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admin | Category: What Cause Ed | 26.02.2014
The American higher education industry could learn some lessons from the way for-profit postsecondary education has been designed in Brazil. Whether one agrees with the criticism or not, it’s fair to say over the last several years, the for-profit higher education industry in the United States has been under withering attack. The criticism for-profit colleges have faced in the United States has largely been avoided in Brazil because the government acknowledges it has severe capacity constraints in the public sector, and the citizenry want a university education regardless of institutional type. In the United States, the narrative is that flim-flam artists entered to make a quick profit as the postsecondary expansion began, but the government has stepped in to begin to regulate the industry.
The for-profits in Brazil follow a business model not unlike what some ed-tech startups are trying to do in the United States; their clientele is so large the provider can negotiate lower costs for goods such as textbooks. What differs between Brazil and the United States is that the left-wing government sees for-profit higher education as a viable way to increase access to higher education, whereas in the United States there’s considerable concern not only about the for-profits’ practices, but their very existence in an arena that was once defined as a public good. I think for-profit universities should only be allowed to provide degrees that lead to jobs. I agree if you are willing to accept that those publics and private nonprofits providing career education be held to the same standard as for-profit career programs. FROM Oxford’s quads to Harvard Yard and many a steel and glass palace of higher education in between, exams are giving way to holidays.
On one front, a funding crisis has created a shortfall that the universities’ brightest brains are struggling to solve.
At the same time, a technological revolution is challenging higher education’s business model.
In Asia tuition-fee inflation, running at around 5% for the past five years among leading universities, has stoked middle-class anxieties about the cost of college. Improvements in machine intelligence are enabling automation to creep into new sectors of the economy, from book-keeping to retail. Nick Gidwani, the founder of SkilledUp, an online-course directory, compares the process to the disruption of publishing and journalism.
Detractors point to high dropout rates: only about 10% of first-time MOOC subscribers finish their course.
Another worry is that students can cheat by getting someone else to sit online tests in their place. Online courses have provoked opposition from academics, who fear that they will accelerate cuts to university staffing. So far, MOOC providers have wooed new students by using graduates’ testimonials, vouching for the fact that completing a course has helped them get a job. In the meantime, a second generation of MOOC is trying to mirror courses offered at traditional universities. Although some companies have authored online courses (Google, for instance, has made a MOOC on how to interpret data), established universities still create most of them. The universities least likely to lose out to online competitors are elite institutions with established reputations and low student-to-tutor ratios. The most vulnerable, according to Jim Lerman of Kean University in New Jersey, are the “middle-tier institutions, which produce America’s teachers, middle managers and administrators”. Since the first wave of massive online courses launched in 2012, a backlash has focused on their failures and commercial uncertainties.
In “The Idea of a University”, published in 1858, John Henry Newman, an English Catholic cardinal, summarised the post-Enlightenment university as “a place for the communication and circulation of thought, by means of personal intercourse, through a wide extent of country”.
Correction: In an earlier version of this story, we incorrectly said that edX was a for-profit provider of MOOCs. The charges have come from multiple angles — the federal government, state governments, newspapers, think tanks, accrediting agencies and disgruntled consumers.
First, some argue the for-profit industry uses predatory practices and recruits customers duped into thinking they’re getting a quality education at a low cost.
In this country of approximately 200 million, a tolerance — if not begrudging respect — for for-profit institutions has grown over the last decade as enrollment for the entire sector has doubled to seven million students, 75 percent of whom attend private institutions (non-profit and for-profit). The result is that the 10 largest for-profits now educate about two million postsecondary students and account for over a third of Brazil’s students. However, there aren’t enough seats in public institutions for everyone who wants to attend even with the creation of several new federal public universities.
In Brazil, students are admitted to institutions based on standardized exams of questionable validity but great utility. Further, the government regulates subsidies so students will not incur the huge debt load students in the United States carry. The Brazilian marriage may not be perfect, but it seems to be working for everyone — the government, the for-profit providers and the students. What’s scary, though, is the idea of moving to standardized testing as a mechanism to define quality. Leave postsecondary liberal arts education, and more high-end vocational programs like engineering, to the publics.
The problem in the US is that the national dialogue has moved to a place of demonizing for-profits as opposed to finding a way to improve them and fit their model into the higher ed system. The key to making the higher ed system work is having some type of oversight (be it from government or another body) of all institutions, like they do in Brazil. As students consider life after graduation, universities are facing questions about their own future. Institutions’ costs are rising, owing to pricey investments in technology, teachers’ salaries and galloping administrative costs.
An explosion in online learning, much of it free, means that the knowledge once imparted to a lucky few has been released to anyone with a smartphone or laptop.
Fees in private non-profit universities in America rose by 28% in real terms in the decade to 2012, and have continued to edge up. For most students the “graduate premium” of better-paid jobs still repays the cost of getting a degree (see article). Susan Fitzgerald of Moody’s, a credit-rating agency, foresees a “death spiral” of closures.
Both Bill Clinton and Barack Obama have said that universities face a poor outlook if they cannot lower their costs, marking a shift from the tendency of centre-left politicians to favour more public spending on academia.
Latin American countries fret about keeping fees low enough to expand the pool of graduates. Around the world demand for retraining and continuing education is soaring among workers of all ages.
New online business models threaten sectors that had, until recently, weathered the internet storm.


It was 2012, dubbed the “year of the MOOC”, that generated vatic excitement about the idea. Most universities and employers still see online education as an addition to traditional degree courses, rather than a replacement.
Large publishers used to enjoy a monopoly on printing presses, subscriber bases and deals with advertisers.
As well as teaching, examining and certification, college education creates social capital. Anant Agarwal, who runs edX, proposes an alternative to the standard American four-year degree course. In Brazil, Unopar University offers low-cost degree courses using online materials and weekly seminars, transmitted via satellite. A pilot scheme at San Jose State University in California, offering a maths and statistics course run by Udacity, was suspended last year. That may not reflect badly on what is offered: the negligible cost of enrolment means that many people sign up without the firm intention to finish the course.
The iversity, a German online college founded last year, is trying to get around this by holding in-person exams with an invigilator present.
When Michael Sandel, a Harvard politics tutor, agreed to deliver some of his popular undergraduate lectures for edX, he was criticised by a group of Californian academics for supporting a model which poses “great peril to our university”.
Many potential students are put off by the fact that there is no guarantee that their online labours will be accepted as credit towards a degree. Georgia Institute of Technology and Udacity have joined forces with AT&T, a telecoms firm, to create an online master’s degree in computing for $7,000, to run in parallel with a similar campus-based qualification that costs around $25,000.
To encourage them to spare their best academics’ time to put the courses together, online-learning companies must give them a financial incentive.
Last year Udacity underwent an abrupt “pivot”, declaring that the free model was not working and that from then on it would sell professional online training. That is good news for the Ivy League, Oxbridge and co, which offer networking opportunities to students alongside a degree. Yet if critics think they are immune to the march of the MOOC, they are almost certainly wrong.
This ideal still inspires in the era when the options for personal intercourse via the internet are virtually limitless.
A second related criticism is that students accumulate debt and they’re unable to pay it back.
Less than 20 percent of Brazilians aged 18 to 24 are in college and that percentage lags behind at least 10 of its Latin American counterparts. Recently, Kroton (Brazil’s largest for-profit provider) bought Anhanguera, the second largest, with a stock market value of more than $8 billion and a clientele of one million. The result is the public universities largely have wealthier, whiter students who score better on standardized entrance tests because they overwhelmingly attend more elite private secondary schools. Grades for courses get published and if the students in the courses don’t do well on the exams, the government will not provide subsidies for students to take that course again. When the government oversees how much support a student will get based on the quality of the institution (as defined by a standardized exam) the for-profits have an incentive to admit qualified students and not to open the admissions floodgates.
Standardized testing has decimated K12 education in this country… how can we think it will help the postsecondary space? That kind of education is the public good that leads to an educated citizenry and highly-paid employees.
Brazil’s politicians need to win back public trust, and the high social debt owed to entire swathes of the population must be repaid. The higher-education model of lecturing, cramming and examination has barely changed for centuries. That comes as governments conclude that they can no longer afford to subsidise universities as generously as they used to. These financial and technological disruptions coincide with a third great change: whereas universities used to educate only a tiny elite, they are now responsible for training and retraining workers throughout their careers. But not all courses pay for themselves, and flatter graduate salaries mean it takes students longer to start earning good money. William Bowen, a former president of Princeton University, talks of a “cost disease”, in which universities are investing extravagantly in shiny graduate centres, libraries and accommodation to attract students.
Cuts made by state governments have been partly offset by an increase in federal “Pell Grants” to poor students.
In Europe high levels of subsidy, coupled with lower rates of college attendance, have insulated universities. Globalisation and automation have shrunk the number of jobs requiring a middling level of education. Carl Benedikt Frey and Michael Osborne, of Oxford University, reckon that perhaps 47% of occupations could be automated in the next few decades. Many prestigious institutions, including Oxford and Cambridge, have declined to use the new platforms. Students could spend an introductory year learning via a MOOC, followed by two years attending university and a final year starting part-time work while finishing their studies online. In America, Minerva University has entry criteria to rival the best Ivy League colleges, but far lower fees (around $10,000 a year, instead of up to $60,000). Whereas 30% of campus students passed an entry-level algebra course, 18% of those studying online did—and the gap widened as material became more complex. But since the providers make most of their money from the certificates they grant to completers, maintaining a reasonable completion rate is important.
Coursera offers paid-for identity-verification services, which involve recording students’ unique typing patterns.
This is starting to change, as digital courses become more intertwined with existing curriculums.
Under rules designed to promote student mobility between EU member-states, students can transfer course credits, at the discretion of universities, in any of the 53 countries that have signed the Lisbon Recognition Convention, “regardless of whether the knowledge, skills and competences were acquired through formal, non-formal or informal learning paths”. Although web-based courses are much cheaper than on-campus ones, they will not retain ambitious students unless they replicate the interaction available in good universities. Students at universities just below Ivy League level are more sensitive to the rising cost of degrees, because the return on investment is smaller. So might weaker community colleges, although those which cultivate connections to local employers might yet prove resilient. Whereas online courses can quickly adjust their content and delivery mechanisms, universities are up against serious cost and efficiency problems, with little chance of taking more from the public purse.


But the Cardinal had a warning: without the personal touch, higher education could become “an icebound, petrified, cast-iron university”. The government wants to increase participation rates to 33 percent in less than a decade, which has created an enormous opportunity for the for-profit industry.
The government is trying to enable poorer students and students of color to increase their representation in the public universities through positive action measures, but capacity constraints remain. Business, marketing, communications, journalism, all these kinds of programs should be from for-profits. Standardized testing comes with its own challenges, but the fact that there’s commonly understood and accepted criteria for assessing student performance helps ensure all institutions adhere to a standard. At the same time, Brazil is attempting to stimulate sustained economic growth, eliminate infrastructural bottlenecks in the short to medium term, and meet stringent criteria for hosting the Soccer World Cup in 2014 and the Olympic Games in 2016.
Now, three disruptive waves are threatening to upend established ways of teaching and learning.
American colleges, in particular, are under pressure: some analysts predict mass bankruptcies within two decades.
Their average fees are now almost $8,400 for students studying in-state, and more than $19,000 for the rest. But American universities will soon receive more money from tuition fees than from public funding (see chart 1). But fees are going up: in 1998 Britain introduced annual tuition fees of just ?1,000 (then $1,650), which by 2012 had increased to a maximum of ?9,000 ($13,900). Those workers with the means to do so have sought more education, in an attempt to stay ahead of the labour-demand curve. These digitally-delivered courses, which teach students via the web or tablet apps, have big advantages over their established rivals. The first batch of 20 students has just been accepted for Minerva’s foundation year in San Francisco, and will spend the rest of their course doing online tutorials while living outside America, with an emphasis on spending time in emerging economies as a selling-point to future employers. Others fret that the main beneficiaries will be stars like Professor Sandel, widening the pay and prestige gap between them and their colleagues.
The Chronicle of Higher Education reported last year that edX lets universities use its platform in return for the first $50,000 generated by the course, plus a cut of future revenues.
Making teachers available for digital seminars and increasing the level of interactivity could help.
Those colleges might profit from expanding the ratio of online learning to classroom teaching, lowering their costs while still offering the prize of a college education conducted partly on campus.
Underlying much of this criticism is a philosophical concern that making a profit in education is wrong. Since the cost of expanding higher education appeared prohibitive by normal measures — building campuses — for-profit institutions were a viable alternative even for Brazil’s two most recent leftist presidents and the governing Workers’ Party. The reason is that the institutions have an incentive to admit qualified students, whereas in the United States if an accredited institution admits a student, the student can access federal and state grants and loans regardless of their performance. Individuals have legitimate concerns that for-profit providers will focus on short-term fiscal gain in lieu of long-term educational quality. Tip of the hat to Brazil for finding a new way to do things after the publics became incapable of managing student demand.
At private colleges average tuition is more than $30,000 (two-thirds of students benefit from bursaries of one sort or another).
In America, higher-education enrolment by students aged 35 or older rose by 314,000 in the 1990s, but by 899,000 in the 2000s.
With low startup costs and powerful economies of scale, online courses dramatically lower the price of learning and widen access to it, by removing the need for students to be taught at set times or places. Just under one-third are Americans, but edX says nearly half its students come from developing countries (see chart 2). It could also draw in those who want to combine learning with work or child-rearing, freeing them from timetables assembled to suit academics. He thinks the San Jose experiment showed that students needed more personalised support to use a university-level online course.
EdX discovered that most dropouts happen quite quickly, in the same way that first-year university students sample courses before deciding which to pursue for their degree credits.
They may be right: lively teachers have always attracted more interest than dull ones (Socrates delivered lectures at raucous Athenian drinks parties).
An alternative model that it reportedly offers is to charge $250,000 for “production assistance” in creating a course, plus further fees every term that the course is offered. But as an alternative to an overstretched, expensive model of higher education, they are more likely to prosper than fade.
And yet, for-profit providers have been more adept than others at offering courses at times and locations that are convenient to the student. The low cost of providing courses—creating a new one costs about $70,000—means they can be sold cheaply, or even given away. Coursera’s new chief executive, Richard Levin, a former president of Yale University, plans an expansion focusing on Asia. Niche subjects can benefit, too: a course on French existentialism could be accompanied by another university’s MOOC on the Portuguese variety. Kennedy University in California, which educates mainly mature students, has started to accept edX MOOC credits towards its degrees.
Coursera reveals only its revenue from certification—around $4m since its launch in 2012—for which it charges students between $30 and $100. Clayton Christensen of Harvard Business School considers MOOCs a potent “disruptive technology” that will kill off many inefficient universities. If they are to compete with ordinary universities, MOOC providers must get better at teaching newcomers to academia.
Hans Klopper, the managing director of iversity, points out that it is easy for students to assess MOOCs’ quality, since they are open for all to see.
So a more varied MOOC-ecology might end up with varying price-tiers, ranging from a basic free model to more expensive bespoke ones. EdX’s Mr Agarwal wants to offer more courses during vacation-time, when students could use them to earn extra credit or to catch up on missed topics. Once students start to complete them in large numbers and clamour for recognition, it will be hard for Europe’s universities to resist accrediting the best of them, he believes.



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