Public, Private, or Proprietary Colleges: Should Students Care?

As a student, I’ve completed educational programs offered from public, private, and proprietary (also called for-profit) universities. I have to tell you that as a student, it didn’t cross my mind to consider the legal business status of the university. When I was a traditional college student, I attended the University of Wisconsin-Stout.  It was close to home so that I could commute and save money. The Applied Math program offered an excellent foundation for someone (like me) that really didn’t know what I wanted to do when I graduated. I also was impressed with the program’s 98% placement rate and among the highest paying starting salaries for their graduates across the UW System. Although my undergraduate experience happened many years ago, I most valued the faculty members that challenged me during the 4 year journey towards a bachelor’s degree. The experience helped me get my first job at McDonald Douglas Aircraft (now Boeing).

My next educational experience was at the University of St. Thomas in St. Paul, Minnesota. This is a private college that offered a unique graduate program in software engineering that was one of a few across the country. At this stage in my life, the goal was no longer to get a broad educational foundation. Rather, I needed to establish even more credibility with the technical people working with me in the Research and Development area at Medtronic.  I also needed to work full time, so having classes in the evening worked well.  As in my earlier education, I most valued the faculty members that challenged me during this journey. Looking back at the experience, I believe the Master of Science degree in Software Engineering allowed me to refine my technical skills, gain recognition within Medtronic, and ultimately helped me get promoted into a management role.

As a manager of various software projects at Medtronic, I realized quickly that what I had learned as a technologist wasn’t helping me. In fact, the technology part of projects was often MUCH EASIER than the human and organizational aspects of the projects. I did the best job that I could, and my teams had many successful software releases, but I realized that there must be some knowledge that I needed to do a better job. I was fortunate to find a PhD in Applied Management program at Walden University (a proprietary school that is now owned by Laureate Education, Inc.). At this stage in my life, it was about developing a deep understanding of how to better manage technical people. I most valued the faculty members from around the country that challenged me to learn about human development, organizational theory, systems theory, etc. and apply this learning in my dissertation research. Looking back at this experience, I realized that it prepared me to enter higher education and help build the business and technology programs at Capella University in the early 2000’s.

As a student, did it matter to me if I attended a public, private, or proprietary college? I would say, no! It was really all about the quality of the faculty! However, things are more complicated today.

Public schools or state colleges are faced with funding challenges as states continue to reduce their financial contributions. It wasn’t too many year ago that state colleges would get 70% of their operating expenses covered by their states. Some state colleges are seeing this contribution go to 30% or less! What happens if this goes to zero? Today, students are likely seeing much larger class sizes. They are also seeing as much as 10% annual tuition increases. I was able to pay my tuition for my undergraduate education within the University of Wisconsin system by working at a gas station and being a statistics tutor (as I recall, both jobs paid $4/hour). Today, I would need to get a sizable student loan to complete my four year degree and it would likely take me more than four years!

Private schools are also faced with funding challenges, but to a lesser degree. Expenses, both faculty related and operational, continue to increase and it’s hard not passing these increases to the student. Endowments at the private schools are likely still down from poor financial performance in the market, as well as, reduction in the cash gifts because of the hard economic times. I’m seeing tuition increases in the 3-4% range for 2012. During my time at the University of St. Thomas, my employer paid for my entire graduate program. Today, I would likely need to pay out of pocket $10,000 to $20,000 because of the employer caps tied to IRS limits for tuition reimbursement. I still feel that this would be a good investment.

Proprietary or for-profit schools, have different challenges. Their enrollments are off because of economic, political, and regulatory issues. Expenses are up because many of the leading for-profits are pumping more funding into increasing the quality of their academic programs. Lower enrollments and increased expenses are tough on for-profits. On the positive side, many of the leading for-profits, like University of Phoenix, Capella, Strayer, DeVry, and even Walden (Laureate) are likely sitting on a large amount of cash to weather the storm. I’m seeing some tuition increases across the for-profits, but most in the 3-4% range. During my Walden experience, my employer paid for a portion of my doctorate program. I still ended up with a student loan of approximately $25,000. Today, I would likely have a much, MUCH larger loan. Would it be worth it? Yes, the doctorate opened up so many doors for me and ushered me into a new career in higher education.

New considerations for future students:

As a future student to a public, private, or proprietary college, I would suggest that you do some research to determine how financially sound these institutions are BEFORE jumping into your academic journey. I don’t think anyone wants to spend the time and money getting a diploma from a college that doesn’t exist a decade from now, right?

Public schools – I wouldn’t be surprised if some of these schools do not survive an ongoing tough economy with deep reduction in state funding. If you are interested in attending a state school, see if you can determine how financially secure they are for the future.

Private schools – What is the annual operation budget? What is annual revenue? How large is their endowment? Similar to our personal cash reserve, does the college have cash reserves to cover 6 months to a year of their annual operating budget?

Proprietary – An advantage of proprietary universities is that many are publically traded giving easy access to financial reports. Pull the latest quarterly report. Are enrollments meeting the forecasts? Are expenses being managed per expectations?

Looking at the financial health of a college is only one of many new criteria to evaluate. For more information on selecting a school, check out my slideshare presentation at:

http://www.slideshare.net/klinberg/so-you-want-to-go-back-to-school

 

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  • 4/29/2012 2:13 PM Marina Kamenetskiy wrote:
    I agree with you. When I was going for my bachelor ’s degree, I attended DeVry University. At that time, they were still a "private" school. I didn't know to check and see what their spending budgets were, etc. In my family (originally from Ukraine) we considered a private school to be prestigious. I remember hearing people say, if you go to a well-known school you are much better off. That way, when you are getting ready to find a job, the employers will see that you graduated from an elite university. I think that nowadays students do not necessarily pay attention to the prestigious factor of a school, but more on the cost of the degree they are seeking. With the economy being the way it is right now, everyone is scrambling to save a penny wherever they can.
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