Education for profit

Public Interest, Summer, 2003 by David L. Kirp

But this isn't the league in which for-profit schools want to compete. Instead, they largely target working adults--the MBA, offered evenings, weekends, and online, is the bread-and-butter course at Phoenix. Yet if this is not the academic war of the worlds, neither is it a tale of peaceful coexistence. Schools Like the University of Phoenix and DeVry University are in a fierce competition with community colleges, regional state universities, and private schools.

The DeVry difference

Begun in 1931 to teach film and radio repair, DeVry University is today one of the largest for-profit schools in the country. Its corporate heads, Ronald Taylor and Dennis Keller, have been a team since 1972, when they left the MBA mainstream, quitting fast-track jobs at Bell & Howell to start a business administration school in downtown Chicago for working adults. In 1986, they bought DeVry, which was then an 11-campus system, and took the company public in 1991. That move generated $10 million--and tied the fortunes of the business to the vicissitudes of the stock market.

Between 1991 and 2002, DeVry was a favored child of the investment community. Scores of business reporters at newspapers across the country sang the school's praises. Term after term, enrollment went up; year after year, profits went up. And though DeVry wasn't as spectacular a performer as the Apollo Group, which operates the University of Phoenix, it did very well on the stock market. The company ranks eleventh on Business Ethics magazine's "100 best corporate citizens list," which is based on how well a firm serves its employees, customers, stockholders, and the community.

In 2002, DeVry shares lost half their value due to the recession. Enrollment dropped an estimated 15 percent--something that hadn't happened in more than a decade--as prospective students became leery of high-tech careers, and their job-placement rate also fell, to 85 percent. "We are adapting," says Taylor, "placing technical people in non-tech-based companies." Despite the economic downturn, the school has continued its practice of adding two campuses a year. "If we were just motivated by the stock price in the short term, we could eliminate that growth, because there's a loss every time we open," says Taylor. "But we know there are cycles in engineering education. There will be a demand in the next few years, and we're positioning ourselves to meet that demand."

Among the for-profits, DeVry is second in enrollment only to the University of Phoenix. It has more than 50,000 students at 25 campuses in the United States and Canada, and annual revenues of $650 million. The institution, which is fully accredited, offers B.S. degrees in electrical engineering, telecommunications, and business administration. Its main rivals are regional public universities like Northern Illinois and San Jose State. Since DeVry is considerably more expensive than these schools (total tuition can run as high as $50,000 for some multiyear degree programs), in order to survive it must be superior--or, through its advertising and recruiting, it must persuade those whom it calls its "customers" that it offers a superior education.