Hedge funds exert pressure on for-profit education industry

Posted by on February 4th, 2011

A recent (JANUARY 25, 2011) Wall Street Journal center-column, front page article titled, “A ‘Short’ Plays Washington,” highlights the negative influence the hedge fund community has had on education companies and their stocks, overshadowing the important role the for-profit sector plays in post-secondary education.


While the hedge funds have positioned themselves as concerned citizens and taxpayers, the truth of the matter is that these powerful groups are taking advantage of their access to influence the Department of Education’s (DOE) rule-making process. These weakly-veiled attempts to influence policy are less about protecting students from the unsavory marketing tactics of the for-profit education industry, than they are about the mighty dollar — making money by shorting the stocks of for-profit education companies.

While we are not calling into question the fact that certain changes in post-secondary education will benefit non-profit schools, for-profit schools and students, alike, we are discouraged that these changes mask the positive influence and contributions of for-profit education.

Unlike the not-for-profit education system, which has proven unwilling and/or unable to meet the needs of today’s student population, the for-profit sector has made tremendous strides to broaden the appeal and access to higher education. Among the most important contributions of the for-profit sector include staggered start dates to meet the unique needs of the working adult as well as the availability online learning platforms.

While access to traditional bricks-and-mortar schools suffer from capacity constraints, for-profit schools, especially those that incorporate an online component, have opened the doors to a much larger swath of the population; this growing population of students are what we refer to as the New Traditional Student – the 25+ years-old, who works full-time and has a family.

If the United States is to have a fighting chance to regain its leadership position as the most educated country in the world, the Department of Education will have to work diligently to protect students’ access to higher education.