The impact of for-profit privatization on higher education in the state of Massachusetts

Abstract

The expansion of for-profit institutions of higher education has outpaced that of traditional institutions for the past decade, both in terms of the number of institutions and the number of degrees granted. The State of Massachusetts has approved three proprietary institutions based outside of Massachusetts since the beginning of 2005 . These institutions join the University of Phoenix that was given approval to operate in 2000. The University of Phoenix is currently the largest private university in the country and all four represent publicly traded companies. The current legal and political environment has helped to foster a period of unparalleled growth of for-profit institutions of higher education. To what extent higher education is truly unique in how it serves the public interest, or is just another product in need of the kinds of efficiencies that might be brought about by market forces, should be of significant importance to those policymakers that oversee the laws and practices that support or discourage for-profit privatization. The multitude of policy questions and the speed at which privatization is taking place led the state of New York to decide to put a moratorium on the approval of proprietary institutions of higher education until there is a better understanding of the implications and consequences of privatization in that state. This issue of for-profit privatization should be of particular importance in Massachusetts, where higher education constitutes a significant part of the state's economy, and understanding the implications of such a rapid change in the competitive landscape is critical. The answer as to whether for-profit privatization is a negative or positive trend is a mix of pluses and minuses that need to be understood in order for public policy to best serve the public interest. Massachusetts regulators have continued to approve out-of-state for-profit institutions that have a primary responsibility to their stock holders. Unfortunately, there is very little in the way of empirical study that can inform policymakers and guide decision making in regards to this expansion of privatization and its consequences. How do policymakers balance competing objectives of protecting the public interest at large and leveraging the fiscal benefits of private competition and tax revenues? Are the two mutually exclusive? What are the current and potential adverse impacts and unintended consequences of privatization for the state's public and nonprofit institutions, as well as the specific populations served by these institutions, and should policymakers in Massachusetts be concerned about these consequences? This exploratory study used surveys to assist in identifying a select sample of institutions for in-depth interviewing. The institutions represented in the interviews included both public and private institutions. These institutions were categorized by their level of response (either political or market focused). Analytical generalizations were used to formulate recommendations for traditional institutions, for-profit institutions, accrediting bodies, and policymakers.