The Private Option

Many are discussing the public option in health care as a way to keep the private insurance companies honest. But in education it’s the for-profit private colleges that are serving to keep the nonprofit institutions efficient and affordable.

College tuition is expensive. Many private undergraduate schools can cost about $200 thousand for a four-year degree. State Universities are cheaper, but even at half the price, that’s a lot of cash.

Which is why online schools like the University of Phoenix are so attractive. At a time when educational credentials are critical, you could get a Bachelor’s degree for less than $15 thousand dollars. This could be a lifeline when jobs are hard to find. For less than the price of a used car, you can get a degree.

For-profit online education is a business model that is here to stay. So the recent troubles of Apollo Group or ITT aren’t all that troubling. While individual schools may have issues with counselors behaving badly, traditional education simply can’t match the price of web-based learning.

Some residential schools are trying to compete on quality, offering online lectures, library services and homework. But the real competition is on price. If traditional schools don’t hold their costs down, they’ll be fishing from an ever-smaller pond.

Douglas R. Tengdin, CFA
Chief Investment Officer
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