From Imitation to Infiltration

For-profits never went away. They just got less conspicuous.

Until the early 2010s, investors who wanted to turn a profit in the higher education market typically set up their own colleges. Although each for-profit college was its own creature, common features included much higher than average spending on marketing, much lower than average spending on instruction, nothing resembling a tenure system, no unions, no athletics and an unapologetic focus on “employable” majors.

The story of the rise and fall of this model of for-profits is well-known but often misunderstood. While it’s true that many of the marquee names of the field are either gone or much smaller than they used to be, private investment hasn’t gone away. Instead, it adapted. It has adopted protective coloration to ward off predators.

Simply put, the model for for-profit higher education has gone from imitation to infiltration.

The recent story of Eastern Gateway Community College, in Ohio, exemplifies the trend. The Inside Higher Ed story on it is quite good. The short version is that EGCC contracted with a for-profit service provider that would provide infrastructure to scale up its online courses quickly, in exchange for half of the profits. (That’s usually called an online program manager, or OPM.) The incentive for the service provider was profits. The incentive for EGCC was, well, profits to offset the losses from declining enrollment on campus. But in the zero-sum world of Ohio’s performance-based funding, there was also an incentive from public policy. Note the college president’s choice of words here:

“We are doing better than all our competitors …”

Outside of sports, it’s bracing to hear a community college president refer openly and without hesitation to other community colleges in the state as competitors. What’s even more bracing is that within the funding system Ohio uses, he’s not wrong. One college’s increased share of funding leads, by definition, to another college’s decreased share.

As any veteran of for-profit higher education can tell you, much of the financial gain in the model comes from “efficiencies.” That usually means an adjunct-heavy model with large classes and minimal overhead. Absent some serious countervailing forces, the fight for resources can quickly devolve into a race to the bottom.

The story became news because EGCC’s regional accreditor is trying to be that countervailing force, albeit largely after the fact. I wish the HLC well, though the binary nature of accreditation—you’re either accredited or you’re not—combines with political realities to make actual closure very unlikely. The HLC’s best hope is probably to sway some Ohio legislators to amend the rules around performance-based funding to stop rewarding undesired behavior.

It’s easy to bash EGCC’s leadership for using the college’s good name and accreditation to launder a for-profit. But the move isn’t unique to EGCC, and in some ways, it’s a rational response to the situation in which the college finds itself.

Over the last few years, other Ohio community colleges that have stuck to the academic high ground have effectively been punished for it. That’s the core issue. When bad behavior is rewarded and good behavior punished, sooner or later, someone will chase the reward. The real cure is to fix the incentive structure.

As my Inside Higher Ed colleague John Warner has argued, public higher education shouldn’t be thought of as a tournament in which colleges compete with each other. It should be thought of as infrastructure, undergirding the health of the society and the growth of the economy. Public colleges shouldn’t compete with each other any more than roads compete with each other. (Again, I’ll carve out an exception for sports. One college’s basketball team playing against another college’s basketball team is not a problem.) To the extent that they devote resources to competition, they divert resources from their mission. As a taxpayer, I know where I’d want my money to go.

When we base colleges’ economic survival on enrollment, we effectively turn them into for-profits. It shouldn’t be shocking that some of them recognize that and make deals with people who are experienced at generating profits. And we shouldn’t be surprised that investors are opportunistic; that pretty much comes with the role.

The reason that for-profits have been able to infiltrate the sector is that the sector has been increasingly forced to behave like for-profits. Whatever the eventual fate of free community college, we absolutely need to recognize public higher education as public, and give it the support it needs to uphold academic standards. Without that, I can predict with confidence that the EGCC story will be the first of many.