For-profit colleges: Market-driven education

Recently, we made note of a Wall Street Journal report that served as an interesting follow-up to our October 2009 cover article, Is a College Education Still Worth the Investment? The Journal found that the earnings gap between high-school grads and college-grads has long been overstated.

This story, from Fast Company magazine, touches on a different aspect of that same October '09 cover article: for-profit colleges. It begins with a very interesting angle.

Michael Clifford never went to college. He was a trumpet player "strung out on sex, drugs, and rock and roll," he says, until he started a new life as a born-again Christian and successful tech investor. Then Bill Bright, founder of Campus Crusade for Christ, gave him a life-changing piece of advice: "He knew I loved business and did a lot of charity work," says Clifford. "He told me education is the one business where you can help people live better lives and make a lot of money for your investors."

Today, Clifford chairs Significant Federation, a private equity firm that is a principal investor in a half-dozen higher-education companies, including the most successful IPO of 2008 (Grand Canyon University) and one of the most successful of 2009 (Bridgepoint Education). His six colleges have almost 100,000 students - 90% of them studying online.

The article notes for-profit colleges now enroll almost a tenth of all students, many of them in online programs. The biggest players are Kaplan (part of The Washington Post Co.), DeVry, and the University of Phoenix, now the largest university in North America (42,000 students).

While private colleges have taken huge hits to their endowments, and public universities weather historic cutbacks, for-profits like Clifford's keep costs down with innovative use of technology, publish metrics like job placements, and are open to any high-school graduate. They target under-served markets like first-generation students and working adults with convenience and a customer-service ethic....

"I don't even use the term 'for-profit' anymore," Clifford says. "I say schools are 'market-driven' or 'publicly funded.' Everyone has to put their guns away and focus on providing the best experience for the student. Market-driven can learn a lot from traditionals, and the traditionals have a tremendous amount to learn from market-driven best practices."

You can read an interview with Michael Clifford here.
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Joseph Slife is a contributing author and editor for SMI. Visit www.soundmindinvesting.com to learn more.