A New Dynamic: Private Higher Education

Financial consideration2Table 2.1.Profits and revenues of the largest higher educationcompanies, 2003 US$, millionsCompany Country Revenue ProfitApollo Group (Phoenix) United States 1,340 247Career Education Corporation United States 1,189 119Corinthian Colleges United States 517 66DeVry United States 679 61Education Management Corporation United States 640 56Sylvan Learning Systems* United States 472 46Source: The Global Education Index 2004. London, OBHE.* Now Laureate Universities InternationalTaxation will also arise in indirect ways, such as through import and customs levies orvalue added tax charges, and these will affect all providers unless special exemptionsare made. Where such exemptions apply to state-funded institutions, it is reasonablefor private providers to expect that they will get the same treatment.The very idea of profit-making higher education is anathema in some countries andin many jurisdictions (such as Argentina and Egypt), the legislation on PHE decreesthat institutions shall be not-for-profit. However, there are notable exceptions, suchas China, where the law of 2002 is very realistic as to the 'reasonable rewards' thatentrepreneurs can expect. 6 The Russian Federation also allows profit-making privateuniversities to operate. Newsweek has quoted profit margins of between 20 and 30per cent on turnover for higher education corporations in the American context andreported an executive of the former Sylvan Group as saying 'One of the things thatinvestors like most about higher education is that typically one can increase pricesfaster than the rate of inflation'. 7 The current economic recession is likely to havetempered this aspiration and there are already reports of some private providers infinancial difficulty in the United States.There are several reasons for this ability to make profits, although they are oftencountry-specific and do not apply universally.6 See details of the legislation in Box 2.6.7 Newsweek. Dollars and degrees. 13 January 2003.35