For-Profits and the Market Paradox

Abstract

The emergence of For-Profit Colleges and Universities (FPCUs) is having a transformative impact on higher education as a whole, yet it disproportionately impacts vulnerable student populations, subjecting them to significant market volatility and risk. A common claim in support of the rise of FPCUs and reducing their regulatory burden is that they provide access to higher education for vulnerable students. This scenario presents an interesting paradox: FPCUs, rather than traditional non-profit and public institutions, are becoming a de facto path for many vulnerable students: low socioeconomic-status students, underrepresented minorities, first generation college students, non-traditional adult students, and veterans. Federal government funding has accelerated the migration of vulnerable students to FPCUs. This migration reveals a shortcoming associated with portable financial aid in the existing regulatory environment: ill-informed vulnerable students selecting educational options that differentially empower them. Although FPCUs provide access to vulnerable student populations, the existing regulatory framework, when combined with market forces, does not at present, adequately protect federal dollars, students, or address broader societal issues, such as higher education stratification.

Keywords: higher education, college, market, for-profit, proprietary, financial aid, higher education act, information asymmetries