There are several important differences between proprietary degree-granting institutions and traditional institutions. The most fundamental difference is related to the for-profit motive of the proprietary institution; for-profits are in business to realize return on investment for stock holders while traditional institutions hold special status as nonprofits and reinvest profits to the institutions (Hawthorne, 1995; Lee & Merisotis, 1990). The for-profit motive, coupled with a lack of governmental oversight, created a crisis in the 1970s within proprietary education as unscrupulous school owners took advantage of increased tax-supported funding for higher education. Problems increased in the 1980s and early 1990s manifested by rising student loan default, low program completion, and dismal job placement rates (Hittman, 1995; Honick, 1995). Moreover, there were accusations of “questionable business practices, aggressive marketing tactics, misleading advertising, and poorly-constructed educational programs” (Schulz, 2000, p. 17). In response to these scandals, state and federal officials enacted quality review systems “to protect consumers from deceptive and unfair practices, [and to] assure quality education through the establishment of minimum standards” (Foster, 2004, p. 2). For-profit schools must now comply with strict licensing and accreditation requirements; institutional performance is measured in terms of student retention, job placement, loan default rates, and federal funds usage. In spite of these remedies, current attitudes toward proprietary education are still often based on the fraudulent practices of the pre-1992 era (Bailey et al., 2001).
Other important differences between proprietary and traditional education include their governance structure, curriculum design, and faculty qualifications. In proprietary institutions, decision-making rests in the hands of a few hierarchical managers, accountable primarily to shareholders, “who may place financial considerations above the needs of their students” (Foster, 2004, p. 15). For-profit institutions are less likely to have a board of trustees and their faculty have neither tenure nor influence through shared governance (NCES, 1999). Without these powerful restraining influences, organizational efficacy and efficiency allow institutions to be more responsive in meeting the changing demands of the modern workplace (Offerman, 2002; Ruch, 2001; Schulz, 2000). Yet, while the governance structure of for-profit institutions is different from traditional institutions, Millard asserts that it would very difficult to prove “quality was a function of governance and ownership rather than of accomplishing educational objectives” (1991, p. 51).
For-profit degree-granting institutions aggressively market their curriculum as a gateway to employment—especially to individuals who might not qualify for enrollment or find success in traditional institutions (Kelly, 2001). The for-profits’ emphasis on vocational curricula and career orientation characterizes both their programs of studies and their mission of “serving students by preparing them for employment and serving industries by supplying them with trained workers” (Cohen & Brawer, 2003, p. 233). Strong linkages to the local business community guide the development of a curriculum designed to graduate well qualified and productive workers. Accordingly, the for-profit curriculum is: more practical than academic, derived from employer identified job skills, and transmitted by credentialed faculty—as defined by education and experience—who link teaching with the authentic business world. As a result, for-profit institutions have developed a narrowly-tailored curriculum incorporating occupational skills, academic education, and work-based learning. Proprietary institutions also offer a more flexible and convenient class schedule than most traditional institutions of higher education. Consequently, for-profits start new courses regularly, many as often as every month compared to one start per semester in traditional institutions. This convenient, no-frills approach to education appeals to nontraditional students who have unique needs and concerns about college (Rutherford, 2002; Sperling & Tucker, 1997).
Proprietary institutions hire few full-time faculty members. Instead, they rely heavily on part-time instructors—generally people experienced in the field they teach (Bailey et al., 2001). A master’s degree is usually required; however, in certain fields, a bachelor’s degree (plus experience, license, or demonstrable proficiency) will suffice. Bailey et al. (2001, p. 28) found that “Neither training in pedagogy nor experience in teaching was formally required…and applicants who have had industry experience and an appreciation for applied learning” are preferred. In addition to their teaching responsibilities, faculty are also responsible for retention activities and accordingly are encouraged to “develop a relationship with their students” (Foster, 2004, p. 10). For example, instructors often are required to contact students who have missed class in an attempt to bolster motivation for academic success and persistence (Rutherford, 2002). One of the greatest challenges facing most for-profits is attracting a credentialed and highly qualified faculty because salaries are generally lower than those found at traditional institutions (Ruch, 2001).