For-profit institutions are making a lot of headlines. In a time where it seems to many that higher education needs to rapidly transform, they have that capacity and are doing it. Kevin Carey writes about his time spent with one for-profit entrepreneur, Michael Clifford. Clifford specializes in purchasing dying traditional institutions and making them over into for-profits, such as he did in 2004 with Grand Canyon University.

The reputable parts of the industry are at the forefront of much technological and organizational innovation. For-profits exist in large part to fix educational market failures left by traditional institutions, and they profit by serving students that public and private nonprofit institutions too often ignore. While old-line research universities were gilding their walled-off academic city-states, the University of Phoenix was building no-frills campuses near freeway exits so working students could take classes in the evening. Who was more focused on the public interest? Some of the colleges Clifford bought have legacies that stretch back decades. Who else was willing to save them? Not the government, or the church, or the more fortunate colleges with their wealthy alumni and endowments that reach the sky.

But . . . 

 

[H]e rejects the Obama administration's proposal to cut off federal aid to for-profits at which student-debt payments after graduation exceed a certain percentage of the graduates' income. In fact, he denies that colleges have any responsibility whatsoever for how much students borrow and whether they can pay it back. He won't even acknowledge that student borrowing is related to how much colleges charge.

That refusal is the industry line, and it is crazy nonsense. As a rule, for-profits charge much more than public colleges and universities. Many of their students come from moderate- and low-income backgrounds. You don't need a college degree to know that large debt plus small income equals high risk of default. The for-profit Corinthian Colleges (as of mid-July, market cap: $923-million) estimated in official documents filed with the Securities and Exchange Commission that more than half the loans it makes to its own students will go bad. Corinthian still makes a profit, because it gets most of its money from loans guaranteed by Uncle Sam.

 

A new study is out with some enlightening data on matriculation and graduation rates for higher education around the world. You can find the original study here.

A study for the National Bureau of Economic Research explores the impact of what the author -- Richard B. Freeman, an economist at Harvard University -- calls the "human capital leapfrogging in the huge populous developing countries." The shift generally (and in particular for science and technology degrees) has important implications for higher education in the United States. . . . "In the face of global competition it is difficult to imagine the U.S. maintaining the dominance it has had in the latter part of the 20th century (just as it is difficult to imagine the U.S. maintaining its dominance of the global economy). But barring some horrific policies or events I would expect U.S. universities to continue to among the world’s leader in higher education into the foreseeable future and thus to keep attracting high skill immigrants to the country."

Word cloud map of this article:The usual litany about competition from non-traditional sources, difficulty in getting student loans, fewer parents able to leverage on their home equity, and the coming demographic peak lead Joseph Marr Cronin and Howard E. Horton, writing in The Chronicle of Higher Education, to use this critical moment in economic history to warn of bubbles and suggest that the day of reckoning for higher education could be drawing near.

The public has become all too aware of the term "bubble" to describe an asset that is irrationally and artificially overvalued and cannot be sustained. The dot-com bubble burst by 2000. More recently the overextended housing market collapsed, helping to trigger a credit meltdown. The stock market has declined more than 30 percent in the past year, as companies once considered flagship investments have withered in value.

Is it possible that higher education might be the next bubble to burst? Some early warnings suggest that it could be.

Some think community clleges offering 4-year degrees is the "Cat's Meow," others think it is a "solution looking for a problem." What do you think of this?

“It’s cooking in several states, in many work-force-related fields, but there’s a lot of debate and politics, and differing views on whether they’re still community colleges if they give baccalaureates,” said Beth Hagan, executive director of the Community College Baccalaureate Association, a nonprofit group that promotes the trend.

In Michigan, community colleges are seeking to offer baccalaureates in culinary arts, cement technology and nursing. Their efforts have stalled, said Mike Hansen, president of the Michigan Community College Association.

“We need legislation to do it, and the legislation’s been introduced, but that’s as far as it’s gotten,” Mr. Hansen said. “The four-year universities in the state are very much opposed to the idea.”

Mike Boulus, the executive director of the group that represents the four-year universities, called the plan to expand community colleges “a solution in search of a problem.”

“It’s clearly unnecessary,” Mr. Boulus said. “Community colleges should stick with the important work they do extremely well, offering two-year degrees and preparing students for transfer to four-year schools.”