None but the shrillest critics of for-profit colleges have ever proposed shutting them all down, but a new study suggests that states would have to spend a lot more money to accommodate all the displaced students in that imaginary world.
How much more? According to the analysis, some $8.4-billion over five years, and that’s just looking at the four big states of California, New York, Ohio, and Texas.
“That’s a lot of money, and it’s a lot of money that these states don’t have,” said Jorge Klor de Alva, co-author of the study and president of the Nexus Research and Policy Center, which produced it.
In fact, that estimate of additional expense would amount to just 7 percent more than what the four states actually spent in that period—a conclusion that can’t be drawn from data in the report but which Nexus provided to The Chronicle. (See chart below for details.)
Still, as David A. Longanecker, president of the Western Interstate Commission for Higher Education, noted, there’s hardly any assurance that states would or could make up that difference. And the sum is a conservative estimate that doesn’t even count the costs of adding new facilities.
Mr. Longanecker’s takeaway from the study, which he reviewed in advance of its release: “Don’t wish for these to go away,” he said of for-profit colleges, where a high proportion of the students are women, minorities, and low-income. “A lot fewer students would have access to higher education, and we know which students would be shut out.”
The study is likely to be controversial, not only because of Mr. Klor de Alva’s history as president of the University of Phoenix and the Nexus center’s origins—it began with funding from John Sperling, the university’s founder—but also because of its timing and the way it’s framed.
The study, “Do Proprietary Institutions of Higher Education Generate Savings for States? The Case of California, New York, Ohio, and Texas,” takes as its premise an implausible “what if” scenario. And it is no coincidence that it is being published this week, days after the U.S. Department of Education released its latest proposal for a “gainful employment” regulation.
The new regulation could eventually close down some programs at for-profit colleges and other institutions where students incur too much debt relative to the income they earn. Before its release, many in the proprietary sector had already begun painting the proposal as a measure that will deprive thousands of students of educational opportunities. Advocates of the measure say a well-crafted regulation would affect only overly expensive programs with poor outcomes.
Mr. Klor de Alva, who undertook the study with Mark S. Schneider, a vice president at the American Institutes for Research, said the analysis would add context to the debate over the ramifications of the gainful-employment regulation and other issues. “One huge piece that is missing,” said Mr. Klor de Alva, is how states would cope if the higher-education capacity offered by the proprietary-college sector didn’t exist.
“This is by far not a defense” of for-profit colleges that are not doing their jobs, he insisted. “That’s a serious problem.” But so too, he said, would be an overly broad regulation that reduced students’ access to for-profit institutions “on highly generalized grounds.” The two authors previously published a study that called community colleges a poor investment for the public and in some cases, for the students themselves—a report that some community college leaders and scholars called flawed and “reckless.”
Cost Analysis
For the new study, the authors estimated the full-time-equivalent enrollments at all two-year and four-year proprietary colleges in the four states. They also calculated the actual per-student appropriations at community colleges and broad-access four-year colleges for each of the states in the years from 2007-8 through 2011-12. (They were deliberately conservative in those estimates, treating a share of the proprietary-college students reported as full-time as less than full time, to more accurately reflect what they know about the attendance patterns of many for-profit students. They also adjusted downward the for-profit enrollment totals shown in federal data sources to account for online students who may be listed as enrolled in a for-profit institution in one of the four states but who in fact live outside the state.)
From that they calculated how much more the states would have had to spend if the students at two-year proprietary colleges had enrolled in public community colleges, and if those at four-year proprietary institutions had enrolled in public colleges like California State University at Bakersfield, Lehman College of the City University of New York, Ohio State University at Marion, or the University of Houston-Downtown.
The results: California’s costs of enrolling the equivalent of 384,041 for-profit college students in public four-year colleges would run nearly $2.5-billion, New York’s 144,724 students more than $1-billion, Ohio’s 113,946 students nearly $530-million, and Texas’s 136,132 students about $709-million. For the two-year proprietary colleges, the added costs of the equivalent of 229,547 students in community colleges in California would be $1.6-billion; for 112,743 students in New York, $609-million; for 126,996 in Ohio, $624-million, and for 120,950 in Texas, $790-million.
They also calculated the costs per degree, using the number of associate and bachelor’s degrees awarded by the for-profit institutions from 2008 through 2012, assuming each public associate degree was underwritten by three years of state appropriations and each public bachelor’s degree by six years of state subsidy. (That calculation might overestimate the costs a little. That’s because students who take six years to complete a bachelor’s degree, for example, generally aren’t enrolled full time for the entire six years. Nonetheless, Mr. Longanecker said he applauded their inclusion of that analysis because degrees matter to students and policy makers.)
The researchers found that the states’ collective costs of providing 155,759 additional bachelor’s degrees at the least-competitive four-year institutions in the study would run $6.4-billion, nearly double the amount the states had appropriated from 2002-3 through 2011-12 to produce 162,093 graduates. The biggest impact would have been in California, where the bachelor’s graduates accounted for more than half of the total number of for-profit graduates and the estimated costs were 122 percent of what the state had actually appropriated for those institutions.
The study says the collective costs of providing nearly 242,000 associate degrees would be $4.6-billion, about 24 percent more than the states appropriated to produce 935,674 community-college graduates between 2005-6 and 2011-12. In Ohio, it would have meant an estimated increase of 55 percent over what the state had actually appropriated.
An ‘Interesting Exercise’
While several people who reviewed the study said they found the approach and methodology sound, they did note some concerns.
For one, the study does not mention the billions of dollars in federal student aid that annually flows to for-profit colleges, money that comes from taxpayers. It also makes no value judgments on the merits of for-profit degrees, even though several studies have noted that graduates of those institutions often fare worse in salary and career advancement compared with those from nonprofit colleges. Mr. Longanecker said the “return on investment” for degrees from public universities may well be higher.
The omission of that “value” perspective may lead some to dismiss the report as an irrelevant distraction from the issue of quality that is more pressing in many people’s minds.
Mr. Klor de Alva, for his part, said that evaluating the relative worth of degrees was beyond the scope of this effort. “The study is not about the quality of the degree,” he said. “The study is about the cost to the taxpayer.”
The authors’ decision to count dollars over a five-year period, while serving to avoid problems in the event of one-year anomalies in funding trends, also raised some questions. While they were conservative in working out the state shares, “they’re trying to make a dramatic statement” with the five-year figures, said Darcie Harvey. She is a senior policy analyst at the National Center for Public Policy and Higher Education but didn’t review the study in that capacity. She praised the study as “an interesting way to look at the tradeoffs.” Even if it’s not realistic to say the for-profits could be eliminated, she said, “it’s an interesting intellectual exercise.”
The study’s co-authors found it interesting too, so much that they now plan to calculate the costs for the 46 other states and the District of Columbia.
Mr. Klor de Alva is aware that critics view the Nexus center’s studies with suspicion because of his long association with the University of Phoenix and the center’s close ties with for-profit companies. But he said that was also an advantage because the companies trusted the center with proprietary data.
“I believe in empiricism,” he said. “The more empirical the data the better. That’s what my bias is.”
