Understanding for-Profit Colleges

For several years Robert Shireman was deputy undersecretary at the U.S. Department of Education. Shireman, who now runs a higher education think tank in California, is perhaps most notable for his efforts to police the for-profit colleges back in 2010.

Shireman recently took part in an interesting debate with Michael Clifford, about how to regulate for-profit colleges. Clifford is a major investor in several proprietary colleges. The debate is presented as a conversation

Both Shireman and Clifford make some interesting points but one of the most interesting explanations comes from Shireman when asked about fundamental difference between good and bad for-profit colleges. As he says:

A good actor recognizes the information asymmetry in the higher education transaction and endeavors to correct this market imperfection by serving as a neutral advisor to potential students and to enrolled students. A bad actor (in any sector) takes advantage of the information asymmetry. A very bad actor takes advantage of the information asymmetry with the most vulnerable consumers.

In the recruitment phase, good actors make suggestions of other options potential students could consider and encourage them to compare; bad actors feed on students’ misperceptions about the magic that a college degree can do (“People with a BA in office management can run a hospital, making up to $180,000 or more! We’re accredited by the same agency that accredits Harvard! We have classes starting tomorrow, let’s get you signed up!”) Very bad actors leave many students worse off, and often justify their deeds by posing as saviors of the poor.

There’s nothing inherently wrong with such institutions, as long as people involved have the relevant information they need to make an informed decision. That’s the important distinction here. Good actors succeed because their students succeed. Bad actors succeed because their students don’t understand what’s going on.

Read the whole discussion here.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer