THE FOR-PROFIT SECTOR:

 

U.S. Patterns and International Echoes in Higher Education

 

 

 

 

By

 

Kevin Kinser and Daniel C. Levy

 

 

 

PROPHE Working Paper #5 [1]

 

February 2005

 

 

 

 

 

* A list of PROPHE working papers and currently published papers are available online at PROPHE website http://www.albany.edu/~prophe/publication/paper.html. Hard copies of the working papers are available upon request.
 
 

 

 

 


Program for Research on Private Higher Education

Educational Administration & Policy Studies

University at Albany, State University of New York

1400 Washington Ave

Albany, New York 12222

Fax: 1-518-442-5084

Email: prophe@albany.edu

 

 

ABSTRACT

 

Analyses of private higher education should consider the increasingly important for-profit sector in many countries. Yet information on the for-profit sector has been quite limited. Even in the United States, where for-profit higher education is well-established, only recently have researchers turned their attention to studying its scope and impacts. While the growth of the for-profit sector is influenced by many of the same forces that have encouraged the global expansion of private higher education, including commercialization and privatization beyond higher education, the focus here is on identifying the international dimensions of for-profit higher education and defining its main types. We feature U.S. data and patterns as starting points for an international portrait. We outline the legal and regulatory aspects for-profit institutions, and note their often ambiguous status in many countries. And we propose a tentative classification of the for-profit sector based on the U.S. experience, beginning to apply it to the international context. Generally, while emphasizing the diversity of the sector, we highlight several tendencies of for-profit institutions of higher education that seem to hold in international analyses.

 

 

 

 

Analyzing For-Profit Higher Education

Analysis of contemporary higher education, especially private higher education, must increasingly deal with for-profit private higher education. In the United States, where nonprofit private higher education is extensive and often prestigious, the for-profit sector has grown dramatically in recent years, fueling discussion about markets and competition across all sectors. Meanwhile, in some countries with traditional public dominance, for-profit higher education adds a fresh dimension—sometimes encouraged, sometimes legally or otherwise suspect—to the global expansion of private higher education. In most countries, the private nonprofit sector remains more prevalent and important than the for-profit sector, which is often ignored or discounted by the public and nonprofit private sectors.

 

Researchers also have largely ignored for-profit higher education.  The current literature on the sector is limited (though fast-growing) for the U.S. Elsewhere, it is paltry. This is often because of newness, definitional ambiguities, or for-profit self-interest against transparent information, particularly on finances. Even in the U.S., analysis is often heavily weighted toward a few large for-profits (Kinser, 2003). As a research program dedicated to building knowledge about private higher education, PROPHE must help come to grips with the extent and dynamics of the now major for-profit reality within private higher education[2].

 

This paper thus aims to advance an internationally sound identification of for-profit higher education and its main types. While our geographic scope is global, the U.S. is at the core. This is a reflection of reality, as the U.S. in many ways leads a global phenomenon. For-profit higher education is larger and more developed in the U.S. than elsewhere: of the roughly 9,000 postsecondary institutions in the U.S. nearly half are for profit (NCES, 2003a). Furthermore, several prominent U.S.-based companies have a global presence in the management of for-profit institutions, by establishing branch campuses in other countries, purchasing existing institutions, or marketing distance education curricula to an international audience. The paper identifies key contours of U.S. for-profit higher education and sketches the parallels or contrasts that can be discerned globally (although often tentatively)[3].

 

At the same time, this inquiry is restricted in a fundamental sense, by not dealing with for-profit elements of either nonprofit or public institutions. These elements are growing and attracting great attention, and although the U.S. leads in this respect, it is far from alone (Kirp, 2003; Clark, 1998). Moreover, many of the driving forces of this expansion, as well as of privatization beyond higher education, are forces also fueling the growth of for-profit higher education institutions. Purpose and even many aspects of practice overlap among the sectors, but this paper focuses on only the for-profit sector.

 

From a global perspective, however, it is crucial to keep in mind that many private higher education institutions that are not legally for-profit display strong behavioral equivalency. The recognition of such reality, as well as a desire to tax, led Brazilian authorities in 1996 to permit the for-profit form (for both universities and other higher education institutions), while at the same time stipulating the requirements for other institutions to be nonprofit. In many countries, the growth of private higher education has spectacularly occurred without a clear legal framework, and sometimes for-profit higher education is neither legal nor illegal (Levy 2002). Nor is it clear whether the legal situation will or should be sorted out through laws on education, higher education, private higher education, nonprofit institutions, or training. In any event, much of what is reported here about for-profits applies to many other commercially oriented private higher education institutions as well. The quite blurry lines between for-profit and nonprofit institutions (and even sometimes public ones) are the subject of ample academic study and policy concern in many fields. As in higher education, it relates heavily to the commercialization of the nonprofit sector[4].

 

Size and Scope

International data on for-profit higher education remain sparse, unreliable, and inconsistent. Nonetheless, it can be simultaneously affirmed that the growth is notable while enrollment percentages remain small. Many countries do not legally permit for-profit higher education institutions (e.g., Poland, Portugal, Russia, Tanzania, Uruguay) or at least are ambiguous as to whether for-profit institutions can be legally recognized. Other countries permit for-profits only in non-university sectors (e.g., Chile).

 

In fact, the bulk of worldwide for-profit enrollment tends to be in non-university institutions, often ones that grant diplomas below the standard first-degree (as in UNESCO level 5 rather than level 6). The vast majority of U.S. for-profit institutions serve non-university students. This remains true despite the fact that since 1990 universities have dominated the phenomenal growth of for-profits in the U.S.; although comprising just 6 of all for-profit institutions, they enroll more than 40 of the students in this sector. In any event, for-profits taken all together still account for fewer than 5 of total U.S. postsecondary enrollment. For degree-granting places, for-profits account for roughly 3 of enrollment and 19 of institutions. Table 1 provides additional data on the U.S. for-profit sector[5].

 

 

 

 

 

 

Table 1. US FOR-PROFIT DATA

 

 

Total U.S.

U.S. Private

For-Profit

For-Profit/Total (%)

For-Profit/Private

(%)

Enrollment (2001)

Total

16,334,134

3,198,354

765,701

4.7

23.9

 

Men

7,104,212

1,377,777

331,464

4.7

24.1

 

Women

9,229,922

1,820,577

434,237

4.7

23.9

 

Part-Time

6,588,536

851,421

126,720

1.9

14.9

 

Full-Time

9,745,598

2,346,933

638,981

6.6

27.2

 

 

 

 

 

 

 

Degree enrollment (2001)

Degree-seeking total

15,927,987

3,694,831

527,501

3.3

14.3

 

2-year degree

6,250,579

253,878

206,329

3.3

81.3

 

4-year degree

9,677,408

3,440,953

321,172

3.3

9.3

 

Non-degree

406,147

269,224

238,200

58.6

88.4

 

 

 

 

 

 

 

Faculty (1999) a

 

1,027,830

315,000

30,000 b

2.9

9.5

 

 

 

 

 

 

 

Institutions (2000)

Total

9,258

7,028

 

4,338

46.9

61.7

 

Non-degree

5,076

4,544

3,549

69.9

78.1

 

2 year

1,732

656

512

29.6

78.0

 

4-year

2,450

1,828

277

11.3

30.3

 

Graduate (2001-02)

1,757

1,210

145

8.3

12.0

 

 

 

 

 

 

 

Degrees awarded (2001-02)

Associate

595,133

123,473

77,712

13.1

62.9

 

Bachelor’s

1,291,900

450,720

25,398

2.0

5.6

 

Master’s

482,118

232,298

14,264

3.0

6.1

 

Doctorate

44,160

16,538

656

1.5

4.0

Note: Year in which data were collected is in parentheses. For historical data since 1980, see PROPHE, 2004.

a Faculty numbers are for degree-granting institutions only.

b Number of for-profit faculty is rounded to the nearest 1000.

Sources: NCES 2003a, 2003b, 2003c

 

 

For-profit higher education is most extensive where the private sector is demand absorbing and has a large share of total enrollments. That applies to some Asian and Latin American cases. Roughly two-thirds of Brazil’s private institutions are now for-profit. The Philippines, with an 82 overall private share of enrollment, had 47 of all students in for-profits, including a few large and many small institutions, though the law since 1982 has insisted that new institutions be nonprofit (James, 1991: 193-204). In Malaysia, some 90 of private higher education institutions are reportedly for-profit. South Africa is a rare case in which the bulk of private higher education is legally for-profit (Levy, 2003), including more than three-quarters of the now 96 registered private institutions. But the extreme case appears to be