Shane,
One theory to explain the high tuition price from for profit colleges can be found in the annual reports of Washington Post which owns Kaplan.
Basically, the theory says that the price hike is partly due to the unintended consequence of one government funding rule, the 90/10 rule. To save me some typing, I will just copy and paste the relevant paragraphs from Washington Post's 2010 annual letter, which does a good job articulating the theory.
"on tuition: the federal government is an inadvertent price-fixer in the for-profit education field. a simple change would allow price competition among for-profit colleges. We would cut tuition for some programs if we could do so without running afoul of government regulations.
How does the federal government fix prices for our tuition?
For sensible reasons, the government long ago decided that for-profit higher education companies had to get at least 10% of their revenue from sources other than federal title iV aid, the
so-called 90/10 rule. Fair enough.
But the 90/10 rule has a perverse consequence:each time the federal government raises the maximum amount granted under pell grants or the maximum federal loan amount, we end
up compelled to raise tuitions to comply with 90/10. (as a general matter, no university can limit how much a student can borrow under title iV.)
Does this make a difference?
there’s one for-profit higher education company whose major source of funds is not title iV. it’s american public education, the owner of american Military university (aMu),and most of its funds come from federal funds that are not subject to the 90% limitation, particularly gi Bills and veterans’ benefits. aMu’s annual tuition for a bachelor’s program is about $7,500. i’m not saying that Kaplan could or would offer $7,500 per year bachelor’s degrees. i am saying: experiment with freeing companies from 90/10 on programs where they offer to reduce tuitions and keep them low in the future. i tell the story of aMu (we own no stake in it) to make a point: for-profit education and low tuition are not incompatible; 90/10 and low tuition are incompatible."
Hope this helps.
Calvin |
