How Does Profit Play a Role in Education?

For-profit universities have come under fire for a litany of reasons. Critics claim that graduates of for-profit colleges are less likely to be employed, have high student debt, are more likely to default on federal loans and don’t receive a quality education. Congress passed legislation last summer to provide more oversight of for-profit colleges and the federal grants that often fund student tuition, and just today, and the number of colleges are diminishing.

As the for-profit university debate rages on, there's another, highly volatile controversy around for-profit companies providing curriculum, content, and other services to school. In a recent article by Reuters News Service, educator and activist Diane Ravitch rang the alarm bells.

"This is a new frontier," Ravitch said. "The private equity guys and the hedge fund guys are circling public education." Some of the products and services offered by private vendors may well be good for kids and schools, Ravitch said. But she has no confidence in their overall quality because "the bottom line is that they're seeking profit first."

In the fringes of that debate, there has been little discussion of the handful of for-profit companies running K-12 schools, most often as charters. A recent forum hosted by the Center on Education Reform discussed the issue, focusing mostly on the positive effects that profit-seeking institutions could have on K-12 education. One company highlighted in the forum was Sabis, a family-owned business based in the Middle East, which operates tuition-free charter schools as well as tuition private schools, all over the world, including the U.S.

For-profit schools in the K-12 space are not run as outright businesses. Rather, Sabis is an “education management organization,” a designation that allows the company to bid for the right to manage charter schools. They have schools in Minnesota, Michigan, Massachusetts, New York and Louisiana. The principal argument against this model is that a company might cut corners to ensure profit levels, sacrificing quality of education. What's more, a private company allows little scrutiny into administrative practices by teacher unions, school boards and parents. The premise behind traditional public schools is that those stakeholders provide valuable checks on school administrators.

Still, some who see a positive roll for business in education. In his book about Sabis, James Tooley, a professor of education policy at Newcastle University in England and author of From Village School to Global Brand: Changing the World Through Education, claims there are at least three clear benefits to the for-profit model: “It’s better for quality and innovation, attracts talent, and it brings down cost,” Tooley said at the recent forum. “Those are true in other areas of our lives, but they are equally true in education."

Tooley says that education could benefit from market competition and believes that a company's motivation for making a profit does not preclude its motivation for providing quality education. And for a school to earn a good reputation, it will have to be innovative, competitive, and rigorous, otherwise parents will look elsewhere.

Those are the conceptual arguments for the for-profit charter model. In practice, however, it might be an altogether different scenario. Parents of children enrolled at Milestone Sabis Academy of New Orleans gave the school mixed, but mostly negative reviews on a Great Schools message board. “This is the absolute worse [sic] display I have seen of professionalism in a school. Most of the teachers and administrators don't seem to care much. My daughter came home and told me that she was told by a teacher ‘I am only here for a pay check and I do not care if you pass or fail,’” wrote one parent in January 2012. In 2010 another parent wrote, “The teachers are new and fresh, but have no clue how to deal with, much less teach the children. It could be a good school if it were not for these very important absences. The director is pleasant, but does not take to criticism well. Instead she turns the situation around on the parent.”

Sabis was criticized in a Boston Globe article for opening a school in Lowell, Massachusetts with a high student-to-teacher ratio even though the student population included many English language learners. Similarly, when Sabis won a contract to run a charter school in Brooklyn, the New York Times raised concerns about the company’s track record in Chicago, where two of its contracts were revoked.

But Tooley and others maintain that if there were a profit incentive, more people would enter the education sector. “There are some people in this world who aren’t motivated by financial gain. But, if you want to attract talent into the education space then you’ve got to bring in the profit motive,” said Tooley.