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Following The Money In For-Profit Education

By Professor Doom

For the most part, I’ve been referencing public institutions in my discussions, because those are the ones I’m most intimately familiar with. One might think such institutions have an advantage here—public institutions aren’t just trying to make a buck, so perhaps they’re in it to provide an education, and it’s just an illusion that administration seems to be plundering all the student loan loot. Do private institutions do any better?

America is still mostly a capitalist country, and with the huge demand by students, and the huge money offered by government sitting on the table, it’s only natural that new private institutions would form, and established private institutions would grow, to soak up all that money. It’s reasonable to suspect that these institutions, without burdensome government regulation, would form and grow more quickly than public institutions. Indeed, they have done so, with enrollment at for-profit institutions more than quadrupling over the last decade…that’s some serious growth1. Much like with the public institutions the rules are the same: students take out loans, guaranteed by the government against the slight chance that the student will get an education that can be monetized well enough to pay the inflated tuition costs, and the institution gets that money regardless of student outcome.

Private institutions naturally aren’t funded directly with government funds, and thus the vast bulk of their revenue, those institutions that focus on teaching, must come from tuition money (no chance of floating a public bond to construct a new campus!). In reading the literature, it’s interesting how often for-profit institutions are criticized for getting the bulk of their income from student loan money…even as every public institution constantly grubs to get this same money. The only difference is private institutions have no public till to loot in addition to the student loan money; they’re forced to get by just on what students are able to “pay.”

Past this point, there’s a sharp division between “private, non-profit” and “private, for profit” institutions. Private, non-profit institutions have significantly higher graduation rates and spending on instruction over public institutions. Surprisingly for those that believe the most in capitalism, the for-profit institutions are generally worse than non-profit, with about half the graduation rate and 2/3rds the relative spending on instruction2.

(phone rings, I pick up)

Phone: “…”

Me: “Hello?”

(A few seconds while a computer transfers me to a salesman, after determining a human being answered the phone.)

Phone: “Hello, this is Raul. This is a recorded line. I see that you are interested in higher education. Let me recommend a college to you…”

--Upon making it known that I wished to enroll in a graduate degree program, I received one or two calls like this every day for weeks.


The for-profit institutions are criticized for low graduation rates, but this is backwards thinking. These institutions even more aggressively target anyone who can apply for a student loan, and these are often not the best students, probably not the ones most likely to graduate from a program. Around 30% of operating costs of private institutions goes towards marketing to get new students, far above other types of institutions. Instead of being praised for not giving away degrees to everyone, the low graduation rates are taken as evidence of inferiority. In light of the obvious difficulty in actually getting a degree from a for-profit institution, shouldn’t such degrees be held in higher regard? Employers certainly think not, but one wonders if these for-profit institutions had 100% graduation, if they would be criticized for that, also, or would other institutions be pressured to increase their graduation rate to match? I suspect the latter. As a reminder, these institutions are just as legitimately accredited as public institutions.


An investigator posing as a student in a class on learning strategies consistently submitted inadequate work, such as photos of celebrities and political figures for a written exam that required detailed answers. The student, however, received a passing grade of C- in the class…In one case an instructor appeared to show a student how to cheat on a multiple-choice quiz, noting that the same test, with the same answers, could be retaken. “It’s not hard to get a 100 percent on the second try,” the instructor said, “just jot down the correct answers and take the quiz again.”

--some findings of a GAO secret investigation of accredited, for-profit, colleges. It’s a shame the Federal government doesn’t take such an interest in what’s going on at public institutions3. How is there a class on “learning strategies”, anyway? Passing grades for courses where the student does basically nothing and a multiple choice quiz that you can just keep retaking until you get it right? I’m shocked, shocked that such things happen at for-profit institutions. Such would never happen at a public institu…oh, wait, nevermind, I’ve seen the same in public, non-profit institutions as well.

With much less spending on instruction, for-profits clearly don’t spend their money on faculty, and are motivated to keep other expenses low as well. They’ve determined that the big money is simply in grabbing students in the first place, and so their tuition money goes into recruitment.

With less of a profit motive, the private non-profits are not nearly as eager to sweep up all possible students, and often have restrictions on admission to go with their higher tuition, probably why they have better graduation. Overall, faculty growth has been slightly higher than administrative growth at private non-profit institutions4.

Despite the growth in the student base, institutions of all sorts seem to constantly face budget issues, or at least to claim to have such issues. Curiously, administrators feel that the most obvious response to budget issues is to increase the teaching loads5—despite the relatively stable student to faculty ratios that were sufficient years ago, before the administrative bloat (caught in their own web with that!). Ideas such as not having such a heavy reliance on support staff, reducing the number of administrators, and/or bringing administrative pay in line with administrative responsibility are not on the table. Go figure, again.


George Warshington was the furst presdent of the United States. He wun the revolutionary war against British and disgnied the flag…”

--Sample from an alleged student paper when I interviewed for a position with University of Phoenix. I and the other applicants were encouraged not to fail this level of work. Failing a student requires faculty to fill out a form justifying the failure, rather subtle pressure not to fail students.

I’ve never taught at a for-profit institution, so I have no direct observations of my own to add here beyond my experience above. While one can cast scorn on for-profit private institutions for their low graduation rates, it’s actually illustrative of the difference between these institutions and the public institutions. In for-profit, it’s all about the check. With no government bureaucracy to answer to, for-profit institutions don’t need to try to inflate their graduation rates to look good…they just need to gather and keep those students, with graduation actually counter-productive to that goal. On the other hand, low graduation rates are a slur against public institutions, and thus administration is motivated to increase it.

Either way, education is not a high priority.

The worse graduation and instructional spending results at for-profit institutions might lead one to conclude that for-profit institutions should be avoided, and that might be the case, but this conclusion is tangential to education. Nevertheless, it’s clear for-profit institutions are a bit of a land mine for the student when it comes to getting an education, at least if an education is all about getting a degree. Considering that degrees from many for-profit institutions are held in such low regard, it seems going there is a lose-lose proposition. These institutions are justified in spending so much money in marketing, as it must be challenging finding students foolish or desperate enough to go to such places.


Me: “Ok, suppose we know the chance of tossing a single head on one coin toss is 0.5. What would be the chance of getting a single head on 10 coin tosses?”

Student, with confidence: “The chance would be 5!”

Me: “5, you say. Are you sure the probability will be 5?

Student: “Yes, it is.”

Me: “How do you get that number?”

Student: “You just multiply the chance by 10.”

--exchange in an Open University statistics course at top tier school I taught at.


When I taught at a top school (a non-profit), I presented courses both for the “usual” students (the ones with admission requirements) during the day and for “Open University” students (the ones for anyone that can get a check)—the latter are generally night classes, filled with people willing to pay to get a piece of “good school” reputation on their transcript. According to the catalogue, I was teaching the same course to both, although my open university course had less content and far less challenging material (and more student complaints, despite that). While to the school’s credit, I wasn’t pressured to pass students, I still had little choice but to simplify the course, as the students were so inadequately prepared for the “second year statistics” course I gave during the day that had I not reduced content, I would have lost almost the entire class.

The aggressive recruiting policies at for-profit institutions lead to lower graduation rates, and those institutions have very little prestige. Public and non-profit institutions should probably be grateful to for-profit institutions for keeping their graduation rates down. It may do little for their prestige, but it does preserve the value of the degrees they, and other types of institutions, give.

But what of the degrees billowing out of other types of institutions? When a non-profit plays the “Open University” game with their prestige, they’re literally cashing in the prestige for more tuition revenue, and it’s hardly any better at public institutions.


Our goal is to graduate more students than ever before!”

--Administrator at commencement address I attended, discussing plans for improved education in future years.


The huge influx of students into colleges, paid for by government backed loans, might very well lead to more people with college degrees. It certainly leads to more people in debt and more money for administrators. Unfortunately, these degrees are cheapened and almost meaningless…even as the loans increase year after year from the rising tuition costs.

It’s strange how institutions can assert the value of a degree as justification for charging so much for it, even as they expand the number of degree programs to the point that it devalues the degrees and even the institution. Should there be loans for programs offering four year degrees in Dance? Women’s Studies? Golf Management? Queer Musicology? I could list more questionable academic degrees, but it’s clear these sorts of programs are more about padding the graduation numbers than advanced study. Do none of the bright and very educated people that run our institutions see a problem with this? Money poured into such “fields” is money that’s being taken away from actual education and learning, the education other people are also being loaned money to receive. It’s often described as some sort of national priority to have more college graduates, but it seems doubtful that America will be improved if we issue 300,000,000 degrees in Queer Musicology (for those that are curious, this is a degree investigating the musical preferences of practicing homosexuals…I can’t make this stuff up).

To summarize, we have non-profit schools giving openly bogus degrees in great quantity, because administrators only want graduates, and education is not an issue. For-profit schools don’t hand out degrees, because they only want the money, and education is not an issue. Neither let educators anywhere near the decision making process. Would that make a difference?

Think about it.

  1. Smith, Charles. “For-Profit Education: Milking Students and the Taxpayers for Corporate Profits.” Truthout. May 2012.

  2. Ibid

  3. Fain, Paul. “GAO Takes Another Crack.” Inside Higher Ed. November 23, 2011.


  5. ACT. “The Condition of College & Career Readiness 2010.”





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