Commentary

The New Trend In Education: For-Profit Schools

By Carrie Lips
November 29, 2000
This fall, more than 50 million children went off for their first day of the new school year. They went dressed in their best clothes, armed with fresh notebooks and sharpened pencils, just as American children have been for decades.

But for some students, this school year will be different.

In Greensboro, N.C., 350 elementary school kids marched off to Greensboro Academy, where teachers use a back-to-basics approach that tries to instill traditional values by celebrating U.S. history and good citizenship.

In Springfield, Mass., more than 1,000 students began the school year at SABIS International Charter School. There, students encounter a curriculum designed to impart a global perspective as well as prepare them for competitive colleges.

In Bellevue, Wash., 122 elementary school students went to Chestnut Hill Academy where they receive more than just quality education during school hours. Chestnut Hill offers before- and after-school activities such as art, science and cooking in an environment designed to be a home away from home.

Those students are just a few of the approximately 100,000 who are attending K-12 schools run by for-profit companies.

Increasingly, entrepreneurs recognize that the public’s dissatisfaction with one-size-fits-all schools is more than just fodder for political debates. It is a tremendous business opportunity. Companies like National Heritage Academies, SABIS International and Bright Horizons Family Solutions are making it their business to meet the educational needs of America’s diverse student population.

There are as many potential “niches” in this marketplace as there are disputes about public education. Should schools provide character education, and, if so, what values should be taught? What is the proper role of religion and multiculturalism in school? Should teachers use phonics or whole language instruction? Does sex education belong in the classroom?

All of these topics have been points of contention, and no wonder: Government-run schools must adopt the same rigid solution to each polarizing question. By contrast, in the competitive education marketplace, parents answer those questions by choosing a school that reflects their values and priorities.

Already a wide variety of for-profit schools offer different teaching methods, educational philosophies and areas of emphasis. But while demand is growing for alternative education providers, for-profit education companies still face obstacles to success. Companies attempting to start schools have large overhead costs and must contend with teachers unions typically hostile to for-profit schools. Companies managing charter schools face significant political risk: While charter schools currently are free from some of the regulations saddling public schools, they must consider the possibility that regulations will increase.

By far the greatest obstacle for the success of most for-profit schools is the public school monopoly, which deprives most parents of the freedom to choose an alternative school.

Today, an education marketplace exists only for parents with means. Low and middle-income families, after paying the taxes that support government-run schools, can’t afford to pay private tuition. That makes it difficult for for-profit schools to grow, and traps many low and middle-income children in substandard schools. School administrators and teachers have little incentive to improve because they know most parents must accept whatever services the local public school provides, no matter how poor those services may be.

If instead all parents had the power to choose a school for their child, then schools would be held accountable. Bad school would have to reform or they would close down. This is the market process, sometimes referred to as “creative destruction.” Consumers vote with their feet, bad businesses fail, and others open in their place.

Critics of reforms giving parents control of their education dollars claim choice will leave poor children behind. But the sad truth is the current system has already left low-income children behind. Politicians like the Clintons and Gores may talk about the need to preserve public education, but they used their wealth to send their own children to private schools.

All children deserve an education marketplace as dynamic as the computer and biotech industries. The existing for-profit education marketplace provides a glimpse of what a thriving, competitive market for education might look like if the United States opened the education sector to competition.

Policymakers who want to improve education should pursue tax cuts, tuition tax credits and voucher programs that put education purchasing power in the hands of parents and encourage a vibrant for-profit education industry.

This essay by Carrie Lips, a former Cato Institute policy analyst, is adapted from her Cato study “Edupreneurs: A Survey of For-Profit Education.