American economists once spoofed university education as the only industry in which those who consume its product do not purchase it; those who produce it do not sell it, and those who finance it do not control it. That apt description, made in the 1970s, has been undermined since then by the emergence of the first for-profit universities in the United States. Controlled by entrepreneurs, these schools which number about 700 and counting sell a practical education to career-minded students and make a good buck doing it. They are now expanding abroad, creating the first multinational corporations in a sector long suspicious of balance sheets.
The companies are lured by a booming market in which capitalist competition is still scarce. The number of university students is expected to double in the next 25 years to 170 million worldwide. Demand greatly exceeds supply, because the 1990s saw massive global investment in primary and secondary schools, but not in universities. The number of children enrolled in primary or secondary schools rose by 18 percent around the world—more than twice the rate of increase in any previous decade. Now these kids are often graduating from high school to find no openings in national universities, which nevertheless don’t welcome for-profit competition. The Brazilian university teachers’ union warned that foreign corporations would turn higher education into "a diploma industry". Critics raised the specter of declining quality and a loss of Brazil’s "sovereign control" over education.
For-profit universities met with similar suspicion when they first opened in the United States. By the 1980s they were regularly accused of offering substandard education and had to fight for acceptance and respect. Lately, they have flourished by catering to older students who aren’t looking for keg parties, just a shortcut to a better career. For-profit colleges now attract 8 percent of four-year students in the United States, up from 3 percent a decade ago. By cutting out frills, including sports teams, student centers and summer vacation, these schools can operate with profit margins of 20 to 30 percent.
In some countries, the American companies operate as they do at home. Apollo found an easy fit in Brazil, where few universities have dorms, students often take off time between high school and college, and there’s no summer vacation—just two breaks in July and December. In other Latin countries, Sylvan has taken a different approach, buying traditional residential colleges like the Universidad del Valle de Mexico (UVM). It has boosted enrollment by adding and heavily advertising courses in career-track fields like business and engineering, and adding no-frills satellite campuses. Sensitive to the potential hostility against foreign buyers, Sylvan keeps original school names, adding its own brand, Sylvan International Universities, to publicity materials, and keeps tuition in line with local private schools.
Most of the schools that Sylvan has purchased were managed by for-profits to begin with, including the prestigious Les Roches Hotel Management School in Switzerland. But in general, Says Urdan, Sylvan’s targets "have not been run with world-class business practices. They’re not distressed, but there’s an opportunity for them to be better managed." When Sylvan paid $50 million for a controlling stake in UVM two years ago, the school had revenues of about $80 million and an enrollment of 32,000. The success of the for-profits is nothing to be afraid of, says World Bank education expert Jamil Salmi: "I don’t think they will replace traditional universities, but they can push some more traditional providers to be more innovative and more attentive to the needs of the labor market."
Some students at Sylvan schools in Latin America welcome the foreign invasion. At the Universidad de las Americas in Santiago, Daniela Villagran says friends tease her for studying at "Yankeeland," but she figures Sylvan connections "will give me an edge when I go out to look for a job." The emphasis on independent thought is what separates UVM from other institutions in Mexico. And, for better or worse, more American schools are on the way.
According to Jamil Salmi, for-profit universities are