Director: Daniel C. Levy

Notable Capital Flow into For-Profit Colleges

(Summary by Yingying Xu)

PROPHE Summary:
Private-equity funds are investing millions in U.S. for-profit higher education due to the size and reliability for-profit college earnings, in turn based on the striking growth of these colleges, as well as increasing job-market and even political acceptance of them. Ironically, traditional colleges and universities are among the significant investors. And the flow of capital into for-profit education is especially notable because it occurs as many public institutions suffer from decreasing state financial support, and as many private, nonprofit institutions struggle to garner adequate revenue. Private-equity funds have become an important way for higher-education companies to raise capital, often purchasing major shares of companies, typically for fairly short-term investment.

For the full story (shown with permission) see the Chronicle of Higher Education, March 14, 2003, "For-Profit Colleges Attract a Gold Rush of Investors," by Goldie Blumenstyk.
http://chronicle.com/free/v49/i27/27a02501.htm

PROPHE Observation:
For critics of for-profit higher education, which grows rapidly in the United States and in an increasing number of countries, private-equity fund investment in for-profit colleges may represent a nightmare. While "real" higher education struggles financially, institutions based on profit prosper. Markets and short-term considerations are served while longer-term academic goals lose out. Yet entrepreneurs in more and more countries see for-profit higher education as a lucrative area and more and more governments, however wary of the for-profits, and however pressured to block or limit them, are attracted to fresh forms that aim at the fast-changing job market and allow increased higher education access, while holding down government expenditures and bringing fresh investment. Whether many other countries will develop vibrant for-profits and investment is an open question as is whether institutions and capital would be mostly indigenous or U.S.-based.