Is for-profit higher education dying or just a shell of itself?
As recently as 2015, the University of Phoenix enrolled more than 400,000 learners, making it not only the center of the for-profit higher education universe but the biggest university in the United States by far.
Word in January that the University of Arkansas system is contemplating buying Phoenix raises fascinating questions about the state of for-profit higher ed and how to regulate the increasingly blurry landscape of postsecondary education and training.
A recent episode of The Key, Inside Higher Ed’s news and analysis podcast, used the possible Arkansas-Phoenix marriage as a moment to take stock of the state of for-profit higher education. The conversation included Kevin Kinser, who heads the Department of Education Policy Studies at Pennsylvania State University and studies for-profit higher education; Julie Peller, executive director of the nonprofit Higher Learning Advocates and a longtime expert on federal higher ed policy; and Paul Fain, editor of the newsletter The Job and a former editor at Inside Higher Ed.
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An edited transcript of the discussion follows.
Inside Higher Ed: What most jumped out to each of you about the potential sale of the University of Phoenix to Arkansas, and what does that potential sale tell us about the broader landscape for for-profit colleges and universities?
Kinser: This used to be by far the biggest university in the United States—depending on how you counted it, half a million students. John Sperling, the founder of the University of Phoenix, was specifically looking to move against this notion of how public education was constructed and the restrictions associated with that, which now comes full circle as it potentially gets taken over by a state school.
It’s still unclear what the transaction is that’s actually happening. It seems like this nonprofit entity with affiliated status is somehow going to acquire Phoenix? The devil’s in the detail. We saw that with what Purdue was doing, the back-and-forth with Arizona Global. Arkansas has previously taken over a for-profit, so they might actually feel like they’ve got some experience with this, [that] they can leverage this and make it a net positive.
Inside Higher Ed: It’s important for us to stipulate just how much we don’t know. When I first heard about it, I assumed they were going to merge it into the University of Arkansas Grantham, the public institution Arkansas created when it purchased Grantham University last year, which itself emerged out of eVersity, the online-only university Arkansas created in 2014. Julie, your early thoughts on what the larger implications are for the for-profit sector?
Peller: I think about it from the perspective of who institutions are trying to serve. When University of Phoenix was first conceived, John Sperling intentionally put the campuses right off highways so people coming home from work could stop in and go to school. That ethos of serving a different kind of student is carried throughout the life of University of Phoenix.
What’s interesting to me is from the flip side of what makes it attractive to a public institution like the University of Arkansas. The public sector is trying to figure out how to serve and how to attract adult learners, working students who we call “today’s students,” less traditional students that used to be only the for-profits’ market share. Public institutions are going after those students much more aggressively, and folding in outside entities like Phoenix is an interesting way to go about it.
Inside Higher Ed: Most of the growth we’ve seen in targeting that audience has been among the private nonprofits—the Southern New Hampshires of the world, the Western Governors … Paul, you’ve been covering this stuff as well and as long as anybody. How should we be thinking about it?
Fain: I totally agree with what Julie and Kevin say. Phoenix wasn’t just synonymous with for-profit higher education. It was synonymous with career education, and certainly online. It’s down to one-fifth, maybe less, of its peak in terms of enrollment. It’s been hemorrhaging money for a long time. But 85,000 students isn’t nothing in online education, and if this Arkansas system entity gets it, they’ll immediately be a player. Despite it being a shell of what it was, it’s still probably worth a lot if you’re trying to catch up in online career education.
This is a sign that the days of the freestanding, degree-issuing, big for-profit chains, particularly publicly traded, are over. That’s years of toxicity, scandals and lots of remaining regulatory headwinds.
Inside Higher Ed: Paul, you just said you think those days are kind of over for big for-profit institutions. Enrollment in for-profit institutions dropped by roughly half over the course of the 2010s, but it’s still in the 800,000 range. And Phoenix takes 10 percent of that out of the picture if it stops being in that bucket. Kevin and Julie, what is the future of the for-profit institution? We’ve seen all these places try to transition to becoming nonprofit in various ways, some more successfully and more controversially than others. Is there still a place for the for-profit institution?
Kinser: With apologies to Mark Twain, the reports of my death have been greatly exaggerated. There is a cyclical component to this. We’ve seen this going back pre–World War II, with for-profit institutions emerging, there being some controversy or scandal, there’s a regulatory effort that goes on. In fact, the accreditation system that we have today was born out of this need to have some control over for-profits after World War II. We see this kind of regulatory effort, the for-profit sector adapts, figures out new ways of operating under the regulatory set and continues on. About every 20 years or so, we see another realm of this. As you point out, the numbers aren’t small.
But at least for the time being, we are certainly out of that era where running a for-profit institution was the same thing as printing money. It’s much more—we need to figure out, “What is the particular focus of this institution? Is it going to be in health care? Is it going to be in local community development?”
The final point is the universities themselves are, in essence, becoming for-profit entities, not just in terms of the partnerships they’re doing with for profits through [online program management companies] and other kinds of contractual entities, but also in the way they think about their finances. The ability to instantly gain 80,000 students is not being done because [Arkansas says], “We really want to serve these 80,000 students better.” It’s because that represents a lot of tuition money that they can do a lot of stuff with.
Inside Higher Ed: Julie, you think about this very much from a policy standpoint. What is your sense of the state of the for-profit institution sector? What do you think it should be? How do you read these developments?
Peller: I read them in two different ways from a policy or oversight perspective. For-profit institutions that have continued to be profitable and grow are, to Kevin’s point, those that are really specific in either the community they serve or the programs they offer. One of the reasons for this shrinkage is a course correction from the growth into liberal arts degrees and other areas, particularly by large for-profits, and that’s where we’re seeing the retreat. We’re not seeing as much retreat from very career-focused programs, professional programs, local, smaller for-profit entities that often we leave out of these conversations because they’re not publicly traded and big. So that’s one—what is the purpose of these institutions and who is providing the skills, education and opportunities for the jobs of tomorrow?
Secondly, we need to be talking about what does “good” look like for a program or student from an oversight perspective. The black-and-white lines of saying we look at for-profits this way and nonprofits that way needs to be rethought because the market does not work that way anymore. If we look at where we started off, if there is a deal between Arkansas and University of Phoenix, is that a for-profit entity, is that not-for-profit entity? Our regulatory system is just not equipped right now to answer that gray area, and it needs to.
Inside Higher Ed: Paul, before we got on, I was referring to a book chapter you and I wrote about the for-profit sector back in 2015 for a Stanford University Press book called The New Ecology of Higher Education. The chapter was called “Boom, Regulate, Cleanse, Repeat.” And it described the cycle Kevin was referring to before, where enrollment blows up for for-profit institutions, often through sketchy marketing–fueled practices. Some institutions cross lines, regulators toughen up the rules governing them, the sector shrinks and most of the survivors operate somewhat better. We did not predict the end of the sector.
When you said before that the days of the big for-profit are over, do you think we’re on the verge of seeing this sector disappear or just certain elements of it?
Fain: From interviews with folks in the space and investors, Title IV–eligible, degree-issuing, national-footprint for-profits, I don’t see it. You definitely still have Strayer and Capella clicking along. They’re doing well, though I don’t think they’re growing much. American Public is still going along. Adtalem, last I saw, is mostly overseas, very different type of company from when it had DeVry. Those big chains have collapsed.
I’ve always wondered, why aren’t the consumer groups celebrating? You won; [the for-profits] are largely gone. For-profit education is bigger than those chains, though. Depending on how you cut it, it’s 5 percent of total enrollment. It’s not as big as the public policy debate would have you think. But the ones that are doing well, from what I hear, are small, local vocational trade schools, in allied health care, automotive repair, the sort of programs that students probably don’t know or care about if they’re attending a for-profit or a public or private nonprofit.
But we were totally wrong, Doug, to predict that things would come back. I was just thinking about this. It was 11 years ago when Senator Tom Harkin of Iowa, a Democrat, put out that big report on the for-profit sector. I had to look to make sure he said it, but he said this is an industry that’s here to stay, will continue to play a significant role in serving growing numbers of nontraditional and disadvantaged groups of students.
That didn’t really happen. In the following years, the Obama administration, Senator Elizabeth Warren, they moved away from the “bad actors, good actors” argument to just “bad.” It’s hard to compete with that, particularly with Western Governors, Southern New Hampshire, dominating the market, getting close to 200,000 students. It’s not just them. I mean, ASU Online, that’s a brand it’s hard to compete with.
Inside Higher Ed: Paul just asserted that the consumer advocates who tried to largely eradicate for-profit higher ed from the face of the earth have largely succeeded, whether we agree that the sector is fully dead or just permanently shrunken and altered. Is our public policy still overly focused on those institutions? Julie, as the resident policy expert in the discussion, you were hinting before at a broader questioning of quality and performance across the postsecondary education and training ecosystem. Do you think the continued focus on for-profits as the evil empire is misdirected or overemphasized?
Peller: I do wish that we had the same level of conversation about value and outcomes for students in all institutions that we’ve had over the last 10 to 15 years for for-profit institutions. At the same time, I think it’s right to ask separate governance questions of for-profit institutions because the federal oversight for public institutions assumes that the state is looking after certain things or nonprofit governance rules look over certain things for nonprofit private institutions.
We can argue whether they do enough with that. But structurally, those things don’t exist in the for-profit sector. But that doesn’t mean that we should stop asking questions about outcomes and value and returns for students in all programs. I’m heartened by the Biden administration’s current request for information about a low-value index that looks across all institutions. I think we’re starting to have some of those conversations. At the same time, there’s a continued hyperfocus by some policy makers and advocates on the profit question.
Inside Higher Ed: Kevin, your thought on this policy question?
Kinser: We’re getting to the point where the idea of designating an institution as a whole as for-profit or nonprofit is problematic because there is so much blurriness. The for-profit industry used to say, “We’re trying to do good; just because our tax status is different doesn’t mean that we’re any different.” I think there really should be an exploration from a policy perspective about should there be more definitions or more categorizations of institutions rather than the three sectors that we have right now, nonprofit public and private nonprofit, because these kinds of combinations are happening so frequently.
There is a risk factor involved in the for-profit form that needs to be discussed. But the Arizona Global issue pointed out how that risk factor doesn’t get eliminated just because you move it into this nonprofit organizational status, that the motivations and pressures can still exist and be quite contradictory.
Inside Higher Ed: Paul, your newsletter focuses on the important job we as a country haven’t done terrifically well with: direct preparation of people for the workforce. Is there a place for institutions that are not public, not private nonprofit, in trying to create and train the workforce for the future?
Fain: I definitely agree with Julie and Kevin that the boundaries are getting blurrier all the time. Look at the debate over online program management companies and their partners as being a continuation of this discussion. One of the most compelling arguments by an advocate who is anti–for-profit that I ever heard was, if a company is well run and they don’t chase growth at the expense of quality and they don’t compensate their executives grotesquely, these things can work as for-profit degree-issuing entities. But ITT and Corinthian are good examples that when it goes off the rails, it goes off the rails.
Looking forward, what’s the really tough conversation? If you’re in the space of trying to train low-income minority students for jobs like home health-care aides, allied health writ large, early childcare, your outcomes are going to be bad. Your completion rates are going to be bad. You’re going to have default, you’re going to have low salaries. I love community colleges. I write about them all the time. As we all know, completion rates can be very low in that sector. What’s acceptable? Where is higher education’s responsibility there? Where does it end? These are the sorts of nuance I’d like to see in policy debates going forward that hasn’t been there.
Kinser: The point is, you don’t want students to be worse off for having attempted higher education than they would be had they not done anything at all. How you actually figure that out is part of the question. For-profit institutions were demand-creating institutions. They went out and brought into higher education students who would not have naturally done that. Where they got off the rails was when instead of doing that demand creating, they said, “Let’s go out and take away students who would have been better served in other kinds of institutions.” For-profit institutions that are focused on bringing people in [to higher education] and helping them be better off through education is an important role to play.
Inside Higher Ed: They also went off the rails, as Julie said before, when they went from focusing on preparing people for jobs to offering credentials and degrees in fields where they couldn’t necessarily do that, in more liberal arts fields. That was in the interest of growth. Julie, Paul’s asking for a better public policy. Can we deliver?
Peller: I’m not sure we can, not to all of our satisfaction, especially at the federal policy level, which is a really blunt tool. We can answer better the question Kevin just asked: Is this institution or, in more ideally, is this program at an institution leaving students better or worse off than when they came in? If they’re leaving them worse off, then we need to ask, are we using public dollars to send students there?
Where public policy at the federal level is hindered is in defining “is this a good institution? Is this a good bet for a student?” Because as a nation, we’ve not really agreed, writ large for higher education, about what a good outcome is. What is the higher education equivalent of “are you college and career-ready” coming out of high school? We just have not gotten there as a policy community. In the meantime, we need to answer better “Is this harmful?” Too often we conflate those things and say we have failed because we can’t answer the “good” question, but that doesn’t mean we should stop trying to answer the “harmful” question.
I’m particularly interested in what Doug said about the larger postsecondary landscape. Not only for-profit and nonprofit blending, but degrees, certificates, certifications, all being part of this landscape. For-profit entities may not be institutions of higher education yet, but for-profit entities are serving and training learners in all sorts of places in that credential space. And we’re seeing growing demand for those credentials.
I’m interested in how a for-profit entity plays there and what lessons from a policy perspective we can learn from the regulatory swings of for-profit institutions to apply to make that a better, better chance, and a better ecosystem for people.
Inside Higher Ed: Paul, you’re regularly documenting all the different players that are now providing credentials, sometimes through institutions, but often on their own. Do you see us having learned things from how we handled for-profit institutions that would influence the policy landscape for potential other for-profit entities that might get into this space?
Fain: I do see a growing number of for-profit companies in the subdegree, nondegree credential space. Boot camps for sure. Apprenticeship providers is another interesting one. We’ve written about OpenClassrooms pursuing regional accreditation and partnering with institutions.
Gainful employment—while dormant, it worked. I talked to a bunch of investors who admitted they didn’t really pay attention to outcomes before gainful employment, and now they do. And when you look at these nondegree credentials, Julie’s right about federal policy being a hammer, but you’re probably going to see more strings attached at the state level when it comes to short-term credentials, with outcomes being baked into that and hopefully some high bars. Getting data on that stuff is very tough.
The new short-term workforce Pell proposal from the House Republicans has some potentially high bars for outcomes, to throw a big wrench into all this. Another encouraging thing is the debate around credentialism, which has been completely absent from the higher ed industry for obvious reasons. Where do you need a degree? Is insurance sales the best degree, you know, for your degree job? No. And you’re actually seeing movement there. I don’t know how deep that will go. Maybe not encouraging students to take out debt for credentials that aren’t really necessary for jobs is a good place to start.