Why do for-profit higher education providers have a small market share?

In this week’s Campus Review, John Quiggin in polemical mode takes aim at for-profit higher education. He claims ‘for profit education has been a consistent failure in all times and places’ , with some ‘limited exceptions’ in vocational training.

Curiously, he provides very little evidence of the failure of for-profit higher education. He reports some of the legal troubles of the University of Phoenix, but it has 250,000 students and has operated successfully for many years, as have various competitors in the US market. The legal troubles relate to violations of student admissions and loans regulations, not the quality of their courses. The statistic he cites on their graduation rate refers to a market they barely target, full-time and first-time college attendees (as here, US completion statistics are of poor quality).

Apart from the Singapore-based but partly Australian owned U21 Global he doesn’t even mention any of the Australian for-profits, though there quite a few of them, with nearly 30 signed up for FEE-HELP (some with common owners). The players in the for-profit market include the stockmarket listed and profitable Navitas, the Australian College of Natural Medicine, and the various providers owned by Amadeus Education.

But there is an interesting issue here: why is for-profit higher education relatively rare? Even in the US, the for-profits have only about 1 million students out of a total enrolment of 17.5 million. (In 2006, about 20 Australia for-profits reported 5,094 students to DEST, but they were only obliged to report students receiving FEE-HELP.)

Professor Q’s answer is:

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