Yet Another Big Danger in For-Profit Higher Education

In August, Aaron Barlow, the editor of Academe and the Academe Blog, posted a piece on the blog addressing the possibility that electronic technologies might have the same impact on higher education as they have had on journalism. Aaron made the case that academia is fundamentally different than journalism in enough ways that our individual institutions are unlikely to be absorbed by some sort of online entities in the same way that, for instance, Newsweek is soon to be absorbed into The Daily Beast.

But I don’t believe that Aaron anticipated that journalism and higher education might become as financially intertwined as they have become in at least one very notable instance.

The Washington Post Company is a major corporation. In 2010, it had assets totaling $5.158 billion, annual revenues totaling $5.12 billion, and net profits of $278 million. Its holdings in publishing included, of course, the Washington Post, but also four other daily newspapers, 35 weekly newspapers, and a less clearly advertised number of military newspapers and real estate guides. Its broadcast holdings include six FM radio stations in major metropolitan markets, two television stations, and one cable network. It also owns three companies that specialize in various types of digital marketing.

You will probably be at least somewhat surprised to learn that the corporation’s newspapers, taken together, generated just 15% of its total revenues, its broadcasting companies another 26%, and its online ventures just 1% of its total revenues. If you have been adding the percentages, you might now be wondering what generated the other 58% of the corporation’s revenues.

The answer is Kaplan University, the fourth largest university and the second largest for-profit university in the United States. Its enrollment in 2010 was 77,966. Of that total, approximately 66,000 were enrolled online. The other 11,000 to 12,000 students were spread across 16 campuses in seven states, stretching from Maine to Nebraska.

For half a decade, the enormous profits generated by this for-profit university kept the Washington Post Company financially solvent while just about every major newspaper in the nation struggled to cope with collapsing subscription numbers and advertising revenues. But, according to Inside Higher Ed, between the 2009-2010 and 2010-2011 academic years, Kaplan’s enrollments dropped suddenly by 30% and its revenues by 33%. And according to Huffington Post Business, in the fall semester of 2010, the enrollment dropped 47% from what it had been the previous year.

In response, Kaplan announced substantial layoffs. For instance, 200 academic advisers were furloughed from its online office in Florida. Shortly thereafter, it announced that 9 of its 16 campuses would be closing.

What happened at Kaplan was also occurring at the same time at other for-profit universities throughout the country. Government reports, in particular a Senate report resulting from an investigation spearheaded by Senator Tom Harkin, had uncovered all sorts of dubious academic and financial practices at the for-profits—most notably an almost complete reliance on federal student aid for revenue and a very high student-loan default rate. This report and others led to changes in the rules governing for-profit institutions, and the sudden and very dramatic declines in enrollment were generally attributed to those changes, as well as to the terrible publicity caused by intensive media attention to the commonplace, exploitative practices in the industry.

It may have also been the case that the industry’s expansion had simply been a classic “bubble”—that is, that the very rapid growth in enrollments had absorbed a backlog of very marginally qualified and/or gullible students. (I don’t wish to mischaracterize all students attending for-profit online institutions, but government data makes it very clear that the smart-looking students appearing in the institutions’ print and broadcast advertisements can hardly be said to be typical.)

Worse for the Washington Post Company, some of Kaplan’s employees became whistleblowers who cooperated with government investigators, and as a result, they were very clearly subjected to retribution by the university’s administrators. The newspaper whose reporters had uncovered Nixon’s “enemies list” was depending on revenues generated by a university whose administrators were compiling the equivalent of an “enemies list.”

After literally and figuratively cutting its losses with Kaplan, on October 1, the Washington Post Company announced that it had bought a controlling interest in Celtic Healthcare, a company specializing in in-home medical services and hospice care.

I don’t know if this news should be regarded as surprising or not. But it does highlight one largely ignored danger in the privatization of public institutions or the replacement of those institutions by private providers. During economic downturns, large public institutions may struggle to maintain viable budgets, but they seldom close. But when private, for-profit institutions fail to show profits, their investors will, without much hesitation, search out more profitable enterprises.

Public institutions may not always serve the public good as effectively as we would like, but for-profit institutions focus not on the public good but on their current profitability, the price of their stock, and the dividends generated for their shareholders.

In the case of the Washington Post Company and Kaplan University, the corporation has had investments in higher education more than it has been truly invested in higher education. For it, faculty and students are very much interchangeable with nurses’ aides and their infirm or dying patients. The values that we associate with higher education and medical care remain important to the corporation only as revenue enhancers.

It is almost enough to make one long for Hearst’s “yellow journalism.” However sensationalized it may have been, it at least had the advantages of generating its own profits and of wearing its hypocrisies like a coffee- and ink-stained tie.

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