not to Waste It.

By Ryan Craig     Nov 11, 2016

For-Profit Colleges Just Got a New Lease on Life. They Should Be Careful Not to Waste It.

The shocking election of Donald Trump as our next president has yielded a number of immediate winners who have been “on the outs” under the Obama Administration. Pharmaceutical companies and banks have done well. Fossil fuel stocks have risen. So have for-profit colleges. Stocks like DeVry, Capella and Career Education are up 10 percent or more. Investors are speculating that new regulations like Borrower Defense to Repayment and Gainful Employment that looked as though they were going to strangle the sector may be enforced lightly or lifted entirely. And perhaps the death of ACICS—the largest accreditor of for-profit colleges—will be revisited. If these optimistic investors are right, for-profit colleges will have a new lease on life.

Postsecondary education companies should be careful not to waste this opportunity. There’s no question of going back to old marketing and enrollment practices. Critics of the sector didn’t simply coin the term “predatory” (which in the past year, has been inextricably linked with the term “for-profit college”) out of thin air. It emerged from real practices—deployed by these companies and the lead generation firms they employed—such as infamous “Obama Mama” ads, which, in an effort to generate clicks, claimed that President Obama had created special college grants and scholarships for single mothers.

For-profit colleges need to return to their roots. For-profit higher education originated to address real labor market needs in vocations not being served by traditional colleges and universities. These included a range of trades, even secretarial and beauty schools. What they did not include—at least not until University of Phoenix came along—was bachelor’s and master’s degrees competing with traditional institutions.

Phoenix and its followers realized that while solving real labor market needs was good business, there was a bigger opportunity selling traditional “college” in untraditional and more convenient forms: convenient campuses located near workplaces, evening classes, accelerated schedules, and, starting in the late 1990s, online delivery. This turn toward degrees resulted in an unfortunate focus and overreliance on marketing and enrollment which spawned “Obama Mama” ads and the ire of the Obama Administration.

Aside from 11,000 voters reportedly writing in the name of Harambe the Gorilla rather than voting for Clinton or Trump, there’s little evidence that what Americans need are more convenient bachelor’s and master’s degrees. Trump also won white college-educated voters, demonstrating that many people with bachelor’s degrees also feel left behind. As degrees have become the sine qua non of the labor market —requirements for virtually any desirable job—the value of degrees from non-elite institutions has diminished. And it’s likely that the regulatory and media assault on for-profit colleges has reduced the value of these degrees even further.

This new lease on life doesn’t mean for-profit colleges will have a free pass. As Trace Urdan at Credit Suisse noted in a research note, “it won’t be all hearts and flowers for for-profit schools.” It’s likely that the trend toward accountability for outcomes will continue. Schools receiving Title IV dollars will need to demonstrate that they’re achieving both employment and learning outcomes, and may well be required to align their incentives. It’s hard to see why a Trump Administration and a Republican Congress wouldn’t require all schools (not only for-profits) to provide $0.10 in institution-based income share agreements for every $1.00 in federal financial aid disbursed. And if that happens, few for-profit colleges are likely to see much payback from plain vanilla bachelor’s and master’s programs.

So rather than providing more convenient degrees that may or may not pay off, postsecondary education companies must refocus on connecting students to employment. I’m not only talking about blue collar or even pink collar vocations, but almost every profession. Coding bootcamps like Galvanize are placing over 90 percent of students into high-paying jobs in the technology sector. And University Ventures is seeing remarkable success at Ponce Health Sciences University, an American medical school with a unique bilingual MD program that trains doctors to treat patients in both English and Spanish.

Some of these education-employment connections may be more easily made as service providers, rather than as full-fledged accredited universities. Public-private partnerships allow traditional universities to do what they do best, while leaving work like employer outreach and placement to specialty service providers.

The challenges facing for-profit colleges don’t stem from regulation or even corruption, but rather a failure of imagination. Millions of Americans are desperately in need of a multitude of pathways to better employment. There are so many models waiting to be built and many of us can’t wait to see what comes next.

Ryan Craig (@ryancraiguv)is Managing Director of University Ventures, a fund focused on innovation from within higher education.

Learn more about EdSurge operations, ethics and policies here. Learn more about EdSurge supporters here.

More from EdSurge

Get our email newsletterSign me up
Keep up to date with our email newsletterSign me up