A Faulty Attack on For-Profits

Senator Tom Harkin continued his relentless attack on for-profit higher education this week by releasing a report condemning the sector. Specifically, Harkin laments for-profits’ success in enrolling military veterans and earning their Post 9/11 GI Bill revenues. Despite federal efforts to slow the sector’s growth, it successfully enrolled 31% of all veterans in 2012, up from 23% in 2009. Meanwhile, the public college market share of veterans declined from 62 to 50% over the same period. So why are veterans increasingly choosing to attend for-profit college over public ones? Harkin blames the profit motive, which he believes leads for-profits to use aggressive marketing tactics on naïve veterans.

Harkin’s argument is mistaken for two reasons. First, he appears to question the decision-making capability of many of our nation’s military personnel, all of whom also voluntarily chose to enter the service prior to choosing to enroll in college. If these men and women were capable of making the decision to risk their life joining the military, they are also capable of choosing a college study program and institution that best suits their needs. One of the best attributes of the U.S. postsecondary education market is that it is very diverse, so our veterans have a wide array of offerings to choose from, including vocationally-oriented for-profit colleges. Harkin wants to limit that choice.

Second, while some myopic administrators may pursue the veteran’s tuition benefits at all cost, including the reputation of their institutions, this is likely an exception rather than the rule. Like other investors, educational entrepreneurs invest substantial time and capital when they believe a long-term profit opportunity exits. That such an opportunity exists suggests that our nation’s traditional colleges are failing to serve the diverse educational needs of an increasingly nontraditional student population such as military veterans. Indeed, veterans increasingly attend for-profit institutions because they offer the right mix of study programs, customer service, and locations and times that meet their needs better than do public college.

Harkin’s report also expresses concern that the for-profit schools that veterans choose to attend are offer little value. He cites the recent financial insolvency of Corinthian Colleges as evidence. However, the financial ruin of Corinthian Colleges is largely attributable to a series of deliberate hostile government actions towards the firm, not market forces. Harkin also suggests it costs taxpayers nearly twice as much to send a veteran to a for-profit college ($7,972) than to a public one ($3,914). But these figures are highly misleading. They only account for GI tuition payments, ignoring significant taxpayer subsidies and tax exemption. A 2011 AIR report estimated the annual taxpayer cost per full-time equivalent (FTE) student at unselective public colleges to be nearly $8,000, while for-profit students actually provided taxpayers with an average net gain of nearly $800.

Taxpayers should therefore think twice before believing Harkin’s antagonistic report.


  • Daniel Bennett

    Daniel L. Bennett is a Research Professor at the Baugh Center for Entrepreneurship and Free Enterprise at Baylor University.

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