Michael DeBow writes for the Martin Center about efforts to thwart the for-profit sector in higher education.
During the Obama years, the Department was dominated by people who regarded for-profit higher education with hostility. They portrayed the whole for-profit sector as a scam to take advantage of hapless students. Secretary of Education Arne Duncan set the tone, quoted in the New York Times that “for-profit colleges take advantage of students and leave taxpayers with the bill.”
Education Department officials proceeded against several of the largest for-profit colleges with all the administrative power at their disposal. The result was the closure of the targeted schools, disruption of the education of many thousands of students enrolled in them, and huge losses that taxpayers will have to bear for the cancellation of student loans.
There are good reasons to doubt that the Obama Administration’s regulatory crusade against for-profit colleges was sensible policy.
As a starting point, it is clear that the profit motive produces enormous benefits. In particular, managers of a for-profit firm have much better personal financial incentives (as compared with non-profit managers) to 1) look for ways to cut costs and 2) look for ways to innovate and out-perform their competitors. Indeed, the results of the long competition between capitalism and socialism strongly confirm this difference in performance.
Education is not fundamentally different from other services where for-profit competition leads to high quality and low costs. For-profit competition in higher education should generate gains for consumers the same as it does in other industries.
