To be eligible for Title IV funds PSCUs must be accredited by a U.S. Department of Education approved national or regional accredited body. Many private sector colleges and universities are accredited by multiple bodies. Accreditation involves an in-depth assessment of an institution's compliance with educational standards. The review examines the school's infrastructure and resources for delivering higher education and, in the case of national accreditations, its ability to produce satisfactory educational outcomes. In terms of the former, such a review covers the adequacy of faculty, curriculum, facilities and equipment, admissions practices, retention, financial and administrative capabilities, and student services. Outcomes include factors such as program completion and job placement rates, graduate performance on state licensing examinations, and student satisfaction. Accreditation of an institution can take up to two years and costs several thousand dollars to complete. The accreditation process involves both self-reporting and on-site visits to the institution by accreditation body personnel. Accredited institutions must comply with all federal, state and local requirements and be financially sound, audited and reviewed by an independent certified public accountant. The institution must file an annual financial statement with the accrediting body.
Comparative Tuition Costs
As a general rule, private sector colleges and universities are more expensive than community colleges and public four-year institutions and less expensive than private non-profit colleges and universities. PSCUs charge significantly less tuition on average than do private non-profit colleges and universities ($14,174 vs. $26,273). PSCUs are more expensive to attend than community colleges and the average in-state rate of public four-year universities ($2,544 and $7,020 respectively), but less than average the public out-of-state rate ($18,548).
Private sector colleges and universities make an important contribution to the American economy. They operate as tax-paying businesses that put dollars in the economy of every state and community in which they are located. In addition, their graduates earn more, spend more and pay more taxes than would be the case if they had not received training beyond high school. A May 2007 report from the Imagine America Foundation concluded that private sector colleges and universities contributed $38.6 billion to the U.S. economy in 2005. This includes $14.6 billion in direct institutional expenditures and $4.0 billion spent by students on expenses other than tuition required to attend the institutions. In addition, the sector generated $3.5 billion in secondary earnings gains, defined here as the increase in career college graduate salaries, and $16.5 billion in indirect economic activity associated with the industries in which graduates are employed. PSCUs return value to society in other important ways. In salary terms alone, in 2007, the median annual earnings of working career college students 25 years and older with some college or an Associate's Degree was $40,769 versus $32,862 for their high school graduate counterparts). The average rate of return on a career college student's investment is 24%.
PSCUs participate in federal student aid programs, but taxpayer subsidies for traditional colleges and universities constitute far higher levels of support
. For public colleges and universities, the difference in subsidy is over 13 to one ($13,920 vs. $1,011). For private non-profit colleges and universities, the difference is seven to one ($7,546 vs. $1,011). If the public subsidy is added to the average tuition of the public college to determine what the true price of providing the education would be, it becomes clear that public colleges and private sector colleges are relatively close in pricing, while private non-profit colleges and universities are much more expensive. This table tells the story.
PSCU two-year institutions graduate students at nearly three times the rate of community colleges. According to the a U.S. Department report, the graduation rate at two-year PSCUs was 60 percent compared to 22 percent at community colleges.
PSCU job placement rates for graduates of nationally accredited institutions can be 70 percent or higher. The National Association of Colleges and Employers reports that only 24 percent of college graduates have a job waiting after graduation. Even in this economic downturn, placement rates for individuals completing programs at private sector colleges and universities are high. One of the national accrediting bodies (ACICS), which accredits over 700 institutions whose enrollment in 2008 was nearly 600,000, collects such information. It reported that in 2008, of over 117,000 completers and graduates, over 69,000 were placed in their field of study and over 10,000 were placed in a related field. Seventy-six percent of those earning an occupational associate's degree found employment in 2008, according to ACICS, while 72 percent did so with academic associate's degrees, 65 percent in bachelor's degree programs and 76 percent in master's degrees programs. Placement rates for certificate and diploma completers were over 72 percent.
Even with defaults on student loans, the cost to taxpayers for PSCU students is still much lower than other higher education students. Almost one-third of PSCU students come from the lowest income quartile. As a result, their cumulative lifetime default rate on student loans (26 percent) is higher than four-year public (8.1 percent) and four-year private (6.7 percent) college and university students. Being similarly situated to PSCU students in financial terms, community college students have about the same cumulative lifetime default rate (21.4 percent). Adding the taxpayer subsidy ($1,011) of PSCU students to the average cost per student default ($3,194) is still much less ($4,205) than the taxpayer subsidy of traditional college and universities ($13,920).
PSCU revenue in excess of expense (or profit) per student is about the same as that of private non-profit colleges and universities ($2,109 vs. $1,919). Every college, whether operated as a non-profit or publicly subsidized institution or a PSCU, attempts to produce a surplus above its total costs. Those who are unable to produce a surplus threaten their ability to provide a quality educational experience to their students. If operating losses continue it threatens the institution's economic viability. PSCUs pay taxes on profits, while traditional colleges and universities do not.
There are approximately 2,900 accredited private sector colleges and universities that provide educational programs in over 500 occupational fields
, including accounting, allied health, automotive technology, business administration, commercial art, criminal justice and law enforcement administration, culinary and hospitality management, emergency medical technology, information technology, interior design, legal administration, mechanical engineering, network administration, nursing, radio and television broadcasting, and visual and performing arts. The top ten private sector college or university programs in terms of the number of programs being offered by schools are:
|Program Classification - General
||# of Programs
||% of Programs
|Health Professions and Related Clinical Sciences
|Business, Management, Marketing, and Related Support Services
|Personal and Culinary Services
|Computer and Information Sciences and Support Services
|Visual and Performing Arts
|Legal Professions and Studies
|Security and Protective Services
|Mechanic and Repair Technologies/Technicians
Spending on Instruction
PSCUs spend about the same percentage of revenue on instruction as public colleges and universities (23 percent versus 28 percent), notwithstanding the fact that tenure within the traditional academic community drives up instructional costs. PSCU instructors tend to be professionals who love to teach rather than teaching professionals. The distinction is important, providing PSCU students with a more "real world" educational experience while driving down the costs associated with full time, tenured faculty.
Private sector college or university (PSCU) students are predominantly working adults looking to achieve the American dream by obtaining an education directly related to their career goals. Almost half are minorities or first generation in their families to pursue higher education. Over three-fourths are not dependent on their parents for financial support and of the dependent students over half come from families with an income of less than $40,000. Nearly half have dependent children and four out of ten are single parents. More than 75 percent of the students are employed, nearly 40 percent full-time, while they are enrolled in private sector colleges and universities. PSCUs serve a more racially and ethnically diverse population, providing a much needed alternative pathway to higher education. About 40 percent of PSCU students are black or Hispanic, compared to 21 percent for traditional public four-year institutions and 31 percent for community colleges.