EU's for-profit providers risk sub-prime 'overpush'

Simon Baker reports on the dangers of unregulated selling practices among Europe's private institutions

July 7, 2011

European higher education is at the same risk of a sub-prime "over-push" for students from for-profit providers that has afflicted the US system, the senior vice-president of a private university network has warned.

Joseph Duffey of Laureate International Universities said that without "guidance and regulation" for students there was always the potential for companies to use "temptations and incentives" to create demand for their courses.

He said the experience in the US was that some firms had gone "overboard" in recruitment.

However, he argued that the expansion of for-profit higher education had initially met a genuine demand among students being "neg-lected" by traditional universities.

Dr Duffey, a former director of the US Information Agency, said: "Later on, as is always the case in a free-enterprise entrepreneurial business, there was no restraint.

"[Just as] people bought houses (worth) more than they could pay for, people borrowed money to improve their lives through education when they might not even have been qualified."

For-profit corporations such as Apollo Group, parent company of Britain's BPP University College, and Kaplan Higher Education, part of the Washington Post Group, have come under intense scrutiny in the US over their selling practices and the amount of income received from students who take out federal loans that they then fail to repay.

This has led to congressional hearings and moves by the Obama administration to bring in new laws to curb the amount of public loans that can be offered to students on courses with poor employability records.

Dr Duffey, who has worked for several government agencies under presidents Jimmy Carter and Ronald Reagan as well as the present administration, said the US system had been harmed "financially and educationally" because of a lack of student protection and guidance.

"We didn't have a system that raised questions about what people were getting for their money," he said.

He said there was a concern that other countries with sections of the population not being served by existing universities risked developing the same problems.

"Europe, I am sure like America in the earlier stages, has lots of people that would like to continue their education," he said.

"But unless there's consumer guidance and regulation, and some control over cost, then you're going to have the same sub-prime over-push we've had here."

Laureate, itself a for-profit company that is not listed on the public stock exchange, has mainly concentrated its expansion away from the US by taking over existing institutions in places such as Latin America.

"I think the thing that makes us very different is that we don't go overseas as though we're bringing an American model," Dr Duffey said.

"Many of my colleagues refer to American higher education as the gold standard in the world.

"That is self-indulgence. It may have been highly respected - but I think that's dramatically changing now."

simon.baker@tsleducation.com.

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