Corporate Universities: Commercializing Education

Few high schoolers ask, “what post-secondary education experience do I want to buy?” when choosing a university to attend. For some, it seems absurd to characterize universities as businesses selling products to customers in the competitive market for education. As former British politician John McDonnell remarks, “education is not a commodity.” Yet, given the present-day organizational structure of universities, students might as well treat their university selection process as a shopping experience. Since 1990, the average tuition for a private nonprofit four-year university degree has risen 3.6% annually to $38,000 in 2020. Consulting firms now comfortably discuss colleges in the context of corporations, using terms such as “customers,” “target market,” and “business”  to describe the operations of educational institutions. To what extent have universities evolved into corporations, and what implications does such a transformation have for students and society?

The idea that colleges should carry a price tag started half a century ago. Prior to the 1970s, students paid very little or nothing to attend universities. Since then, lawmakers have begun to view higher education less as a public good and more as a private good that benefits individuals at the personal level. Following his election as the Governor of California in 1967, Republican politician Ronald Reagan, later the 40th President of the United States, set a new tone for education by declaring that the state “should not subsidize intellectual curiosity.” Similarly, economists such as Milton Friedman argued that free education places non-university attendees at a disadvantage because they have to subsidize those who do attend. Individuals seeking private gains, proponents of tuition fees reasoned, should therefore pay the price. 

Students in today’s society must pay to learn, and universities have embraced this corporate concept. In a competitive market, you supposedly “get what you pay for.” To honour the value-based pricing principle, universities now charge different fees across programs – business, arts, engineering, and the sciences – to reflect the value of each educational package, measured by the future earnings of students. The principle of innovation and product differentiation as key drivers of willingness to pay also comes into play. Complementary to the price hikes, universities have expanded and upgraded their product offerings: fancier dorms, finer chefs, and more modern facilities. Interestingly, none of the development projects enhance the quality of education and have instead turned universities into hotels and tourism businesses. In the commercialized market for education, food and residence have become major selling points for prospective freshmen, and students now view foreign exchange programs as an opportunity to travel. As students increasingly consider their four years at college a consumer experience, the transition of higher education from being a public good to being a private one approaches completion.

However, the emergence of the capitalist market for education has created its own problems. Tuition fees have not only doubled over the last five decades but also outpaced inflation. Student debt in the US has grown to an astronomical $1.6 trillion, representing the second-highest type of debt after mortgages. Moreover, the commoditization of the education system has worsened economic inequality. Wealthy parents can send their kids to private schools and tutoring to boost their child’s chance of gaining admission to prestigious universities while less well-off parents cannot. Not only do privileged children have an unfair start to the college application process, but their financial environment also enables them to afford the high tuition fees once college begins. The money-driven system also promotes unethical behaviour such as the abuse of power. Consider the college admission scandal involving actress Lori Loughin, who paid over $500,000 to buy her daughters entry into the University of Southern California (USC). While Ms. Loughin initiated the bribery, USC faculty also demonstrated a willingness to participate in light of the lucrative offer. If an education system ruled by capitalism leads to corruption and inequality, then universities prioritizing the advancement of knowledge should question whether their current operating model still makes sense.

The ways in which universities have responded to the COVID-19 crisis further confirm their corporate identity. Travel bans have caused universities distress by physically separating universities from their most profitable customer segment – the international students. Struggling with deepening operating deficits, a handful of universities have increased tuition fees, despite offering only virtual classes with no in-person activities. McGill University, for example, has increased tuition by 4%, as have American universities such as Stanford, Yale, Brown, Rice University, and Dartmouth. From a consumer perspective, the tuition increases run contrary to the expectations that tuition should not only remain unchanged but fall due to a decline in the value proposition of the service. Enraged customers have consequently raised their voices, initiating class-action lawsuits against the unwarranted price hikes.

Universities today operate as businesses in a society that has monetized education. To compete and win, universities have expanded beyond their primary education offerings into nonacademic areas such as accommodation and food. While it remains unclear whether these corporations endorse or object to their current organizational form, rising tuition indicates the model’s acceptance on the part of consumers. Students have adopted the identity not as individuals pursuing knowledge but as consumers purchasing a university experience. However, this does not mean that students should mindlessly pour tens of thousands of dollars into the purchase. As with making any major investment decisions, students should perform a thorough analysis of the sellers, their products, and the market. Since every university package comes with its own customizations pre-determined by the seller, students should make efforts to understand the composition of each package and assess the extent to which they agree with the seller’s priorities. Businesses need happy customers to survive; students should have the right to not only know the details of the product but also point out areas of deficiency, negotiate, and recommend changes as they see fit. Ambitious customers can make the most of their purchase by learning as much as possible – especially while they can still acquire such knowledge for free.