Did you know some universities operate for a profit? If you didn’t then you’ve definitely heard of some. The University of Phoenix and ITT Tech are probably the most well known, if for nothing else their large advertising budgets. These schools seek to provide a quality education for students while at the same time turning a profit. This is a stark contrast to traditional private schools and public universities. Traditional schools operate as non-profits with excess being reinvested back into the school. For-profit schools give excess back to shareholders.
Is this right? Should a university be allowed to operate on a for-profit basis? I don’t see any problem with it so long as pricing is competitive and the education remains of good quality. I checked prices for an MBA at the University of Phoenix and it’s a hell of a lot cheaper than any of the top 25 schools and it competitive with a run-of-the-mill regional public school MBA. But ITT Tech is a different story. It’s estimated to cost $40k to get a 2 year associates degree from ITT Tech. Any local community college is going to cost less than that.
Furthermore, these schools have huge dropout rates. This means that people go to these schools and pay a boatload of money but never get a degree for their hard work. At the University of Phoenix only 18% of students finish a degree within 6 years (compared to 55% national average). Of the online students, it’s 4%. This makes me concerned considering how happy the students are that are featured in commercials. Are they painting a picture that all you have to do is get a degree and it’s as easy as going to their website and borrowing thousands of dollars in student loans?
It’s not that easy. You have to look at the typical student and note that they are different than those attending a traditional school. Many of them are parents and are working full time. They may have hit some bumps in the road in life or are the type of person less likely to commit to something long term. I’m making generalizations of course, but there’s no denying Phoenix has a different target student than UC Berkeley.
So it should be expected many, if not most, of the people going to for-profit schools won’t finish. I don’t know how much effort these schools put into painting realistic expectations, but it seems the government is starting to look into these questions. I’m worried we’ll find a world of lofty promises to people that will never get much from it.
But that doesn’t mean these schools are all bad. The University of Phoenix has graduated some impressive people. Howard Schmidt is the cybersecurity chief for the White House and holds both bachelors and masters degrees from the University of Phoenix. And the programs are great for certain people. For example Shaq has an MBA from the University of Phoenix. The education he got isn’t going to get him a job on Wall Street but it’s going to help him manage his money and his businesses whenever he finally retires.
If you’re considering one of these programs, I suggest you first look at local options and compare the quality of education for the price you pay. For-profit schools aren’t the only online options, many universities offer online degrees. I like public schools myself. To each his own, but until more transparency emerges from these for-profit schools I’d say buyer beware.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
Be First To Comment!