A Troubling Look At How The Largest For-Profit College System Is Taking Over The World

Flickr/lsgcpA college lecture hall, not at a Laureate institution.For-profit colleges, distinct from private universities that are run as nonprofit organizations, aren't just a troubling phenomenon in the U.S., where the Obama administration has cracked down on aggressive recruiting. The largest for-profit educator in the world, Laureate, actually gets most of its profits from Latin America, according to a new Bloomberg article by Mina Kimes and Michael Smith.

Laureate, which owns and operates colleges around the world, has high-profile investors like private equity firm Kohlberg Kravits Roberts and Microsoft's Paul Allen, and uses Bill Clinton as a spokesman. It earns in excess of $4 billion a year, and says that it's expanding access to education where it didn't exist before.

But the company's strategy involves taking over highly indebted existing institutions, amping up marketing and sales efforts and focusing on career education to quickly boost enrollment. At the same time, teachers often get laid off. So enrollment and profits skyrocket, and costs go down.

Private and public schools in many of these countries are cheap, but limited in size, so the market opportunity is huge in places where a fraction of the population has post-secondary education.

Here are a few of the notable statistics the article revealed about Laureate, which has more than 800,000 students at 75 schools in 30 countries.

• The number of students has increased by more than 500,000 in the last six years.
• In one Chilean school, UDLA, 10,000 students were added as full- and part-time staff was cut, and there were 15% graduation rates in some majors. (It may lose national accreditation, a decision which is being appealed.)
• At University Del Valle De Mexico, owned by the company and teaching 100,000 students, only 5% of teachers are full-time. That number is 0.3% in the Universidad Tecnologica de Mexico system, which has 51,000 students.

There are other worrisome anecdotes as well. The company spends $200 million a year on marketing, including telemarketing, and pays recruiters based on how many students they recruit, a practice that has been banned in the U.S. since 1992.

Other students are attracted by tuition discounts, which sometimes end up being temporary. And another student told the authors that after registering for a philosophy course she expected to be held in person, it ended up being online, teacher-less, and of a quality she calls "a joke."

Laureate, and CEO Doug Becker, claim that the outcomes of some of its schools are better than other private for-profit competitors. That has been true in some cases. But in the U.S., students who enroll in for-profit schools have significantly worse job outcomes. They earn less, default on more loans, and are more unemployed. Tuition is much higher, and debt levels are, too.

Many countries in the world don't collect job placement data, and many are less regulated. And since part of the business model of the company is focusing explicitly on career-oriented courses, students likely go with the hope of breaking into a new career or making more money.

Even in the U.S., where there's more data, more regulation, and more options, poor and less-informed students end up mismatched at poor-performing for-profit schools at a disturbing rate. That's likely even more frequent in the places Laureate and companies like it are expanding most rapidly.

Find the full piece at Bloomberg.