“All Wet” in the For-Profit Industry

An article in Tuesday’s Daily Caller points to a study that calls into question an assumption that has become widespread – i.e., the for-profit sector of higher education is far more dependent on federal support for its revenue than traditional, public colleges and universities.  The study by economist Robert Shapiro was admittedly funded by the private sector – Kaplan, Inc., Devry, Inc., and Education Management Corporation (EDMC) – but it should be evaluated on its design and its findings rather than on its funding source.  Entitled, “The Public Costs of Higher Education: A Comparison of Public, Private Not-for-Profit, And Private For-Profit Institutions,” the study argues that for-profit universities don’t receive nearly as much in federal subsidies as critics have claimed that they do, especially not as much as nonprofit private colleges and public universities.

Shapiro’s study examines direct and indirect governmental support for higher education.  Direct support refers to sources of revenue that all of us from public higher education know well – federal, state, and local grants, appropriations, and contracts – that come directly to public colleges and universities.  Indirect support comes through federal grants and loans to students that provide the foundation for students’ tuition and fees.  Because of the amount of direct support from governments to traditional higher education institutions, they depend less than private sector colleges on revenue from the student’s share of the costs of education.  But when the extent of both direct and indirect support is considered, Shapiro finds that taxpayers spend three times as much per student in a public college than in a for-profit college and twice as much in private, not-for-profit schools than in for-profit schools.  Admittedly, both types of traditional colleges and universities receive direct support for research as well as student education, but the comparison is instructive in dispelling the perception that taxpayers are somehow supporting only private sector higher education.

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