Academic journal article AEI Paper & Studies

Private Enterprise in American Education: Special Report 7: Focus on For-Profits in K-12 Education Misses the Real Divide

Academic journal article AEI Paper & Studies

Private Enterprise in American Education: Special Report 7: Focus on For-Profits in K-12 Education Misses the Real Divide

Article excerpt


For decades, for-profit educational provision has been merely tolerated, often grudgingly. In the world of charter schooling, for-profit providers are lambasted and sometimes prohibited. In higher education, for-profit institutions have grown rapidly, enrolling millions of nontraditional students and earning enmity, suspicion, and now investigative and regulatory actions from the federal government. When it comes to student lending, teacher quality, and school turnarounds, there is a profound preference for nonprofit or public alternatives. All of this is so familiar as to be unremarkable.

The problem is that K--12 and higher education are desperately in need of the innovative thinking and nimble adaptation that for-profits can provide in a landscape characterized by healthy markets and well-designed incentives. As critics have noted, for-profits do indeed have incentives to cut corners, aggressively pursue customers, and seek profits. But these traits are the flip side of valuable characteristics: the inclination to grow rapidly, readily tap capital and talent, maximize cost effectiveness, and accommodate customer needs. Alongside nonprofit and public providers, for-profits have a crucial role to play in meeting America's 21st-century educational challenges cost-effectively and at scale.

However, we rarely address for-profit provision in this fashion. Most statutory and regulatory discussion focuses on how to rein in for-profit providers, largely ignoring what it would take to harness the potential of such providers while establishing the incentives and accountability measures to ensure a level, dynamic, and performance-oriented playing field.

AEI's Private Enterprise in American Education series is designed to pivot away from the tendency to reflexively demonize or celebrate for-profits and instead understand what it takes for for-profits to promote quality and cost effectiveness at scale. In the seventh installment of the series, Alex Hernandez of the Charter School Growth Fund urges parents, educators, and policymakers to listen critically when arguments are levied against education companies merely on the basis of tax status. Hernandez instead reframes the debate as one between incumbent organizations such as teachers unions and school districts, and new entrants with the potential to disrupt the traditional structure of the American education system.

In an era of reform where performance is quickly eclipsing compliance as the metric used to measure student success, incumbent education providers will struggle to maintain their position of power for two reasons. First, America's educational institutions were designed not to be nimble, but to instead entrench bureaucratic policies into the long-term structure. Second, the rise of technology in K--12 education allows new entrants to modify instruction to fit individual students' needs. Parents and students whose public schools do not offer individualized attention may quickly turn to new providers for help.

While the K--12 education system's current institutional structure "seems immutable," writes Hernandez, "tectonic shifts driven by new technologies and a renewed focus on student performance will fray the bonds between incumbents, creating an opportunity for new providers--nonprofit and for-profit alike-- to build a better public school system for America's children." I am confident that you will find Hernandez's piece as eye-opening and informative as I have. For further information on the paper, Alex Hernandez can be reached at For other AEI working papers in this series, please visit For additional information on the activities of AEI's education policy program, please visit or contact Lauren Aronson at


Director of Education Policy Studies

American Enterprise Institute


The for-profit, nonprofit divide is taking new prominence in American public schools as traditional K--12 institutions--besieged by dwindling budgets and greater pressure to improve student outcomes--face growing competition from new education providers such as Khan Academy, the Knowledge is Power Program (KIPP), and Teach For America. …

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