Globalization and the Emergence of For-Profit Higher Education Author(s): Ann I.

Morey Reviewed work(s): Source: Higher Education, Vol. 48, No. 1 (Jul., 2004), pp. 131-150 Published by: Springer Stable URL: http://www.jstor.org/stable/4151533 . Accessed: 05/06/2012 05:16
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Higher Education 48: 131-150, 2004. @ 2004 Kluwer Academic Publishers. Printed in the Netherlands.

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of and Globalization the emergence for-profit highereducation*

ANN I. MOREY
Centerfor Educational Leadership, Innovation and Policy, San Diego State University, San Diego, USA Abstract. Globalization and the revolution in technological communications are major forces of change in higher education. This environment, when coupled with the needs of adult learners and the rising costs of tuition at traditional colleges and universities, has stimulated the emergence of for-profit, degree-granting higher education in the United States. This paper examines the growth of for-profit higher education, provides a cost/ profit analysis, and gives examples of for-profit universities that are increasing international in scope. The paper concludes with a discussion of the implications of these developments for traditional colleges and universities. Keywords: For-profit higher education; adult education; nontraditional students; diversification of higher education; postsecondary education

Introduction A major force for change in higher education is the globalizationof economic,cultural,politicaland intellectualinstitutions,along with the of increasinginterdependence nations. The revolutionin technological this communications accelerated transformation bringingabout has by a real time, globally connectedworld. There has been an explosion of virtualor on-line coursesthat reach across state and national borders. Furthermore,a developing trend toward the globalization of higher education is apparentwith a number of institutionsmoving toward truly global operations,such as the Universityof Maryland,the British Open University,MonashUniversityof Australiaand the Universityof Phoenix (Newmanand Couturier2001). This environment, whencoupledwith the needs of adultlearnersand has the risingtuition at traditionalcolleges and universities, stimulated the emergenceof for-profithigher educationin the United States as a viable sector of postsecondary education. The rapid growth and financialsuccessof these institutionshas focuseddiscussionand debate around this expandingsegmentof Americanhigher education.Earlier
* An earlier of versionof this paperappeared Morey,A.I. (September, as: 2001).The emergence Education. for highereducation: for-profit implications teachereducation.Journalof Teacher

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for-profitcompanies'involvementin higher education targetedvocational programsand/or ancillaryand supportservices,whereasthe new entrantsinto the marketfocus on highereducation'score, the curriculum. Supporters for-profiteducationpoint to the benefitsthat accrue of from competitionin a free marketscenario,most importantly education and potential reductionsin cost. Educatorsargue that improvements public colleges and universitiesplay a critical role in a democratic and accessto opportunity societyby providingeducationfor citizenship - functionsnot often addressedby for-profitfirms. This paperexaminesthe recentgrowthof for-profit,degree-granting higher educationin the United States. It discussesthe reasons for the growth,providesa cost/benefitanalysis,and givesexamplesof for-profit universitiesthat are becomingincreasingly internationalin scope. The concludes with a discussionof the implicationsof these develpaper opmentsfor traditionalcolleges and universities. The growthof for-profit highereducation From theirmodestbeginnings duringthe colonialperiodover 300 years schools in the United States have had a ago, proprietary(for-profit) vocational orientation (Honick 1995). In the nineteenthcentury, the commercialschools becamemoreformalizedand businesswas the main curricula.In the early twentiethcentury,progressiveera reformersattacked the legitimacyof privatevocationalschools due in part to their reputationfor dubiouspracticesand the growthof vocationaleducation in public schools. Organizedlabor groups and manufacturing companies put further pressureon the private, for-profit trade schools. In response, the schools securedtheir future by forming their own regulatory agencyand lobbyingbody and makingsome reforms.Significant growth occurredafter World War II when the Serviceman's Readjustment Act (G.I. Bill)providedreturning veteranswith federalfundingto subsidizepostsecondaryeducation,includingthe for-profitschools. In the 1970s and 1980s, proprietaryschool lobbies again exercisedtheir power and becameeligibleto receivestate and federalstudentfinancial aid. A key condition of eligibilitywas and continues to be state and professional accreditation.It should be noted that the two primary accreditationbodies for proprietary schools, the AccreditingCommission of IndependentColleges and Schools and the AccreditingCommission of Career Schools and Colleges of Technology, are not associatedwith the regionalaccrediting bodies that focus on traditional

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colleges and universities.When the for-profitschools receivedsignificant federalsubsidiesthroughstudentfinancialaid, it allowed them to shift theirenvironment from beingpurelymarket-driven one of being to subsidized(Clowes 1995; Hawthorne 1995; Honick partiallyfederally
1995).

skill trainingbeyond the secondary majorprovidersof entry-level

school level. They offer occupationallyorientedcertificatesand sometimeseven associateand bachelor'sdegrees.By the late 1980stherewere

Today these schools, sometimesreferredto as career colleges, are

estimated1.8 million students(Lee and Merisotis 1991). By and large, these institutionsdid not compete with traditional,non-profitcolleges and universitiesand remainedon the peripheryof highereducation. However,in less than a decade,therehas been an emergenceof forinstitutions of higher education offering proprofit, degree-granting grams traditionallyunder the purviewof non-profithigher education. Numberingover 650 in the US, many of these for-profitcolleges and universities seekingrecognitionby regionalaccrediting are agenciesand severalare now fully accredited. This developmenthas the potentialof providing real competition and altering some segments of non-profit highereducation.Within a very short time postsecondaryproprietary education has transformeditself from a small sector of the economy mainly offeringspecializedtrade trainingto a $3.5 billion a year business in 1998 (Strosnider1998) and over $5 billion today that is dominated by companiesbuildingregionaland national franchises.Among the majorplayersis the Apollo Group,whichofferscertificate programs as well as associate,bachelor's,master'sand doctoral degreesthrough its subsidiaries: Universityof Phoenix,Inc. (including University the the of Phoenix Online), the Institute for Professional Development, the College of Financial Planning Institutes Corporation, and Western International University, Inc. Currently, Apollo offers educational programsand servicesat 71 campusesand 121 learningcenters in 37 states, Puerto Rico, and Vancouver, Canada. Its combined degree enrollment approximately is 200,000students,about one thirdof whom are graduatestudents(http://www.apollogrp.com/About Apollo). in DeVryUniversityspecializes businessand technicaleducationand has over 44,000 undergraduate 8000 graduatestudentsin business and and technology at sites spread across the United States and Canada (http://www.devry.com/inc/about.html). DeVry measures itself by its
job-placement rates and has an employment assistance program that places 93% of its students within 6 months of graduation. In addition to

4000 recognized institutions approximately proprietary enrollingan

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its 25 campus sites, DeVry offersits degreeprogramsonline and draws many internationalstudents. Jones InternationalUniversityalso specializesin business, offering college courses,certificate programs,and bachelorand master'sdegrees in business,educationand communications. curriculum exclusively Its is on-line and Jones International itself on its programsbeing deprides such as Columbia,Stanford, signedby facultyfrom leadinguniversities and the London School of University of Pennsylvania,Thunderbird, Economics. While its students come mainly from the US, it draws studentsfrom 70 countries.Jones gives up to 15 undergraduate 9 and graduatecreditsfor priorleaning.The universityopenedin 1995and in 1999 became the first online universityto be fully accreditedby the North CentralAssociation (http://www.jonesinternational.edu).

What has fueled the growth?

One major force for change is the globalizationof economic, cultural, political and intellectualinstitutions,along with the increasingintercommunications dependenceof nations.The revolutionin technological has accelerated this transformationby bringing about a real time, globally connectedworld. As marketsbecome more global, economic developmentis linked to nations' abilitiesto acquireand utilize scientific, technical and socioeconomic knowledge, and medium to high levelsof technologycontentnow characterizes over half of international trade (Salmi 2000). Yet, many corporations are having difficultyin recruitingthe skilled workersneeded for these marketsand there is a adult education at growing demand for accessibleand career-oriented the postsecondarylevel to fill this need (Lips 2000). Thus, emergingtechnologiesand changingmarket mechanismsare stimulating new opportunitiesfor for-profit education and training organizations.Green (1999) argued that information technology increasesaccess to higher educationand the growing numbersof adults engaging in lifelong learning are fostering an evolutionary event in Americanhighereducation: "Technologybringsnew, rich resourcesto the learningof content; createsnew contextsfor interaction betweenand amonginstructors
and students; and can fundamentally change the way students and institutions approach assessment and certification. (p. 14)"

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Distance educationand distributed instructionhave freed education from beingtime and placebound, makingit more flexibleand attractive to adult learners.It has also challengedlong held conventions,such as that course credit can be measured by the number of class hours. Changesin modes of instructionand deliverymechanismsoccur daily. This evolution is slower at higher education'straditionalcenter and faster on the perimeters. While it is well documentedthat information researchexaminingits imtechnologychangesthe learningexperience, and pact on enhancingacademicachievement learningoutcomesis not consistent(Green 1999). An importantfactor in the growth of for-profitinstitutionsis their abilityto cater to adult students.Undergraduate college studentstoday no longerfit neatly into the 18-24 year old, fulltime,living on-campus image. In fact, only 16%of college students today fit this traditional profile(Levine2001). Over60 %are working,over half are female,and nearlyhalf attendcollege part-time.About 45%of college studentsare 24 years of age or older, and this marketis growing(Levine 1997). In his study of undergraduate attitudesand experiencesconducted between 1992 and 1997, Levine(1997) found that older, part-time,and workingstudents,especiallythose with children,wanteda different type of relationship with theircollege- a relationship that is more like those or they have with their bank, supermarket gas company. They want their colleges to be convenient, accessible,high quality for low cost, open during the evenings and on weekends, and have helpful staff, availableparking,and no waitingin long lines.Manyare likelyto prefer distanceeducationso they can study at home or in the office. They do not want to pay for services they do not use, such as recreational facilities and student extracurricular activities. For these students, education is just one of many activitiesin which they engage higher every day and they value convenience,quality,serviceand cost. Added to this are student preferences active modes of learning for and for concreteor practicalmethods. This contrastssharplywith the prevalenceof the lecturemode of teachingand faculty orientationtowardconcepts,ideas and theory (Schroeder1993).This generalcontext of the changingcollege student makes a ready marketfor institutions that are 'no frills'and offerprograms with activeinstructional strategies and at times and locations convenientto students- just what the forprofitsoffer. For-profitinstitutionsfocus on studentsas customers,and provide servicesfor them that minimize the amount of bureaucracythrough whicha studentmust navigate.Whilemany adultsenrolledin for-profit

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institutionsrecognizethat they are not receivinga degreefrom a 'brand name' university,convenienceand shortertime to degreeattractthem. Their objective is to enter a career. Courses in the evening and on weekendssuit their needs, the practicalorientationserves their career objectives,and the cost of attendance,while above that of the public institutions, is usually lower than traditionalprivate universitiesand colleges in their region. Another reason that many students enroll in bachelor degree programs at for-profit institutions is that they would not be accepted elsewhere. The awardof creditfor life experiences not unusual,can be is an incentiveto enrollingin for-profits,and can have a significantaffect on time to degreecompletion. Recently,some for-profitinstitutionshave witnessedrisingminority enrollments.At least half of the students at DeVry University, ITT TechnicalInstitute and StrayerUniversityare from minority groups. The reasonsgiven for this increaseare several,includingtargetedand studentservices,useful and aggressive marketing,convenience-centered readilyavailableinformationabout financialaid and the narrowfocus on professionaltraining(Farrell2003). The success of the for-profitsector in meeting consumerneeds has fueled the rapid growth of these institutions. They have expanded through mergersand takeovers,aggressivemarketing,expansion into other states,and contracting with othercorporationsand universities to services(Soley 1998).For example,Apollo has been aggressive provide in lobbyingstatesto allow it to offerprograms withintheirjurisdictions. In 1996, it successfullypersuadedthe PennsylvaniaLegislatureto revoke its ban on for-profit universities(Bronner 1997). In 1999, the University of Phoenix obtained experimentalstatus to offer teacher credentialprogramsin Californiaand is currentlyofferinga Master of Arts in educationalso. Theirexpansionhas not beenwithoutresistance. The Universityof Phoenix's requestfor a license in New Jersey was strongly opposed by the Association of Independent Colleges and Universities.The Associationclaimedthat insufficient libraryholdings, over-reliance part-timefaculty, and teachingtoo few hours for the on credits awardedshould bar the Universityof Phoenix from licensure (Soley 1998).In 2001, the Universityof Phoenixsubmitteda 2000-page applicationto the New JerseyCommissionon HigherEducationasking for anotherreviewand Phoenix now offersprogramsin this state.
An example: the University of Phoenix. The University of Phoenix

(UOP) is the foremostexampleof this new breed of educationprovid-

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in ers. Headquartered Phoenix, Arizona, it is now the nation's largest accrediteduniversity.The Universityof Phoenix began as the private Institute for ProfessionalDevelopmentin the mid-1970s under John Sterling,and the North CentralAssociation of Colleges and Schools it accredited in 1978.Today UOP serves174,900studentsand has more than 47 campusesand 87 learningcentersin 29 states as well as Puerto It Rico and Vancouver,BritishColumbia(http://www.apollogrp.com). also serves students via the Internet with the University of Phoenix Online,enrolling79,300 studentsworldwide.It offersvariouscertificate degree programs,bachelor's,master'sand doctoral degreesin several areas, including business, administration,accounting, management, technology management,information systems, education, counseling and nursing.Its explicitmissionis to serveworkingadultswho wish to retrainfor new careersor to advancein theircurrentfield. The average age of theirstudentsis about 35 yearsand specialpermissionto enrollis requiredfor studentsunder23 years of age. Over 75%of the students receive some form of tuition reimbursement from their employers Unlike most traditional (www.phoenix.edu/students/1.1a.text.asp). colleges and universities,UOP also gives academiccreditfor life experience.It acceptsabout 90%of its applicantsfor bachelordegrees. The University of Phoenix has no tenured faculty. They employ about 285 full-timefaculty membersand about 17,000 adjunct(parttime)facultymembers,including4000 facultymembersfor UOP Online (www.phoenix.edu/factbookweb). Experienced faculty members at UOP mentornew instructors. instructors All receiveongoing in-service in teachingmethods favoredby the university,and in subject training mattercontent areas. Faculty memberswho do an inadequate job are simplynot re-hired. Educationat the Universityof Phoenixis 'streamlined' 'no frills'. and Classesmeet weekly for four hours and are five to six weeks in length. Courses have a standardized, centrallydevelopedcurriculumand are Studentsare given schedules sequenced,ratherthan held concurrently. for their entire program in advance, including all homework and assignments.Studentsprogressthrough a programas a cohort. Parttime facultymembersare professionals who work fulltimein theirfields and hold at least a master's degree. This practice is consistent with UOP's approachto educationthat places emphasison practicalexperience rather than theory (Raphael and Tobias 1997; Stamps 1998, www.phoenix.edu). People active in their fields teach classes. Lecturesare not the mode of teachingat the Universityof Phoenix;rather,the instructor seen as is

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a facilitatorof studentlearning.Studentsand facultyare encouragedto draw upon their workplaceexperience. The University'scampusesand centers are located in store fronts, malls and office buildingsclose to freewayoff-ramps.It uses both onsite and distance education modes. UOP's libraryhas no books and consists entirely of journals and articles that are accessible on-line. Studentscan ask staffto do librarysearchesfor them and can make use UOP's links to some free and low-cost websites. These students also have access to public libraries,includingthose at public colleges and universities. The Universityof Phoenix's small classes, all-adultcohorts, group work instead of lectures,and efficientapproachto the trainingof its instructors underlie claimthatit does a betterjob of teachingits target its Like other than equivalent population publicand nonprofituniversities. for-profitinstitutions, the University of Phoenix places emphasis on preparingits graduatesfor job placement,and the fact that many professorsare local practitioners assistsin this endeavor.UOP also tendsto be moreresponsive meetingdemandsfor new programs. in Unlikepublic it collegesand universities, can expandits programswithoutthe trouble of awaitingstate appropriations campusallocations. and While establishedin 1989, University of Phoenix Online only has been fully operationalfor the last several years. It has served 13,700 studentsand last year enrolled4000 new students.UOP Online offers education,technologyand nursing. programsin business,management, The entirecurriculum deliveredvia the internetand does not require is on-campusattendance.UOP Online advertisesthat their students can earn a degreein 2-3 years (www.online.phoenix.edu).
Corporationsand higher education

In the 1970s, higher education was slow to respond to the need for trainingwithin corporationsso many corporationsformed their own universities.Nearly all of these universities,now about 1600 of them, are not accreditedand thereforecannot offer degrees.However, some have sought approvalfor their classes to carrycollege credit and have enteredinto partnerships with for-profitand nonprofitinstitutionsfor this purpose. Severalcorporate universitiesdo offer degree programs often in partnership with traditionalcolleges and universities. Many of
these, however, are no more than new labeling for training departments (Stamps 1998).

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For-profitinstitutionshave been responsiveto corporateneeds for trainedpersonneland adults'needs for careermobility.They have been successfulin attractingan increasingnumberof studentsfrom business and industry. For example, Corporate Educational Services, a subsidiaryof DeVry,has AT&T, GTE and PhilipMorrisamongits clients. US West and Intel Corporationhave agreements with the Universityof Phoenix (Soley 1998). These for-profitinstitutionshave capitalizedon the fact that companieswill at leastpartlyreimburse theiremployeesfor tuition costs.
The economics

in Highereducationis a $231 billion annualenterprise the United State (Lips 2000). In 1998, Gerald R. Odening,vice-presidentof Salomon Smith Barneyin New York, predictedproprietaryinstitutionswould increasefrom about 2%of the marketto between15%and 20%over the next two decades (Strosnider 1998) with the for-profit segment of educationaccountingfor about $5 billion in 1999 (Moe postsecondary et al. 1999). Winston (1999a)outlinedreasonsfor this projectedgrowth: and the organizationalefficienciesof privatizationcan lower the cost of producinghighereducationenough that for-profitschools can compete with existing nonprofit and public colleges and universitiesby offering students a better deal and still making a profit. Or they will producean educationthat studentsdeem more appropriate, improvingqualityfrom the consumer's point of view. costs and priceswill be lower, or the educationwill be different So, and better,or both. (p. 13)" Thus, a for-profitfirm will either have lower costs than traditional or highereducation,delivera productthat studentsfindmoreattractive, both. For proprietaryinstitutions,price less average cost equals unit profit (Winston 1999a). But, as Winston points out, the structureof as highereducationis unconventional nonprofithighereducationhas a cost-price-subsidy hierarchystructure.That is, in public and nonprofit colleges and universities,the price chargeda student for tuition is always less than the averagecost of providingthe education.The difference is made up by 'donative resources' coming from state appropriation, gifts, endowment, and physical wealth. In short, students "The vision - or specter - is simple. New information technologies

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are subsidized.Based on 1995IPEDS data, Winstonestimatesthat the average subsidy per student at a nonprofit college or universitywas $8800 per year. This educationcosts $12,500 to produceand is sold to the student for a price of $3700. When public and privateinstitutions are separated,the subsidiesremainsimilar but the cost and price are costs are $10,150per studentand the Publicinstitutions' quite different. student'buys' it for $1230, while privateinstitutions'costs are $15,310 the and are sold to the studentat $6640.Winstonrepresented cost-pricesubsidythis way:
student subsidy = cost - price

Using the above informationthe averagesubsidyis:

for all nonprofit colleges and universities: $8800 = $12,500 - $3700 $8920 = $10,150 - $1230 for all public colleges and universities:

for all nonprofitprivatecolleges and universities:

$8670 = $15,310 - $6640

in It is interesting note that thereis not much difference the subsidies to between public and private nonprofitcolleges and universities.These subsidies are a real barrier for entry into the market by for-profit institutions.As noted earlier,similarto most businesses,for-profitfirms use the following formulato calculateprofits:
unit profit = price - cost

Winstonnotes that the studentsubsidyand unit profitequationsare the same with only a differentsign:
student subsidy = cost - price

Profit is negative subsidy. Subsidy is negative profit. Thus, subsidies that for-profitinstituamountof cost reduction representthe maximum tions have to make in orderto be competitive(if they offeredthe same product).In the examplegiven above, a new companyofferingthe same type of educationwould have to lower its costs by $8800 to be competitive.But, the types of programsfor-profitinstitutionsoffercan also influencestudentdecisionsabout enrollment.The challengefor the forlower costs; that profitsthen is to offer good programsat substantially are suited for their needs and ofis, programswhich students believe fered at a reasonableprice. For-profit institutionshave employed various strategiesto reduce is educationcosts. Since highereducation'smajor expenditure for per-

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sonnel,cost reductionin this areais essentialfor success.Facultyat forprofit institutionsdo not have to engage in research,which comprises 33-50%of traditional university facultyworkloadand often necessitates expensivelaboratoriesand other sourcesof researchsupport(Raphael and Tobias 1997).Without this researchfunction, faculty membersat for-profit institutions have more time for teaching. Faculty time in anothertraditionalactivity,academicgovernance,is reducedto a bare minimum.At the Universityof Phoenix, for example,personnelcosts are reducedthrough the heavy relianceon part-timefaculty members who teach for lower wages. In addition, course syllabi are prepared and every threeyearsby practitioners professionalsin the subjectarea, develeliminatingthe need for wide facultyinvolvementin curriculum Coursesare uniformthroughoutthe systemand instructional opment. faculty membersare expectedto follow these centrallydeveloped syllabi. There are no electives,furtherreducingthe costs of course production and the potential for small classes that electives can bring (Raphaeland Tobias 1997;Soley 1998;Stamps 1998).Anotherexample is International Inc. It offers University,owned by Jones International, degrees through the Internet. On-line courses are designed by independent contractorsand thus are the property of InternationalUniversity. The universityhires part-time 'instructors'at low cost who answer e-mail questions that students have about course materials (Soley 1998).Faculty time is not spent in governancemattersor taken up by continuouscurriculum development.Most for-profitinstitutions make heavy use of part-timefaculty and do not grant tenure. As a result, they can recruit,train, assess, and retain faculty that meet their immediateneeds. Other cost reductionstrategiesinclude leasing space in officebuildings, storefrontsand malls in which to hold classes and house a small administrative staff. Sometimesthey even use space in public schools. These proprietary institutions also avoid the costs of supporting extracurricular activitiesand an athletic program.In short, the main reasonsbehindtheirfinancialsuccessare low labor and overheadcosts and the sole focus on teaching.They are assistedby the largercontextof growth in people wantingto attend college and rising tuition at traditional colleges and universities. These cost reductionstrategiesusuallyallow proprietary institutions to set their tuition and fees above the publicinstitutionsand below the nonprofitinstitutionsin the region they are targeting.Using Winston's national estimates presented above, the average 'price' per year for tuition and fees in traditionaluniversitiesand colleges was $3700. The

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Tuition and fees for 4 years $4920 $26,560

Price per credit unit $41 $221

Price per 3 unit course $123 $663

averageprice for public institutionswas $1230 and for privateinstitutions was $6640. To be pricecompetitive,a for-profitinstitutionwould need to priceits productbetween$1230 and $6640.Assuminga student takes 30 units per year, these figuresyield the following information:
Investment opportunities

Growinginterestin educationby venturecapitalistsis one indicatorof the potentialfor growthin for-profiteducation.Theseinvestorsprovide crucialfinancingfor new companiesin whichthey see high potentialfor rapidgrowthand high rates of return.EducationWeekand Knowledge Quest VenturesIIc conducteda surveyof 1000 venturecapitalfirmsin 1998 to ascertaintheirinterestin investingin education.Eightypercent of the 64 firmsresponding said they would considersuch an investment. Most of these firmswere more interestedin investingin postsecondary education,includingfor-profitand technicalschools, ratherthan K-12. to Primaryfactorscontributing this interestwerethe potentialreturnon investment,and the size and growth of the industry.Improvingeducation was rankedlast among the reasonsfor investment. The stocks of many for-profitinstitutionsare traded on the NASDAQ and New York Stock Exchange.DeVry was the first of the large education companiesto make a public offering of stock in 1991 and Apollo followed in 1994. Shares in Apollo Group started at $2 per share.Sincethen,the stockhas split severaltimes(mostrecentlyin April 2002) and, as of December8, 2003 was being tradedat about $67 per share. StrayerEducation,Inc. becamepublic in 1996 at $10 per share, split once, and in December2003 was tradingat $103 per share. Another avenuefor-profithighereducationcompaniesto raise capital is private equity funds. Given Wall Street'sweak performancein recent years, privateequity funds have become an importantway for investorsto put their cash into one of the few businesssectors that is expanding: for-profit education (Blumenstyk 2003). In addition to proprietary/career colleges, these funds have acquired or purchased

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interestsin colleges and chains of colleges for the last four years. For example,since 1999Arena CapitalPartnersin New York has acquired sevencolleges in Californiaand threein the Southeast.Coincidentally, some of these private equity funds have major universities,such as Brown,Harvardand JohnsHopkinsas investors.As Blumenstyk points the flow of capital into the for-profitsector is especiallynotable out, given the cutbacksin state funding of public colleges and the current financialtroublesof many non-profitprivates. and responses Implications institutional Whileit is too earlyto judge the impactof this growingfor-profitsector of higher education, some observationsare possible. Most fundamentally, for-profithighereducationand nonprofithighereducationinstitutions are differentat their core. As Hawthorne(1995) observed,forprofit institutionsprovide educationto make money, while traditional colleges and universitiesaccept money to provide an education. Put anotherway, there is a major differencebetweenthose who are in the business of education and those whose mission it is to provide an these two types education.The basicvaluesand assumptions underlying of institutionsare dissimilar,therebydriving decisions about curriculum, the natureof faculty, researchand servicefunctions,institutional admissions,services,and the like. Of particular significance governance, to this discussionis the different emphasison job trainingand education for for life and citizenship.Certainlypreparation a career,especiallyin the professions,is a purposeof traditionalhighereducation.But at the centerof its undergraduate mission is the provision of a liberaleducation with its emphasison culturalheritage,critical thinking,communication skills, qualities of the mind and spirit, and education for The inclusionof profit-driven schools with clearand specific citizenship. missions regardingjob training into the higher education's fold has resultedin policymakers and accreditation agenciesholding traditional for educationmore accountable the employability theirgraduates.In of accreditationagencies remain uncertainabout how to deal addition, with substantive differences betweeninstitutionswith distinctlydifferent missions(Hawthorne1995).Recentactionsby these agenciesindicatea willingnessto considerand accreditfor-profituniversities.
It is the entrance of the for-profit institutions into the core college curriculum that raises concern and presents challenges (Winston 1999a). These core courses and programs at traditional institutions, such as

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introductorycourses taught by teachingassistants,large section lower division courses, and majorssuch as education and accounting,subsidize moreexpensivecurricular offeringselsewherein the institutions.As these courses and programsare offeredby other institutions,they will impact the ability of traditionalinstitutions to cross-subsidize.Marchese (1998) points out that this situation also applies to brand name courses offered by traditional universitiestaken over the Web that students may seek to transfer.One immediateimplicationis that colwill leges and universities have to gathermore detailsabout the costs of theircurricula,and over time these institutionsmay need to restructure their instructionalbudgets. Pusserand Doane (2001) arguethat the key distinctionbetweenforprofit and nonprofit providersrelates to public or private economic benefitsand public or privatesocial benefits.For-profitinstitutionsare oriented toward monetary and non-monetaryprivate benefits. Nonprofitinstitutionsprovidethe same, but also providesocial benefitsuch as greater levels of educational attainment generate increased tax, higher productivity, more leaders from diverse backgrounds, and This orientationtowardsocial benefitjustifies greatercivic engagement. of nonprofitinstitutions. public subsidy The impressive growth in the college-going rate of high school graduatessince 1960coupledwith populationgrowthhave implications relevant to the impact of for-profiteducation. With over 65% of all education high school graduatesattendingsome form of postsecondary in the US, state policy makers increasinglyview this as a sufficient number(Levine 2001). Higher educationmay no longer be viewed as a growth industry, but rather a mature one. Usually when this is the case, the governmentseeks to control and regulate the industry, thereby diminishingtheir autonomy and demandinggreateraccountability. This certainlyhas been the trend in higher education.Furthermore, state policy makerslike those in Californiaare not inclined or able to fund the neededexpansionin highereducationto accommodate the projected increase in number of people seeking postsecondary education. Another major shift is that the focus is moving away from teaching (process)and towardlearning(outcomes).This changewill resultin less emphasis on courses and credits and more on the measurementof student achievement(Levine 1997). It weakens reliance on in-class hours as a measureof studentlearningand progresstowarddegree,and along with advances in technology, opens the way for new forms of measuringstudentprogress.

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The entry of for-profit providers has the potential to accelerate dramaticchanges that are alreadyoccurringin the Americanprofessoriate.Of specialsignificance the changeduringthe last decadefrom is 80%of the professoriatebeing tenuretrack, to approxapproximately 60%today. ArthurLevine (1997) believes that among the five imately forcesthat will continueto changethe professoriate the United States in are the rise of new technologiesand the growth of privatesector competitors. He also believesthat highereducationis at a crossroads: "There is an underlyingbelief that colleges and universities are making precisely the same mistake that the railroads made. The railroadsbelievedthey were in the railroadbusiness;they focused on making bigger and better railroads.The problem is that they were actuallyin the transportation industryand, as a result,were derailed the airlines. Similarly,it can be said that higher education is by makingthe mistakeof thinkingit is in the campusbusiness,when in realityit is in the very lucrativeeducationbusiness.High technology and entertainment educacompaniesare viewing noncampus-based tion as an opportunity.(p. 17)" As mentionedearlier,for-profit institutions instructional have separated deliveryfrom the design of the course. Thus, course content is in the hands of the corporationand not individualprofessors. As such, it removesfaculty from their importantrole of control over the curriculum and diminishesthe need for subjectmatterexpertise.Relatedly,the lack of scholarlyexpectationsof faculty breaksthe importantlink between the productionand transmissionof new knowledgethat underpins academiclife. This approachto instructionis not in the context or traditionof academicfreedomas instructorsare not free to determine what they teach in theircourses. Leadersof 'traditional' collegesand universities questionthe extentto which their institutionswill be affectedby the for-profits.Based on his analysisof IPEDS data, Winston(1999a)identifiedthe types of schools that are most vulnerableto competition from for-profit institutions. Non-elite private institutions were most vulnerable,including many doctoraluniversities, comprehensives, two-yearcolleges,and specialized institutions.They might have difficultywithstanding cost-reduction the competition,or be unable to make organizationalshifts without seriously erodingthe natureof theirinstitutions.On the otherhand, the low cost to students and public subsidiesof public higher education will insulatethis type of institutionfrom seriouscompetitionfrom the forprofit sector. (See Winston 1999a,b for more information).

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institutionsrespond? How can vulnerable They can reducetheircosts and change their programsand organizationto be more competitive. Cost reductionwill most notably be achievedthroughthe reductionof full-time,tenured faculty and indeed this is alreadyhappeningacross the country(Schuster1999).One outcome of this trendmay be altering the role of faculty, who may have less discretionabout the content and instructionmethodologiesemployed(Levine 1997). Another implicationis that vulnerablenonprofit colleges and universities may either become a 'for-profit'or be taken over by them. are Thereis other evidencethat cooperativearrangements beingformed and universities(Marchese between for-profit and nonprofit colleges For example, the Universityof 1998) regardlessof their vulnerability. with Lotus to sell its coursesand programs Wisconsinhas an agreement with Caliber(a worldwide.Johns Hopkins Universityhas partnerships Sylvan and MCI venture). Soley (1998) noted the partnershipsof Apollo with CardinalStritchCollegein Wisconsin,WilliamPenn College in Iowa, and Indiana Wesleyan in Indiana. Apollo Group has successfullyassisted these colleges in marketingand developing programs using the same methods as the University of Phoenix, and in return, Apollo has received a percentageof their revenues. Another strategyis for nonprofitcolleges and universitiesto increasecorporate training.In most institutions,this would entail an expansionof the role and function of their extension/continuing educationunits. most nonprofit institutions believed that the for-profits Initially institutions did not provide real competition regarding educational quality. But public perceptionsabout the merit of some of these new institutionsare beginning has providers begunto changeand traditional to take note (Newman and Couturier2001). Some well-known forprofits, such as the Universityof Phoenix,have developedmeasuresto evaluate learner outcomes and teaching effectivenessthat far exceeds efforts at nearly all traditional colleges and universities. Moreover, many prestigious nonprofit universities (e.g., Stanford, Chicago, Columbia, Maryland) have establishedfor-profit subsidiariesand/or believe with for-profitfirmsthat Newman and Courturier partnerships erodes the aura of traditionaluniversitiesas disinterested guardiansof and independentthought. quality and for-profitdeThe currentfocus of lobbyistsfor career-colleges gree granting institutions is the reauthorizationof the US Higher
Education Act. They are pressuring policymakers to relax certain rules

that for-profit institutions must follow to participate in federal-aid programs.Many leadersof nonprofitcolleges and universitiesoppose

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any changesthat would increasethe eligibilityof for-profitinstitutions for federal dollars which they note are already stretchedthin (Burd 2003). Entrepreneurial, for-profitinstitutionswill increasinglyforce nonand to examinetheirprograms becomemorecompetitive. profitcolleges Some colleges may need to change their roles, and have a different orientationtoward their studentsas customers.Most especially,nonprofit institutionswill need to increasetheireffortsto communicatethe value of their broadermission regardingthe productionand transmission of knowledge,the public benefitsto the economy and society, and the importanceof having an institutionwhere freedomof ideas is fostered and maintained.

Concluding thoughts "It is not easy to predict the future of higher education, nor, once its shape is discerned, to suggest the paths one would like it to take."

Burton R. Clark 1976 Highereducationhas undergonesome dramaticshifts since the midtwentiethcentury. Most notably, higher education has gone from an elite, mainly private system to an open, public system of mass education. One important shift has been the entrance of non-traditional students, including adult students and those from underrepresented groups. The rapid growth in knowledge,the onset of the information age, and the need for education for career mobility have resultedin education becoming a lifelong necessity.Within this context, the entranceof new providersthat are responsiveto adult needs for postsecondaryeducationis consistentwith marketneeds and forces, as are the new venturesbeing undertaken traditionalhighereducation.Green by (1999) observedthat highereducationis undergoinga period of system segmentation.The emergenceof for-profithigher educationwill cause both increaseddifferentiation highereducationand at the same time in about changes in traditional higher education. Even so, the bring are boundaries becomingporous;institutionsfirmlyrootedin one sector now seek students from another. Partnershipsbetween profit and nonprofitentitiesare increasingand most likely will continueto do so. As traditional, especiallypublic,highereducationfindsits way within
the 'education business', it must do so within its special mission. Society expects public higher education to advance social justice through in-

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creased access for underrepresented groups, provide service to communities,enhanceeconomicdevelopmentthroughtrainingand applied research,and advanceknowledgefor the social, economic,culturaland scientificbenefitof society. The means by which it fulfills this mission may be informedin part by the for-profitsector. This sector has demonstratedcost-efficient and consumer-oriented ways of developingand deliveringtrainingprograms. In his seminalarticle,TheBenefits of Disorder, Clark(1976)describes the benefitsof the disorderlypatternof highereducationin the United States.This systemof highereducationis a deviantcase from the modes of organizationfound in other nations. It is special,'not only by virtue of its huge size, but also its dispersionof control,varietyof institutional such as an extensivestudentchoice forms, and a host of characteristics and high faculty mobility'(p. 32). By most comparativestandards,the system has been very successfuland served society well. It is not the resultof a carefullydeveloped,centralized plan, but ratherhas evolved from a specificsequenceof strugglesthat createda postsecondarysystem responsiveto a variety of societal needs. Among the five factors Clark believed contributedto this strengthwere the competitiveness and the systemof checks and balances among colleges and universities no one superstructure in control).As highereducationmakesits is (i.e., one way throughits current'struggles', hopes that Clark'sthesis on the benefitsof disorderremainsa viable one. References
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Addressfor correspondence: Ann I. Morey, Center for Educational Leadership, Innovationand Policy, San Diego State University,San Diego, USA