Thursday, September 09, 2010

No Time to Subsidize Profit: Minnesota Facts

The numbers speak for themselves. While Minnesota has significantly cut funding for public higher education in Minnesota, state aid has freely flowed to for-profit private higher education. Congressional attention has been focused on the questionable recruitment practices and loan repayment rates of for-profit colleges. However, Minnesota policymakers have not been nearly as aggressive in investigating our own burgeoning for-profit college industry for the same practices and problems. In fact, Minnesota's been among national leaders in transferring state student aid money to this industry.

Consider the following four charts depicting the growth in Minnesota's state tax dollars flowing to for-profit companies operating colleges in Minnesota. These companies include publicly traded national for-profit college chains (such as University of Phoenix, Corinthian, and Career Education Corporation) and a couple of very large privately held for-profit colleges based on Minnesota (such as Minnesota School of Business and Globe College) Here are the top 10 schools that received Minnesota State Grant funds in 2009.

The interest of these national chains is understandable. Minnesota is a national leader in the amount of State need-based student aid that goes to for-profit colleges.

As you can see, Minnesota is #5 in the total amount of need-based aid going to for-profit colleges. In this 2008 survey by the National Association of State Student Grant and Aid Programs, Minnesota also ranked in the top 5 in the proportion of state need-based aid that goes to for-profit colleges.

The amount of federal and state need-based financial aid going to Minnesota for-profit colleges has increased dramatically from 2004-2009.

And the growth of the number of students at for-profit colleges receiving state need-based aid money has outpaced students at all other institutions.

The powerful Minnesota Chamber of Commerce has prioritized protecting this source of revenue for the for-profit college industry. One of their listed "2009 Legislative Accomplishments:"
We defeated a proposal to make for-profit higher education institutions ineligible to receive state grant dollars.
Here's the Chamber's higher education agenda:
Minnesota should invest 30 percent of the state higher education appropriation in programs that distribute resources directly to consumers, thereby giving them access to the higher education opportunity that best fits their individual needs. The best way to give consumers choice in higher education is to allocate the revenue to the Minnesota State Grant Program – the state’s need-based aid program – to help lower- and middle-income students access and afford a college education or additional training beyond a high school diploma. The remaining 70 percent of the appropriation should be invested in the public institutions. The state should expand the parameters of the Minnesota State Grant program whenever Congress expands Pell grant funding to maximize grants in Minnesota.
If adopted, this proposal would triple the biennial allocation for the Minnesota State Grant program and pay for it by cutting support for public higher education commensurately.

Why is it that Minnesota lags behind the national realization that the for-profit college industry is doing a disservice to their students and is public money poorly spent? It's because the powerful Chamber, patron of Tom Emmer, has spent resources and political capital protecting the industry.

It's time that Minnesota started paying attention. Unlike MN2020, I am not comforted by the absence of Minnesota for-profit companies on the list of those investigated by the GAO. The same national chains operate here. At a minimum, the investigative resources of the Legislative Auditor, turned recently toward MnSCU, need to be turned on the for-profit college industry. And it is about time that Minnesota joined the majority of states that spend little or no state tax money subsidizing their profits.

Follow me on Twitter @aaronklemz

Aaron Klemz is an Instructor in the Communication Department at Century College in White Bear Lake, Minnesota. His views are his own, and are not the views of his employer.


Aaron Klemz said...

Mr. Dykhuizen's response is well crafted, it is probably the best response one could make. But it is full of unsupported assumptions.

This distinction between "a more practical type of training" and "traditional" education is a false one. The programs offered by for-profit schools are largely not of a different type offered by public higher education, especially among 2 year programs. Whether we are talking about law enforcement, HVAC, Cosmetology, Allied Medical fields, or Business, even Culinary programs, MnSCU 2 year colleges offer these programs.

Additionally, the liberal arts and general education skills of writing well, communicating effectively, and the ability to work in teams are skills that employers consistently rate highest in value.

There's no way that 2 year programs in business or law enforcement that charge over 14,000 dollars a year are affordable on the wages of the careers that they are trained for. That's why the student loan default rate is so much higher for for profit college students compared to public higher education students. Important information about cost is largely concealed from students and the public. For edification, go to the Minnesota School of Business website ( and try to find out how much tuition costs per semester. Go ahead, look for it. Now go to Century College's website ( and click on the "Future Students" tab. See if you can find out how much tuition is.

This little exercise, in a nutshell, is the difference in transparency between public and for-profit systems. We're held accountable for our tuition rates by the public. Our budgets are open to scrutiny. Our only glimpses of the budgets of for-profit institutions are from the large national chains that are publicly traded. MSB/Globe, the largest recipient of MSG funds is privately held and is not required to disclose such information. However, what we know from looking at the 10-K forms of Corinthian Colleges, Career Education Corp., and the Apollo Group is that marketing and recruitment are at least 1/4 of the expense of operating a for-profit college. If MnSCU schools spent 1 in 4 dollars on advertising for students, there would be a revolt.

As someone who teaches in the "traditional" education system, I understand the lack of resources that cause the long waitlists for specific programs or delivery methods like on line programs. This is an argument for more fully funding public higher education. As a graduate of a public high school, and recipient of two degrees from public higher education institutions (working on a third), my passion is to make sure that all students have the same opportunities that I did.

Thanks for your response.

edykhuizen said...

In talking about the chances to pay off loans based on starting salaries of career fields, you're referring to the "gainful employment" provision of proposed regulations. I for one welcome those provisions. But why not apply those provisions to all colleges, for-profit, public and non-profit? Public schools would probably be just fine, and for-profit would certainly need to make some changes. But non-profit schools would have to make major, major changes.

Of course non-profit schools teach writing and critical thinking schools well, and these are vital skills. But in terms of practical training for specific jobs, they are sorely lacking. I do believe we need some Sociology and English majors in this country (I was an English major at a non-profit college myself). But we graduate way, way too many English majors for the number of jobs available to them. Everyone I graduated with thought they were going to go into publishing or become an English professor, because that's all they knew of the job market. Most ended up being severely underemployed for many years.

This is largely a problem with academia, and is perhaps a sidebar to this discussion. But academia often becomes so entranced with the idealism of liberal arts education that it neglects the pragmatism of career training. There is a certain elitism in assuming that every 18-year-old in the country can afford to spend 4 years studying an academic field. It is certainly an ideal worth pursuing, but economic realities must take precedence at the moment. This country has much too severe a disparity between the rich and poor for such an approach to be feasible.

If you'll permit a bit of a digression, I'd like to see the whole educational system overhauled into something more similar to the German system. There students are divided at about age 14 (if memory serves) into those who will learn a trade and those who will go on to college. If you were sent to the trades track, you would need some way to work your way into the college track if you want to. But if you don't, you can get exposure to a wide range of practical career paths and become ready for employment at 18. You would need to still teach critical thinking and writing skills to those in the trades track. But maybe, just maybe, someone who wants to be a massage therapist doesn't really need to spend years being force-fed trigonometry and Shakespeare. ;-)