Problems with US for-profit colleges aren't unique

The Harkin report into US for-profit colleges makes for uncomfortable reading and for those of you who want the details you can download a copy at http://bit.ly/T2dnve.

I have watched this investigation from afar, which may seem odd as ‘I don’t have a dog in this fight’. Well, not directly, but I work with people in the US education market and so need situational awareness of what’s happening there.

Senator Harkin’s clearly report highlights fundamental problems, but getting any substantive legislative action looks very unlikely given the logjam of partisan politics and lobbyists in Washington and the impending Presidential election.

It’s the numbers that I find most damming in the report, for example here is how some of the $32bn provided by US taxpayers was spent:

On CEO salaries that averaged $7.4m!
22.4% of revenue was spent on marketing
19.4% of revenue went to profits
17.7% of revenue was spent on ‘instruction’ (what I’d call education).

Now I’m not an educationalist or even a tertiary graduate, but these are scandalous figures.

Australia and Britain

What’s interesting to me is that many of the concerns in the Harkin report correlate closely to problems seen in the for-profit sector of Australian and British universities. The key difference is in these two nations, instead of the financial benefits flowing to shareholders and investors the profits flow to Australian and British universities and indirectly to their national treasuries.

In the international student market the top three countries by market share are the USA, Britain and Australia. The first two may seem obvious given their size and traditional strength in higher education, but Australia is the outlier. In less than 40 years Australia has built its market share by targeting Asian market with aggressive marketing, easily obtained visas and very ‘flexible’ course entry requirements.

Having watched both the Australian and British universities for over 20 years, I think many institutions behave like rapacious drug addicts in their pursuit of fee-paying students, with income having primacy over far more important issues like educational quality, duty of care and the human rights of foreign students.

In Australia after the failure of several FE for-profit colleges, a high-profile murder of an Indian student and a raft of politically sensitive problems, the government commissioned former politician Bruce Baird to review the Education Services for Overseas Students Act which governs international education.

While the Harkin and Baird reports were looking at different issues, the similarities are striking with both:

led by senior politicians (one current and one former)
finding serious problems in the for-profit sector of their national higher education systems
facing large barriers to delivering substantive systemic change

The UK’s problems are very similar, but so far there has been a major political review and most changes seem ad hoc. For example visa rules have been tightened, although the UK Border Agency still don’t check if a student has ever left the country. In addition several colleges and one university have had their ‘highly trusted status’ suspended by the UK Border Agency, effectively stopping them from recruitment fee-paying foreign students. To put this in perspective, imagine the impact at London Metropolitan University where almost 50% of all students are from outside Britain.

A shared problem?

It seems that each of the three largest players in international higher education market have significant problems in their for-profit sectors.

At it’s core the issue seems to be that the provision of quality education is subsidiary to the profit motive. In the US the victims of this educrime are local students and taxpayers with the illicit proceeds ending up in the bank accounts of shareholders and financiers. In Australia and Britain it’s the same crime, but the perpetrators are public institutions and the victims are foreign students.

Will things ever change?

In the US the aggressive response of the US Association of Private Sector Colleges and Universities and their lobbyists shows achieving any change will be nigh on impossible.

It seems (to me at least) that change in American education isn’t primarily driven by political ideology or technology (yet), but instead by another factor altogether – crisis. For example the global financial crisis and collapse in US real estate prices and property taxes, has arguably driven more immediate changes in K12 education than the combined effects of No Child Left Behind, charter schools and Big Data. What’s not clear is whether the same factors will drive change in the for-profit college sector?

My guess in all three countries bureaucrats, politicians and for-profit institutions won’t drive change, but crisis and the following things might:

changing competition in the global education market e.g. European universities offering high quality, reasonably priced qualifications taught exclusively in English
growing consumer pressure from students and families who expect better value for their significant investment in higher education
technological change that drives things that range from the Bring Your Own Device (BYOD) movement to MOOCs like Courseara, edX and Udacity and companies like 2tor and The Minerva Project.

For all the problems in the for-profit education sector (and there are plenty) I still believe a mixed economy model is a far better market model for education than either the ossifying effect of state monopolies or potential excesses of free markets.