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Marketing and For-Profit Schools: Conflict of Interest?

Aug 1, 2012 Jennifer Williamson, Distance Education.org Columnist | 0 Comments

You’ve probably seen them—the ads for for-profit colleges. They’re everywhere—on billboards by the side of highways; on posters on subway walls; and on the television and radio. For-profit colleges market aggressively—it’s no secret. But is all this marketing good or bad for the students?

Some senators would say it’s bad. Particularly Senator Tom Harkin from Illinois and Senator Kay Hagan from North Carolina, who recently announced their support for a bill that would restrict the amount of money from the federal government for-profit colleges can spend on marketing.

This would put a serious crimp in for-profit marketing budgets. For-profit colleges receive approximately 90% of their funding from federal financial aid given on the behalf of students who attend these colleges—the percentage is larger if you factor in aid from military benefits. Currently, large-scale marketing campaigns could take up as much as 25% of a for-profit college’s budget.

Marketing

When it comes to how for-profits are funded, there are few easy answers. However, with greater regulation, hopefully the industry will improve and grow over time. 

But the measure could have significant benefits for students, theoretically. Most importantly, more money could be spent on the students. According to some accounts, for-profit colleges spend as much money on marketing as they do on instruction—sometimes more. Proponents of restrictions generally hope that the money saved on recruitment and marketing could be reinvested in school infrastructure, curriculum, programs, and instructors.

In addition, if this measure went through, it could ensure that federal tax dollars would be spent more wisely—on online degree programs that enrich student education, not school coffers. Senator Harkin argues that taxpayer money should not be spent on for-profit colleges’ commercial activities such as marketing. Given the outsized percentage of money for-profit colleges make from federal dollars, this rule would significantly impact their marketing operations.

It could also provide incentive for schools to rely less on federal tuition money. The federal government has struggled financially in a difficult economic climate, and President Obama has had to roll back or limit his instinct to expand federal funding for tuition aid on many fronts. In this climate, it is prudent for the federal government to consider whether the money going to for-profit colleges is really going to worthwhile programs or to marketing budgets aimed at benefiting the colleges themselves, not the students they serve.

It should be pointed out that this law would not affect only for-profit schools. It would also apply to non-profits, although it’s likely to affect non-profit schools much less. According to Senate supporters of this bill, non-profit colleges typically don’t spend more than about 1% of their budgets on marketing. In addition, non-profit colleges and universities rely much less on federal aid than for-profits do—so their marketing budgets are less likely to be taxpayer-funded.

There are problems with this approach, however. The reason for-profits rely so much on federal aid, opponents of the bill might claim, is that they serve a larger percentage of low-income students who qualify for need-based aid. Creating incentives for for-profits to rely less on federal aid could make low-income students a less attractive market segment for them—and further serve to limit the options of these students.

When it comes to how for-profits are funded, there are few easy answers. However, with greater regulation, hopefully the industry will improve and grow over time—and can find ways to operate that are beneficial for students, investors, and society as a whole. If you are concerened about the quality of a for-profit school, make sure you check out the online college reviews that previous students have written.

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