A business school dean can’t help but notice the scandalous business model at the for-profits.
… Annually, about 25 percent of for-profit colleges’ government-subsidized tuition revenue is spent on aggressive student recruitment programs. Taxpayers are thus financing not just educational expenditures but expensive advertising campaigns and sophisticated call centers.
The University of Phoenix spends nearly $1 billion annually on promotion. It used its federally subsidized profits to purchase naming rights to a sports stadium. Bridgepoint Education reported spending 28 percent of this year’s first-quarter revenue on promotion, compared with only 25 percent spent on instruction costs and services.
There are many lessons traditional colleges can learn from the successes of the for-profits. But imagine taxpayers’ reactions if traditional schools decided to divert a quarter of their already constrained budgets away from the classroom to carry out massive self-promotion campaigns.
September 17th, 2010 at 9:46AM
Many journalists, politicians, and, ironically, hedge fund managers seem to feel that the profit motive corrupts and dirties the educational process. They don’t seem bothered by the astonishing profitability of NYU’s Gallatin School or the Harvard University Extension School, and they maintain a touching faith in the purity of the motives of non-profit institutions. But if the for-profits worship Mammon, non-profit schools have their own violent, carnivorous hunger for something other than student success. What non-profits crave is prestige.
One aspect of academic prestige is luxuriousness. Non-profit schools are spending absurd amounts of money, in some cases the majority of their budgets, to brand themselves as luxury goods like Prada handbags and Juicy Couture tracksuits—the things the hyper-affluent must buy for their children as a proof of their love. In their quest for prestige, non-profit colleges and universities build monumental sports complexes and recreation centers that divert hundreds of millions of dollars away from teaching. Washington State University-Pullman’s 160,000-square foot student recreation center has a 50-person Jacuzzi, doubtless very helpful in raising Washington State’s standing among its educational peers. One excellent liberal arts college with 2,350 students has its own 18-hole golf course, a ski slope, a private beach, and a hockey rink with 2,600 seats. Numerous non-profit universities offer such recreational amenities as water slides, in-line skating courts, juice bars, indoor waterfalls, climbing walls, massage tables, facials, golf simulators, and salt-water fish tanks. The University of Wisconsin-Oshkosh has leaped into the upper academic echelon by offering its students manicures and pedicures as well as massages.
Where athletic programs are concerned, it is not just the facilities that are costly. Some college football coaches make salaries of as much as $4 million per year. Do these athletic superstars pay for themselves? Not even close. The total cost for a Pac-10 athletic program? Don’t ask. Who can put a price on the glory of a winning NCAA division III team? Major athletic programs also have a high human cost. Many high-level athletes simply do not have time for real coursework: they are being used and injured for the glory of the school. Non-profit colleges also build rather swanky dormitories, with grocery delivery and maid service, and gourmet dining facilities. If, dear reader, you have a morbid curiosity about just how far universities will go in marketing the superiority of their gourmet offerings, I highly recommend that you watch Boston University’s video about its visiting chef series (http://www.bu.edu/dining/about/index.html). Wild partying, vile fraternity misbehavior, and underage drinking are also essential selling points for many non-profit colleges. Many commentators have complained that for-profit schools think of their students as customers. Well, yes, but at least the for-profits are thinking of their students as customers who are buying an education rather than a leisure experience. Capella University does not ask taxpayers to foot the bill for four years of beer pong, jello shots, bong hits, and recovery from hangovers.
Non-profit schools also pursue various forms of academic prestige, some less healthy than others. Non-profits create new doctoral programs whose graduates are unlikely to find tenure-track jobs. They hire expensive academic super-stars for endowed chairs with almost no teaching responsibilities, although this expense is trivial next to the recreational and athletic ones listed above, and is pardonable because it is so closely related to the task of educating students. Non-profit schools also divert precious scholarship money away from the poor and into the pockets of students with high SAT scores who come from affluent families (SAT scores correlate more closely with family income than with academic success, but SAT scores are what count for rankings like those of U.S. News and World Report).
Even notoriously lax ratings agency Moody’s, which entirely overlooked the housing bubble, has gotten off its La-Z-Boy to offer some mild disapproval: “we continue to see institutions borrowing heavily for projects that serve more to enhance an institution’s status rather than to advance its mission or to meet current pressing facility needs. These projects include mixed-use commercial developments, high-end residential facilities, research parks and lavish student recreation buildings and performing arts centers” (the Moody’s quote and many of the colorful facts above come from a wonderful Bloomberg article by Liz Willen; see http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aMJLUNQEijjA&refer=us). Prestige is very, very expensive, and it would be difficult to argue that the quest for cash is more corrupting at for-profits than at non-profits.
September 17th, 2010 at 10:56AM
Ex-professor: Thank you for that thoughtful and detailed comment. In a way, your post sums up much of what I’ve been about on this blog for the last few years.
I of course agree with you that non-profit universities have much to answer for in their own march toward corporatization — you could also have mentioned presidents’ salaries, the hoarding of billions of endowment dollars in the case of Harvard, mercenary conflict of interest in medical schools, etc., etc. Yet I disagree that for-profits represent greater honesty and a greater commitment to the ‘customer’ in these matters.
By definition, for-profits can’t be at all selective. In fact, they have to recruit aggressively, and, in many cases, unconscionably. From the start, their relationship with their student bodies – often made up of people who don’t understand what’s going on in the relationship – may well be corrupt and exploitative. Some for-profits don’t even publish the names of their faculty. Only a person completely ignorant about universities would pay good money to go to a place when she doesn’t even know the names and backgrounds of the people who are going to be teaching her.
There’s simply little to no accountability or transparency at for-profits, whose primary commitment, after all, is to their shareholders and not their students. I don’t think the comparison to the non-profits – with all of the non-profits’ faults – holds.