15 August 2016

Report finds little evidence for the benefits of for-profit higher education outside the UK

A report published today by the Centre for Global Higher Education shows that the growth of the private higher education sector, especially the for-profits, has led to few improvements in the quality of provision.

While the opportunities to study have been extended, the risks for students are often considerable in the countries studied. The report, ‘The entry and experience of private providers of higher education in six countries’, highlights some of the potential dangers posed by the liberalisation of the higher education market, and calls for better regulation.

The desk research, conducted by Dr Stephen Hunt (UCL Institute of Education), Professor Claire Callender (Birkbeck College and UCL Institute of Education) and Professor Gareth Parry (University of Sheffield) between March and April 2016, focuses on the emergence and nature of the private higher education sector in six countries: the US, Australia, Germany, Poland, Japan and Chile.

Co-author Professor Claire Callender said:

‘There are some important lessons from this report for the UK’s higher education system, particularly in light of the White Paper and the Higher Education Bill currently going through parliament. There is limited evidence from the countries we studied that increasing higher education competition and expanding the private sector has improved the quality of provision, contributed to innovation, or driven down prices in either the public or private sectors. Indeed, relative to the public sector, the quality of provision, especially in the for-profits, is often found wanting, while tuition fees are usually higher. This suggests the need for much tighter regulations in the UK for all private providers, and not just those receiving government funding.’

The findings show that most private providers, in the countries studied, rely on tuition fees as their key source of income (although some also receive state/public funding), and their expansion is facilitated by allowing students access to state financial support. Yet the reliance of private providers on tuition fees, especially among the for-profits, makes them vulnerable to the consequences of fluctuating demand. The report reveals cases where providers have been forced to close when demand for their courses diminished. This can have serious educational and financial consequences for students, who risk being left in limbo.

The findings also show that the quality of provision in the private sector, relative to the public sector, is often low. In all the countries studied, private institutions are likely to be teaching-oriented, rather than research-oriented, and to offer low-cost subjects in the humanities and social sciences. Research remains located mainly in the public sector, even in countries (e.g. Japan) where the private higher education sector dwarfs the public. In the US – a country with a long-established tradition of private higher education – an important distinction can be drawn between the for-profit and not-for-profit private providers, the latter of which are more prestigious and highly selective.

For-profits in the US, and to a lesser extent in Australia, have used aggressive marketing and recruitment techniques to attract students who qualify for federal and state financial aid but who often have little prospect of successfully completing their course. Such inadequately prepared recruits, in comparison to equivalent students in the public sector, are more likely to fail their courses, to drop out of higher education without securing a qualification, and to be left with large student loan debt. In Chile and Poland, the credibility of private higher education – in terms of accreditation, the quality of the teaching, high non-completion rates and the labour market value of qualifications – is similarly weak.

These outcomes bring into question the idea that greater competition, and private provision in particular, improves quality. They also highlight the problem of how to regulate the sector. In practice, quality assurance regimes take time to be effective, but private institutions must respond swiftly and flexibly to changing market demand if they are to survive.

The lower entry requirements of many private providers reduce the principal barrier faced by many wanting to enter higher education. In countries which have comparatively small elite public higher education sectors there is evidence to suggest the private sector has been important in expanding and widening participation. At the undergraduate level, students from lower socio-economic backgrounds tend to populate private institutions in Japan, Chile and Poland, and have a significant presence in the for-profit providers in the US.
Yet while quality and entry requirements are usually lower in for-profit private providers, tuition fees are generally higher than in the public sector. The greatest costs of obtaining a degree tend to fall, therefore, on those with the least resources. In Australia, for-profit colleges have contributed relatively little to widening higher education participation for disadvantaged and low-income groups when compared to public sector providers. This is because, as well as being more expensive, private providers in Australia concentrate on recruiting international students paying full fees, and lack the resources and infrastructure to support disadvantaged and academically weak students.

The lack of publicly available data, particularly on drop-out rates and employment outcomes, highlights some of the difficulties faced in assessing the advantages and strengths of private providers – in their own right, and in comparison to public providers. However, the evidence from this report suggests that increasing competition in the higher education sector does not result in innovation, higher quality and lower prices. In fact, the opposite trend emerges in the countries studied. The UK government will need to ensure that regulations are tighter in the UK to avoid facing similar issues.

The report underlines the need for a proper accreditation system for private universities (Australia, for example, has a national quality assurance system covering both the public and private sectors: a revised framework will come into force in 2017). Given that marketing campaigns focus almost exclusively on increasing enrolments, prospective students need an effective means by which to assess the worth of an institution and the quality of provision on offer. Private instiutions must provide assurance that they not only represent value for money (both to students and the general public) but that they have a strong financial foundation and will not ‘fail’ should the demands of the market change.