Merits of for-profit colleges? Another lame argument about efficiency....

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First, here’s some breaking news. I officially accepted admission to UMass’s PhD program, which is unbelievable and a statistical anomaly. Unfortunately, I am now really broke because I spent so much on graduate school applications. But… I couldn’t be more grateful and happy.

In other news, new Economix contributor Judith Scott-Clayton had a post yesterday about the “Merits of For-Profit Colleges”. I was initially appalled after reading this, but I do get her point. Yes, for-profit college, for all of their evil practices, certainly are comparatively more efficient at obtaining Federal funds for their students and boosting their enrollments. But, efficiency in what context? And, do traditional schools really have a thing or two to learn from their for-profit counterparts?

Being able to procure Federal funding for students needs to be taken with a grain of salt, considering that for-profits are seeking well…. profits (duh!), not opportunities for their students. Traditional private and public universities arose from a tradition of either religious scholarship (like Ivys) or scientific research (like the land-grants). For-profits are rooted in capitalist opportunism, popping up when skyrocketing tuition has crowded out financially strapped students form more traditional schools, and when desperate job seekers see no better alternatives than enrolling in for-profit programs when facing a moribund job market. A for-profit incentive for securing funding is a lot different than seeking out what is best for your students.

Efficiently securing the most Federal funding per student then results from a natural incentive for profit-seeking schools, since Pell Grants and other funds give a pretty direct hand-out to their shareholders. This is not to be praised- it’s downright wasteful of Federal funds and harmful to students who more often than not leave these schools without any degree in hand.

As for whether or not these schools are actually any more “efficient”, I am not convinced that the higher Federal-funds-per-student at for-profits is necessarily correlated to more better or more navigable financial aid services either. A 2008 study by the National Center for Education Statistics shows that lower-income students have a higher percentage of students who enroll in for-profit schools. It is likely the case that students more likely to qualify for aid also happen to be more likely to enroll in a for-profit college, as many socio-economic and institutional barriers may impede their ability to be admitted to public or private university (think about the barriers to entry: costs of SATs, application fees, the time spent researching schools, etc.). Being more likely to qualify for funding then translates to these schools having more students receive Pell Grants and other forms of Federal student aid.

Are these schools efficient at ripping off Federal educational funding? Yes. Are they efficient at providing what is best for students, in terms of risky debt and solid graduation rates? Not so much. Instead of jumping to conclusions about how well these schools operate, let’s hold our praise for the merits of for-profits (unless of course you happen to be a shareholder in one of these institutions).

Efficiency is such a gross term… I wish people would put it in context before branding it onto every analysis.