Education for Profit

Why is everyone flaming the University of Phoenix?

By many measures, the University of Phoenix is the most successful institution for higher education in American history. With more than 325,000 students currently enrolled—22 times the number at the University of Chicago—Phoenix is vast, and contains multitudes. On campuses scattered across 39 states, and online as well, it offers everything from associate's degrees in sports management to Spanish-language MBAs. And unlike most universities, Phoenix makes a hefty profit. Its parent company, the Apollo Group, produced margins of 11.7 percent last year on revenue of $2.9 billion. What began in 1976 as a small night school where firemen and policemen between shifts completed unfinished bachelor's degrees is now an educational and commercial powerhouse listed on NASDAQ, with a market capitalization of $7.4 billion.

But in recent years, the University of Phoenix has become the poster child for everything the mainstream academic establishment thinks is wrong about for-profit higher education. The school's aggressive recruiting practices and high dropout rates have drawn fire from The Chronicle of Higher Education, where a college admissions specialist in 2004 called Phoenix's approach "an affront to the principles that have been developing in college admissions over the last three decades." The head of the major accreditation body for business schools, the Association to Advance Collegiate Schools of Business, last year accused Phoenix of using "a lot of come-and-go faculty." The U.S. Department of Education has punished the school for insufficient hours spent in the classroom and illegal recruiting practices, exacting two settlements during the last decade totaling $15.8 million. "Their business degree," Henry M. Levin, a professor at Columbia University's Teachers College, told The New York Times last year, "is an MBA Lite."

Many of the criticisms are technically accurate. The school does have aggressive recruiters and skimpy class hours. The faculty is nearly all part time. Graduation rates are low, and the level of instruction can be too.

But much of what academic traditionalists see as problems, Phoenix advertises proudly as solutions. The university aims to meet underserved demand for post-secondary education, tailor-made to fit the individual circumstances of harried adults. Like other for-profit schools such as DeVry and ITT, Phoenix offers the educational equivalent of a subprime mortgage: not the best product the industry has to offer, but a potentially valuable option for people who might not otherwise get into a desired market.

As with subprimes, a nonnegligible portion of consumers won't be able to stay afloat, exiting school moderately poorer and perhaps not much wiser. But the students who do graduate—like the millions who use subprime deals to gain a firmer foothold in the housing market—have a much different story to tell. Their tales are not about sunshine on the quad, Saturday night football games, or ivy-covered walls. They're about a kind of practical, bare-bones education that you never see in coming-of-age films but that is usually superior to no education at all.

At the same time, the size of the Phoenix student body—like the number of homeowners during the recent bubble-has been artificially inflated by policies set in Washington. There are legitimate criticisms of the university. But the education establishment's hostility to the institution often lies elsewhere, in an attitude toward for-profit higher ed that is essentially an aversion to change and commerce, the same snobbish disdain directed at payday lenders, providers of adjustable rate mortgages, and inner-city fast-food vendors. Few sins are less forgivable in polite society than offering poor people products they actively seek.

From ‘Plague Spot' to Juggernaut
For-profit higher education is nothing new in America. Up through the 19th century, most doctors, lawyers, and accountants picked up their basic skills at schools that were out to make a buck. The army of typists and stenographers that midwifed the information age at the turn of the last century came pouring out of commercial institutions all over the country. One hundred years ago, most medical schools were still small trade operations run by practicing local or retired doctors as a way to supplement their income.

But in 1910, amid newspaper horror stories about quack doctors ("The Doctor Who Killed His Patients With Germs") and fears that the U.S. was falling behind the rest of the world ("Germany to Stop Quackery"), the Carnegie Foundation sent the prominent educator Abraham Flexner to survey the state of medical education in North America. The influential Flexner Report, which singled out Chicago's 14 mostly for-profit medical schools as "the plague spot of the nation," called for standardizing curriculum and dramatically reducing the overall number of diplomas issued. As a result, the 160 institutions that educated more than 28,000 med students in 1904 became 85 schools educating half that many in 1920. (Among the effects: a decrease in medical competition and an increase in doctors' fees.)

The Progressive Era also saw the creation of the modern research university. Schools such as Princeton, with its Institute for Advanced Study (founded by Flexner himself), hit on the magic formula of combining under one roof undergraduate education, graduate and professional training, and academic research. Universities expanded and began to swallow smaller medical schools. By 1935 there were only 66 medical schools left in the country, 57 of which were affiliated with universities, according to a study by the University of Virginia radiologist Mark Hiatt and the D.C.-based consultant Christopher Stockton.

After World War II, the baby boom and the GI Bill helped usher in the "golden age of higher education," a three-decade stretch in which America went from a country where two-thirds of adults hadn't even managed to complete high school to one in which more than 17 percent earned a college degree. Not coincidentally, this era was also the golden age of public funding for universities. Federal and state research grants and student aid became major sources of revenue for public schools and nonprofits. In 1972 Congress allowed for-profit colleges to sidle up to the government trough as well. Now students were allowed to carry what would eventually be called Pell grants with them from school to school; as with vouchers, the money adhered to the student, not the institution.

John Sperling was a middle-aged professor of humanities at San Jose State University in the mid-1970s when he decided to take advantage of what he saw as a gap in the market by risking his life savings, a whopping $26,000, to start a private school. According to Phoenix's official history, Sperling hatched the idea after realizing that "working adult students were invisible on the traditional campus and were treated as second-class citizens."

Initially, there was little more than a facility in San Jose called the Institute for Professional Development, dedicated exclusively to adult education—that is, education for students past their early 20s. At the time, Sperling found, it was taking adult students in the U.S. about eight years to finish a typical four-year degree, in part because nearly all university business happened during work hours. Even if classes were offered at night, the rest of the campus was typically closed, forcing full-time workers to take time off just to register for class, meet with a professor, or buy a book. By offering extended hours and a host of other individualized tweaks, Sperling made it possible for older students with jobs to satisfy all the requirements for a college degree in about four years.

Sperling's fledgling school left San Jose in 1976 and struck out for Arizona after being denied accreditation (not for the last time), in this case by the Western Association of Schools and Colleges. (Nonprofit regional accreditation bodies certify most schools in the U.S. based on site visits and other measures of quality, though schools do not need any accreditation to operate.) The Institute for Professional Development was reassembled as the University of Phoenix, winning accreditation from North Central Association of Colleges and Schools the following year.

The school grew quickly, graduating its first full class in 1981 and gaining accreditation for a nursing school in 1987. In 1989 it inaugurated an online campus. A few years later it launched an online library, one of the first of its kind, offering course materials and reference books that might otherwise require students to dig through the stacks of an academic library—a time-consuming luxury many Phoenix students can't afford.

Although the university is now best known for its online programs, in which students log on for lessons and group projects and deal with their professors via email, it has more than 200 physical campuses across the country, many of which are little more than leased rooms in buildings near a convenient highway off-ramp.

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  • MikeB||

    I believe the traditional model for education will collapse over the next 20 yrs. Computers are slowly replacing most office and management positions. Future jobs will require far more technical training, which can be obtained from numerous sources outside of universities.

    I graduated from a top 40 MBA program (SUNY Buffalo) in 1992 and was unable to find a professional career. I moved furniture in a warehouse, managed a Taco Bell, and did temp jobs with the US SBA. Finally, through self study, I learned programming and began a far more rewarding career. My MBA has become nothing more than a framed paper-weight.

  • Naga Sadow||

    Universities are such whores for money. I can't believe they would bitch so much.

  • thoreau||

    MikeB-

    Yes, we will need a lot of technically trained people, and they will need a lot of ongoing education. However, I think the advantage of more traditional educational models is that you focus on the basic intellectual and communication skills that will transfer to different settings in a rapidly-changing environment. The hot technologies will change quickly, but the basic skills learned in a science or engineering program will transfer.

    Not to exalt the traditional model too much--I've taught at a for-profit technical school, and there's a lot of value there. But I think we'll need both. The future will see greater variety in education, but the traditional model will be part of that variety, and the mix of offerings will (1) keep the models in competition with each other (a good thing!) and (2) provide different opportunities for students with different goals, interests, and skills.

    Here in traditional academia there is a lot of snobbery about what we offer, but outside the ivory tower there are a lot of critics who recoil from the snobbery by going to the opposite extreme. The truth is that we need both.

  • classwarrior||

    This is a good example of why the market doesn't always produce the best results. All the world's top universities are a mixture of public and private, while the worst ones (the degree mills) are invariably private.

  • robc||

    classwarior,

    I can name some public schools that arent any better than a degree mill.

  • robc||

    thoreau

    I agree. Im a big fan of traditional acedemia, at least for certain degrees (engineering/sciences/traditional liberal arts). I also teach some technical classes for a private education center (primarily linux and perl). They both have their places. Ive met too many programmers/sys admins who had a high school/partial college education that were very skilled at certain areas but with obvious limitations. Of course, Ive also met people with cs degrees who couldnt program their way out of a paper bag (although that may be harder than the metaphor was meant to imply).

  • ||

    As a point of fact, I believe Abraham Flexner worked for Rockefeller, not Carnegie, as did his brother Simon.

  • Chris||

    "Few sins are less forgivable in polite society than offering poor people products they actively seek."

    You are exposing a deep bias here.

    Later you admit that the average tuition for a UoP program is much less than the average tuition for a program at a public university.

    The trick with education, especially the online variety, is how to set it up where the students actually learn - instead of just pay for a piece of paper. I was shocked by the low completion rate, but this strikes me as a good sign for UoP. Did you know that a large portion of their grading scheme is class participation?

    By the way, class participation for UoP is met posting five posts a week on a friggin message board...

  • J||

    I highly doubt traditional University style education is going anywhere, at least at the top tier, but I do like having lots of options available for different needs. I have a close friend (from childhood) that is considering a for-profit track (not Phoenix though) after dropping out of college, and I think its a good option for him. Choice is good.

  • MikeB||

    I think the advantage of more traditional educational models is that you focus on the basic intellectual and communication skills that will transfer to different settings in a rapidly-changing environment.

    thoreau

    Shouldn't high schools have already taught this?

    When I took Labor Economics there were long discussions on the value of a college degree. At that time, there were still no studies that adequately adjusted for sample biases and compared college degree holder's career success with that of non-holders.

    Further more, most of my learned knowledge from college and graduate school has since been forgotten. I view human capital as I due any other form investment. When it is gone, it has no value.

    I guess I was a bit grandiose on my proclamation of imminent collapse of the traditional educational system. I do however believe that enrollment will start to decline and the monopoly will be lost as information flows, regarding options, to parents and prospective students improve.

    I guess it comes done to whether college teaches you how to think better than you would have been able to on your own.

  • MikeB||

    Ooops closing italic tag

  • Chris||

    "I guess it comes done to whether college teaches you how to think better than you would have been able to on your own."

    Clearly. Study after study and obvious observation show that people are strongly influenced by the ideas and people they surround themselves with.

    However, "on your own" in the case of UoP would be doing readings and contributing ideas on a computer with minimal contact with persons in your program in person - Eerily similar to our scenario here at Reason. We are reading and inputting information and sharing our points of view but it is nearly impossible for us to fully express our viewpoint, understand another's viewpoint, or learn (adapt).

    This is the reason (it's not anonymity) that intellectual discourse is so rare on the internet - most layers of communication can not be trapped by it.

  • kinnath||

    Clearly. Study after study and obvious observation show that people are strongly influenced by the ideas and people they surround themselves with.

    Let's see, I'm an engineer with a Fortune 500 company that has offices spread around the world. I have collaborated on multiple products with people that I have never met except through telecons and email. As far as I can tell, our work products are every bit as real as the ones I generate with the people in the next hallway.

    My wife is 1/3rd the way through a graduate program with UoP. Doing class work with people scattered around the world (some of her classmates are in Europe) is virtually the same as doing her day job with people also scattered around the US.

    There is no way to argue that an online degree MUST be inferior to an on-campus degree just because its online.

    Is the UoP as good as the heavily-credentialled MBA program at the local university -- no way. But it is virtually impossible for a fully-employed 50-year-old person to attend the MBA program at the local university. Bang-for-the buck the UoP delivers a worthwhile product; otherwise, the Fortune 500 company my wife and I work for wouldn't pay for it.

  • kinnath||

    Eerily similar to our scenario here at Reason.

    Bullshit. You're not spending $10K a year in order to make anymous posts that have consequences in your real life.

  • alittlesense||

    "Is the UoP as good as the heavily-credentialled MBA program at the local university -- no way."
    Then why would your wife want a degree that you seem to indicate is pretty worthless?
    One thing that has gone unmentioned in practically every article I have seen on this whole U of Phoenix kerfuffle is the propensity of established, old-line brick and mortar universities to establish their own on-line degree programs.
    Could we be seeing a wee bit of squashing the competition? Of course not, it is all about academic rigor and the grand traditions...
    Now, as the University Glee Club quietly sings "Gaudeamus Igitur" in the background, I am going to go be sick.

  • kinnath||

    Then why would your wife want a degree that you seem to indicate is pretty worthless?

    A sterling silver teaset would be really nice to have, but we're will to get buy with copper-clad.

    Where exactly did I state or imply the UoP was worthless?

    If fact I said Bang-for-the buck the UoP delivers a worthwhile product

    Leatn to read, dude.

  • kinnath||

    but we're will to get buy with copper-clad.

    Enineer can't type so good.

    So "we're willing to get by with copper-clad."

  • kinnath||

    Fucking IE needs to get a spell checker.

  • ||

    Fucking IE needs to get a spell checker.

    Use Firefox. It does have a spell checker, so your spells come out well. Oh, it also has a spelling checker, but that is a minor luxury compared to a spell checker... now, that one rocks! My man-to-frog spells come out well on the first try, thanks to Firefox's spell checker.

  • a little sense||

    Kinnath:

    If the U of P degree is "no way" as good as the same degree from a heavily-credentialled local university, I wonder how good it can be? I have no axe to grind about U of P, it just seems that a degree from U of P, according to this thread, is "better than nothing". That is not saying much.

  • a little sense||

    btw, read my WHOLE post, dude.

    I wasn't trashing the U of P, I was noting a certain "damning with faint praise" in the thread.

  • kinnath||

    Use Firefox. It does have a spell checker, so your spells come out well.

    I used to use the full Mozilla suite at work (still do at home), but the last "software upgrade" to our computing infrastructure "broke" it. So now I'm stuck with the company-supplied MS IE :-(

  • kinnath||

    If the U of P degree is "no way" as good as the same degree from a heavily-credentialled local university, I wonder how good it can be?

    Is the peformance of my wife's 2-yr-old Sentra as good as the new GT-R, no way. But bang-for-the buck it a nice little car. Certainly beats the crap the Ford or GM puts out in the same price range.

  • Pez Tres||

    Torres turned me into a newt!

    I got better.

  • kinnath||

    Perhaps the missing information is that the MBA program at the local university is a top-tier program at a Big Ten school. So saying that UoP is "no way" as good as a top-tier, Big Ten program, should not be an interpreted as "better than nothing".

  • economist||

    I think that in every emerging market, you get a fair number of bullshit providers. They tend to get weeded out over time, but they can make the market's emergence a royal pain. I say that if UoP can cut it, value wise, then more power to them.
    And I agree with Naga Shadow. Universities are whores for money. And while I don't love paying taxes for someone else's education, if I must I figure it might as well be for something useful at a competitive price rather than a shitload of money to pay for ethnic studies and English departments (Full Disclosure: I've always thought ethnic studies classes were bullshit, and I never got along with my English teachers in high school. I also didn't like the English professor I had to put up with for a whole semester in college.)

  • kinnath||

    Also note that it is pretty much impossible to hold a job with significant responsibility at a Fortune 500 company and concurrently attend a top-tier MBA program at a Big Ten university without actually quitting your job at the Fortune 500 company.

    That's why the Fortune 500 company is more than willing to pay for its employees to attend the online UoP program as part of the employees' career development plans. Which was the whole point of the original article.

  • ||

    Universities are whores for prestige. Former students who benefit from the prestige of their alma mater send the universities money. This creates a perverse incentive not to educate too many people (elitism in other words).

    Then there is the grant thing. Good stuff, but it doesn't result in too many butts in seats.

    I myself am a graduate of Strayer University, a school that is similar to UoP, and I am a damned good Software Developer/ Database Administrator. Of course, the vast majority of what I have learned to be able to do my job I learned on my own rather than in the classroom, but I don't think there would have been too much of a difference if I had gotten my IT degree from a more prestigious school.

  • ||

    The U.S. Department of Education has punished the school for insufficient hours spent in the classroom and illegal recruiting practices, exacting two settlements during the last decade totaling $15.8 million.

    The author neglected to mention that the NCAA took away 15 scholarships from their football team for athletes having non-approved jobs that qualified as "extra benefits".

  • ||

    Former students who benefit from the prestige of their alma mater send the universities money.

    Not this one. Those fuckers don't need my money; they've go a big enough endowment to stop charging tuition altogether.

  • ||

    As a free market proponent, one would expect Reason Magazine to embrace the concept of for-profit education. Yet Ms. Mangu-Ward, who incidentally is a graduate of Yale and former New York Times researcher, could not be more disdainful of the institution, as evidenced by her rehashing of every negative allegation leveled against University of Phoenix in recent years - and without fact checking. There is not enough space in the "Comments" box to challenge each error, but here are some highlights of her reckless journalism:

    Ms. Mangu-Ward claims University of Phoenix graduation rates are low, yet their completion rates are equal to traditional four-year colleges and universities, averaging between 40-60 percent. And, in a comparison of students who enter college with "risk factors" that often contribute toward their dropping out, University of Phoenix's rates of completion for a bachelor's degree are substantially higher than for public institutions overall. She also claims the school declines to release detailed figures on its graduation rates, yet they are readily available, for instance in University of Phoenix's newly published Annual Academic Report (available here http://www.phoenix.edu/academicannualreport/).

    She states that University of Phoenix offers "the educational equivalent of a subprime mortgage," yet according to the university's Annual Academic Report, its students often enter with lower scores in the general education areas as compared to more exclusive institutions but perform at levels comparable to seniors at other institutions by the time they graduate. For a first-hand account on the university's academic rigor and quality by a Chronicle of Higher Education reporter, click here http://chronicle.com/wiredcampus/article/3082/whats-online-learning-really-like.

    Ms. Mangu-Ward alleges that the school has never applied for accreditation of its MBA program because "it's not eligible," yet its MBA program is accredited by the Association of Collegiate Business Schools and Programs, as is, for example, the State University of New York (SUNY). ACBSP is one of only two accrediting organizations for business programs recognized by the Council for Higher Education Accreditation (CHEA), a primary national voice for accreditation and quality assurance to the U.S. Congress and U.S. Department of Education. University of Phoenix graduates more underrepresented students with master's degrees in business than any other university in the nation.

    Ms. Mangu-Ward references that the university in its early years was denied accreditation in California, yet it never operated a school in the state. She also cites dated complaints by the New Jersey Education Association, but fails to reference the fact that University of Phoenix was granted licensure approval in the state, which is known to have among the toughest quality standards in the nation.

    She frequently references David Breneman, a noted expert in higher education, as a "critic" of the university. In fact, he is a strong supporter of University of Phoenix and serves as a non-paid advisory board member of its newly formed National Research Center (see here http://www.upxnewsroom.com/news/pressrelease.aspx/2008/National_Research_Council).

    Ms. Mangu-Ward cites recruitment violations against the university by the Department of Education, but settlement of the regulatory matter proves otherwise, stating that the agreement constitutes "no wrongdoing or violation whatsoever" (see here http://www.apollolegal.com/hendowDocuments/Document_13.pdf and for more background here http://www.apollolegal.com/prrCritique.html).

    She references a "comprehensive takedown" of University of Phoenix by the New York Times, yet the story was largely discredited by the facts (see here http://www.upxnewsroom.com/_downloads/UPX_NYT_FactCheck.pdf), leading This Week in Education to ask, "Did the NYT Get it Wrong on the University of Phoenix?" (see here http://blogs.edweek.org/edweek/thisweekineducation/2007/02/did_the_nyt_get_it_wrong_on_th.html).

    Finally, she implies that University of Phoenix preys on the underprivileged who attend the school primarily through government issued PELL grants designed for low-income students, yet only about a quarter of the university's students received PELL grants during the last year - not an uncommon percentage for any public college or university offering Associates through Doctoral programs.

    And the list goes on and on. Flaming errors, wouldn't you say?

  • ||

    It isn't an elitist thing. UOP's product sucks. It exists to suck financial aid from poor students, who at any measure are not students and never will be. Sigh.

  • jhn||

    I can embrace for profit education as a concept without having to acknowledge that UoP is anything other than garbage.

  • ||

    Am I the only one that finds it disturbing that government employees (teachers) are petitioning government employees (politicians) to enact tyrannical laws to protect their monopolies so they can continue to collect absurd economic rents?

  • ||

    Full Disclosure; I earned my degree at night, while workng full time days. My "college" was little different from U.O.P. "Jay" you're not only one. But I suspect their efforts are as much about trying to protect their monopoly on ideas, as it is about economics. Modern technology, particularly innovative new information delivery systems (like U.O.P.) are making it much harder for "elites" to control the flow of information.

  • HughAkston||

    I still say the free market works brilliantly, when it is allowed to do so. Case in point: When I clicked on the link to this story, what did my little eye spy at the top of the page? An internet ad for (gasp) UOP!!

  • ||

    concurrently attend a top-tier MBA program at a Big Ten university without actually quitting your job at the Fortune 500 company.

    Most top tier universities have part-time programs specifically designed for working students.

    I also work at a global company where I work with people all over however, for the most important meetings, people still meet in person for the most important meetings.

    I went to a traditional MBA program and I found a lot of the informal meetings and discussions added a lot to my education and experience. It's just one anecdote, but I found a lot of value from being on premise.

    However, not all situations lend themselves to ideal situations, so it's good to have extra options. One thing is for certain, being online won't replace being in person.

  • kinnath||

    Most top tier universities have part-time programs specifically designed for working students.

    So does the local university, but you would be hard pressed complete in less than 3 or 4 years part-time taking evening classes.

  • ||

    I think the fact that I get spam email from UoP pretty much says it all. I even contacted them and asked why I kept getting spam, their reply was that I had to have requested information. After hearing that I informed them I had not as I already had a degree in Engineering from a real college. The Fortune 500 company I work for pays 90% of the UoP tuition for people that work at my site but only one has graduated and she is hardly any more intelligent than before she started.

    You will never see them offer Engineering Degrees or Medical degrees at online universities I assure you.

    But really when your "school" spams people for potential students that is pretty sad and not something I would be looking for as a person hiring someone for a job.

    Ok I see here you graduated from the UoP, while thinking in the back of my mind, thats the fucking place that spams my email. Now you want me to take this applicant seriously as educated for the job which they are applying over the other 100 applicants that actually went to class and got up and delt with professors year after year? I don't think the two are anywhere close to being the same degree or education. Odds are neither will the person interviewing unless they too are graduates from an online U.

  • ||

    From my spam folder.

    byran jyh-shin - S0FT C1alis, branded quality‏

    University of Phoenix - Online. Improve your life. Earn your degree.‏

    TakeAd.vantageOf Che.aprMedic.ationPri.cez‏


    Yeah thats serious education!

  • ||

    The article takes the quality of American Univerisities for granted. Please see http://studentloanjustice.org/ for stories about those that overestimated the value of a degree.

  • ||

    As an adjunct teacher of both public and private universities, I've taught in traditional classrooms, emergent seminars and online. I also teach with many who also teach at Phoenix. It is hardly the devil or the savior, but like WalMart it gives something to certain segments of the population that won't get that kind of education, but it also reduces the quality of the profession as a whole.

    It has a place, but it shouldn't have an overly large influence on the economics of education overall.

  • ||

    The complaining by the higher education establishment of University of Phoenix using part time faculty who are actually working in the fields that they are teaching in is a red herring at best.
    I graduated from the California State Polytechnic University (Pomona) School of Business in 1979. The majority of my business school professors were ***part time faculty who were full time working professionals**.
    At the time I was attending there this was being promoted by the school as being the way of the future and the way to have access to the most current thinking and techniques in business.
    Methinks the Ivory Tower beardscratchers are finally starting to feel the hot breath of competition breathing on their neck.

  • Diwant Vaidya||

    Well written. I got a good understanding of the for-profit education model from this. Using some of the info here I have made a visual showing cash flow of such for-profit institutions. Find it at http://paradigmpop.com/blog/di.....pend-money

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