The U.S. Senate Committee on Health, Education, Labor, and Pensions issued a report last week with a revealing title: "For-Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success." I doubt if many people will read the entire 1,100-page document, but the 14-page executive summary will tell you just about all you need to know: Every year, hundreds of thousands of students emerge from the for-profit sector of higher education with, as the summary puts it, "debt but no degree."
The report demonstrates the problem in a number of ways, but the general upshot is this: For-profit higher education has exploded in the United States during the last decade.
Most of the newly created colleges are owned by publicly traded, private-equity owned, or closely held companies, which means that they answer to shareholders who expect a steadily increasing profit margin.
Generally, for-profit colleges depend on high-pressure sales tactics to enroll students. In fact, many more resources are put into recruitment than into instruction or the kinds of services that help students succeed in college. The cost of tuition is more closely related to the availability of loan money than to the actual cost of instruction.
Therefore, tuition is comparatively high, and most students take out large loans and leave the colleges with significant debt.
Often, instruction is provided by part-time faculty members in large, anonymous online classes. This is highly efficient economically but not well suited to inexperienced students who have been pressured into taking out loans to attend.
Unfortunately, in this unhealthy academic atmosphere, many students drop out well before finishing a degree or they finish with a credential that does not prepare them for employment. In the meantime, profit margins at the colleges are high and administrators and investors are well compensated.
This is an admittedly broad-brush perspective on for-profit colleges, but the Senate report supports its findings with more than 1,000 pages of statistics. A few will serve: 13 percent of students at public community colleges and 48 percent at public four-year colleges borrow money to go to college; 96 percent of students at for-profit colleges take out student loans, often at taxpayer expense.
For-profit colleges spend 22.7 percent of their revenue on marketing, advertising, recruiting and admissions. They realize 19.4 percent of all revenue as pre-tax profit. They spend 17.2 percent of all revenue on instruction. Their CEOs average annual compensation of $7.3 million.
Yet, of 298,476 students who enrolled in two-year associate's degree programs at for-profit colleges in 2008-2009, 63 percent left without a degree.
So, what's the takeaway from this unseemly picture of for-profit higher education? No one is arguing that, in a free country, for-profits should be outlawed. In fact, the most the Senate committee calls for in its report is better oversight and more transparency.
But, at the least, for-profits illustrate that education and the profit motive do not mix well. Education is so complicated and subtle that even the best public and private colleges recognize that producing a well-educated student -- how to do it and how to know when you've succeeded -- is much more elusive than producing a good tire or a good television.
In fact, one wonders if the Senate report might serve to undermine our much-beloved fantasy that competition and the free market can solve all of our problems. They can't.
This should be obvious when it comes to basic needs and services such as policing our streets, putting out fires and delivering the mail. And we tend to ignore the extent to which the success of important industries like petroleum and agriculture are protected by regulations and subsidies that lie far beyond the limits of the free market.
In their complexity, education and healthcare -- primary elements of any good society -- defy the simple-minded principles of the free market. When the profit motive arrives, corruption often isn't far behind.
(John Crisp teaches in the English Department at Del Mar College in Corpus Christi, Texas.)