3 Questions with Dr. Cory Koedel
Are For-Profit Colleges Bad for Higher Education?
Dr. Mike Robinson host of 3 Questions interviewed Dr. Cory Koedel, an associate professor of economics and public policy at the University of Missouri–Columbia about the role, future and status of the for-profit sector of higher education.
Dr. Robinson: Is the for-profit sector of higher education in danger of not existing as we know it today? How can they survive the push to regulate their industry which has a reputation of disingenuous and false advertisements, abusive treatment of students and misleading government officials?
Dr. Koedel: I do think that the for-profit sector is likely to change significantly over the next ten years, just as it has changed significantly (most notably via rapid expansion) during the previous ten years. It is difficult to predict how the change will unfold. Certainly there is a strong policy push for more stringent regulations, at least for institutions that rely on federal funds for revenue. If regulations strengthen, the business model will need to adapt.
Dr. Robinson: Are for-profit colleges and universities bad for higher education? Is there a role for competition in the higher education arena?
Dr. Koedel: I hesitate to label an entire sector of higher education as “good” or “bad.” In theory, it is not hard to envision a useful role for private, for-profit colleges in the higher education market. Among other things, for-profit colleges have the potential to operate more nimbly and flexibly than their public-sector counterparts, making them more responsive to changes in labor demand (for more on this point, see this article by Gilpin, Saunders and Stoddard:http://www.montana.edu/cstoddard/whyhasforprofitcolleges.pdf). However, it is also reasonable to argue that the for-profit sector has expanded too rapidly, and with this expansion has come adverse consequences. Many, including Joseph Stiglitz (http://usatoday30.usatoday.com/news/opinion/forum/story/2012-07-03/student-loans-debt-crisis/56006496/1), have argued that for-profit colleges exploit at-risk individuals who do not fully understand the costs and benefits of a for-profit education. Supporting this argument, the Government Accountability Office performed an undercover test of 15 for profit colleges and found evidence of some combination of fraud and/or deceptive and questionable marketing practices at all 15 schools (http://www.gao.gov/products/GAO-10-948T). This is very disconcerting, and it is evidence like this that is driving the push for better regulation of the for-profit sector.
Dr. Robinson: If the for-profit sector is eliminated or greatly reduced will this be, in your opinion, an ultimately good strategy? And what will the reduction or elimination of these schools mean for access and opportunity, especially for moderate to low income students who are the primary student base of for-profit/career colleges?
Dr. Koedel: This is an important question, and certainly a question that for-profit colleges raise when they come under scrutiny. The argument is that in the absence of for-profit colleges, fewer students would have access to a college education, and it the most disadvantaged students who would be harmed more than others by the elimination or reduction of the for-profit sector. I do not think we have a good sense of whether or not this is truly a problem, and the policy debate would benefit from more evidence. To elaborate, if for-profit colleges ceased to exist, it is not clear how many of their would-be students would end up pursuing comparable degrees at public colleges –which for the most part offer comparable programs – versus not attending college at all. Moreover, even among students who end up not attending, it is not clear how much worse off they would be. In a resume audit study I performed with several colleagues (http://www.caldercenter.org/sites/default/files/WP-%20116.pdf), we found that employers were no more likely to call back for-profit college students than their public-college competitors, who pay much less to attend college. In fact, we also found that for-profit college attendees receive no more interest from employers than high school graduates (although there are some caveats to this result that I won’t go into here but are discussed in our paper). In summary, I do not think there is a strong enough evidence base at present to answer this question with confidence, but between our study and others (for example, see Deming, Goldin and Katz: http://scholar.harvard.edu/files/lkatz/files/foc_dgk_spring_2013.pdf), there is reason to question the value of the for-profit sector in terms of expanding access to higher education.
Cory Koedel is an associate professor of economics and public policy at the University of Missouri–Columbia. His research is in the areas of teacher quality and compensation, curriculum evaluation, school choice and the efficacy of higher education institutions. His work has been widely cited in top academic journals in the fields of economics, education and public policy, and he has served on several technical advisory panels related to school and teacher evaluations for school districts, state education agencies and non-profit organizations. Dr. Koedel is an associate editor for the Economics of Education Review and serves on the editorial board for Education Finance and Policy and the board of directors for the Association for Education Finance and Policy. He was awarded the Outstanding Dissertation Award from the American Educational Research Association (Division L) in 2008, and in 2012 he received the Junior Scholar Award from the same group.