Federal Higher Education Policy and the Profitable Nonprofits

Abstract

Undergraduate education is a highly profitable business for nonprofit colleges and universities. They do not show profits on their books, but instead take their profits in the form of spending on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry’s high profits come at the expense of students and taxpayer. The author points out that in order to lower the cost of education, federal government policies should encourage competition. Regulations should not favor non-profits over for-profits. Further, the accreditation process should be reformed so that any qualified institution can easily enter the industry. The financial aid process should be redesigned to remove the bargaining advantage that colleges currently hold over prospective students.