For-Profit, Non-Profit & Education

For-Profit Education

For-Profit Education (Photo credit:

As a professor, I have some interest in the increasing trend to turn education into a profit focused industry. One example of this is the push for schools to partner with for-profit companies that provide MOOCs. Another example is the relentless push for assessment that involves instruments provided by for-profit companies. There are many other specific examples, but it is clear that education is being regarded as a new frontier for economic exploitation.

Being a reasonable person, I do favor things that can increase the availability or quality of education (or both) while doing so at a lower cost. As such, I was rather intrigued by the idea of MOOCs and their promise to provide quality education to the masses at a low cost. Likewise, I was interested by the idea of for-profit colleges that were touted as providing quality education at a low cost—all driven by the invisible hand of market forces. As someone who has served on assessment committees since 2004, I am always eager to hear about effective methods of assessment that take as much workload off the faculty as possible.

Unfortunately, I have been rather disappointed by the reality of MOOCs, for-profit colleges and assessment. Since I have written numerous essays on these specific topics already, my focus will be on the generic problem that seems to arise from the for-profit model relative to the non-profit model of traditional education.

On the face of it, the problem with the for-profit approach is obvious: a for-profit must charge to a degree that covers the costs and also provides for a profit. In contrast, a non-profit needs to only cover its costs. To use an analogy, a for-profit is like a vehicle that is loaded with extra weight—it has to burn fuel to move itself, but also to move that weight. In contrast, the non-profit does not need to move that extra weight.

To take a specific example, consider a university that is considering contracting a for-profit company to provide instruments of assessment or online courses. The for-profit will need to charge the University for the cost (including paychecks for workers) of the instruments or courses, plus extra for the profit. That is, the university is effectively giving the company some of the money in return for nothing. After all, the university could simply create the assessments or courses itself and pay just the cost, thus saving money that could be used on other things, like student scholarships or updating obsolete classroom technology.

The obvious reply is to argue that a for-profit can provide goods and services at a lower cost than the university and, even with the profit tacked onto the bill, the cost to the university would be lower than it would be for the university to do it itself. For example, consider the development and operation of an online course. The university would need to pay faculty and staff their usual salaries to do this while a for-profit could hire cheaper labor to do the work (perhaps even outsourcing it to countries with very low wages). Also, the university would need to create the online infrastructure to  run the classes and this could cost considerably more than having a for-profit company provide infrastructure it already has in place (perhaps in another country).

The obvious counter to this reply is that university could simply do what the for-profit does and thus bypass the middleman. That is, if a for-profit company has lower costs because it will hire people in low-wage countries to do the work, the university could simply hire people in low-wage companies to do the work. There is, after all, no special for-profit magic that allows a for-profit company to do things that cannot be done by a non-profit. The university could thus save money or, alternatively, pay the low-wage workers a better wage.

It can be objected that while there is no special for-profit magic, for-profits have the advantage of the profit motive. That is, to steal a bit from Adam Smith, they will work hard to provide a better product at a lower price so that they can make that profit. Since non-profits do not make profits, they lack that motivation and hence will deliver inferior products at a higher cost.

The easy reply to that, as I have shown in my essays on for-profit MOOCs and for-profit colleges, is that the for-profits in education consistently deliver inferior products at higher prices than the non-profit colleges and universities.  This is not to say that a for-profit education company cannot deliver high quality at a lower cost than a non-profit. After all, just as there is no for-profit magic, there is no special for-profit curse that precludes this. However, universities should be cautious before turning to for-profit companies—assuming their goals are to provide quality education at a reasonable cost (as opposed to more corrupt goals).

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  1. For-profit higher education has not worked well in Chile. The educational results of for-profit higher education here are uniformly worse than those of public higher education or of universities run by non-profit private entities or by the Catholic Church. In fact, the two best universities are the University of Chile, which is public and the Catholic University.

    While the market seems to be an excellent way to get people to produce more apples and fewer oranges, following the laws of supply and demand, things don’t work that way in higher education.

    It seems to be a fallacy (it must have a name) to assume that because the market makes for more efficiency in producing light bulbs, it must necessarily produce, say, philosophers or doctors more efficiently.

    Of course, it may be that philosophers are not “produced” or that in educating philosophers or doctors we do not seek efficiency, but other qualities.

    However, even in areas of instruction where one might imagine that the profit motive works well, in my experience it does not.

    I’ve taught English as a second language in a public university and in various for-profit language institutes.

    Judging from my non-scientific experience, I would say that the results are superior in the public university.

    In the private institutes there is always a subtle or not-so-subtle pressure on the teacher to keep the students paying, get them to think that they are learning a lot even when they are not, to make studying easy and pleasant for them, even when it should be difficult and a bit strict, etc, the teacher having to be something of a salesperson to keep their job.

  2. Professor Sir,
    You’re comment smells of fear and self-interest. And you mistake the question. The issue is not ‘Profit or be nice and break-even’ but ownership. These days almost all universities are profit-driven; and the quibble is about who gets to enjoy the fruits: which faculties or athletics or administration etc or the institution itself?

    From a student point of view, would it not be more useful to have a GEE (i.e. graduate exit exam) to provide a common measure of how much recent graduates have learned at their institution — why would a student pay more to know less? So, what we have is a lack a mean by which to measure university performance in terms of learning.

  3. Almost “all universities are profit-driven” Boreas says.

    Whilst prima facie that seems at odds with most universities in the US (including all the reputable ones) being either non-profit private institutions or public ones, of course, a great many undergraduate students at such institutions (and not only those in the US) will get charged far more than it costs to provide their course of study and it’s not entirely ridiculous to describe that difference as ‘profit’. Where that ‘profit’ goes to, and whether it should it go there, are questions that occur to me too. But, for what it is worth, to say a comment “smells of fear and self-interest” doesn’t smell very nice to me at all.

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