Tuesday, March 12, 2013

For-Profit Universities: Between a Rock and a Hard Place

I wrote a little while back about the University of Phoenix and its current difficulties with its accrediting body, the Higher Learning Commission (HLC) of the North Central Association. Now we find out why they're in trouble: the HLC has revised its accrediting standards to include a statement that universities must, first and foremost, serve the public good.

This new statement is fascinating for a couple of reasons. First, it is a deliberate push back against the general philosophical direction which the US has been headed in for a few decades - namely, that university education is a private good, not a public one. All of the recent discussion about "is college worth it?" and the debates over student debt assume, as a matter of course, that a college education is something an individual buys as an investment in their own future, much as one might buy a car in order to get to and from work. State legislatures have been following this trend, sending less and less money to heretofore "public" universities. I don't know if the HLC's action can, on its own, reverse these trends, but it's a step in the right direction.

So the HLC's move is, in and of itself, interesting. What's more interesting is the potential impact on for-profit universities like Phoenix. In essence, the HLC's statement has put Phoenix in the proverbial Catch-22:

• In order to be accredited (which is necessary for survival - only accredited universities can receive Federal financial aid), Phoenix must convince outsiders that it is willing and able to put the public interest ahead of its own self-interest.

• In order to continue operating under securities laws as a publicly-traded company, the Apollo Group (Phoenix's parent company, which gets 90% of its revenue from Phoenix) is legally bound to take whatever action is necessary to protect the interest of its shareholders.

This is a circle that can't be squared - you can't always and everywhere operate both in the public interest and in the fiduciary interest of particular investors. I don't expect for-profits to go out of business tomorrow. But unless they find a way out of this trap, they will ultimately have to decide between their publicly-traded for-profit status and their accreditation as universities.


  1. Fascinating! I love the idea that a university needs to meet the public good to be accredited. Do you know anything behind this change? Will be very curious to see if/how it spreads. Will also be very curious to see just how rigorously they now apply this standard to Phoenix.

    1. Steve - I don't know any more than what's in the Inside Higher Ed article. But I suspect that this is, in part, an effort to find a rule that the for-profits can't wriggle through without cleaning up their act (or, as seems to be happening, going out of business).