Author: Kristen Pue

Especially over the past year, American for-profit higher education institutions like the University of Phoenix have been embroiled in scandals on the quality of their programming, low graduation rates, and the high burden of debt that their students, disproportionately poor Americans, carry after they leave. These scandals have led to a broader policy debate in the U.S. on the privatization of higher education (see articles here and here).

The University of Phoenix Stadium. Credit: Peter Eisenman

But the privatization of higher education is not only an American problem. It is a global trend that is particularly pronounced in some developing countries. And it is one that highlights how the challenge of providing education is taken up differently across countries and regions. Nonetheless, this global trend poses some common policy challenges. This blog post discusses the privatization of higher education, where and why it is occurring, and the policy challenges that it poses.

Private higher education institutions can vary a lot;

moreover, there is no neat dividing line between public and private.

It is challenging to study the privatization of higher education because the sector is so diverse. Experts point to at least three different kinds of private higher education institutions: research universities, religiously affiliated universities, and pseudo-universities (specialized institutions like technical colleges). Each of these organization types has different purposes and structures.

The subject gets more difficult because the line between public and private can be blurry. This is especially true in regards to revenue sources: almost all colleges, whether public or private, are supported by a mix of public and private funds. Most private universities and colleges rely on tuition fees but some may have substantial endowments or may take in government grants.

There is a global trend toward an increased role for private

(often for-profit) providers in higher education, to meet rising demand.

Privatization of universities is not a new phenomenon. However, the role of the private sector in higher education is growing. Further, although private universities and colleges have long existed, the rise of for-profit higher education institutions (FPHEIs) is a new trend in most countries.

Asian Development Bank report, March 2012.

Globally, the private higher education sector accounts for 31% of total enrollment and 56% of the total number of higher education institutions. It is worth an estimated $400 billion USD worldwide. However, there are substantial regional differences behind this figure. The private share of total enrollment in higher education is greatest in East Asia and Latin America, with a smaller but rapidly growing private sector in the U.S., South Asia and Central and Eastern Europe, and fewer students in private universities and colleges in Western Europe, Africa, and the Middle East (although the sector is growing steadily in the latter two of these).

Privatization of higher education is occurring for two interconnected reasons:

  1. Massification: the expansion of access to higher education beyond a small set of elites and
  2. Commodification: A shift from the perception that higher education is a public good to the view that it is primarily a private good.

The U.S. is not the leading country in private higher education enrollment.

Because the U.S. is often purported to be the basis for privatization trends in higher education provision, it is worth noting some stats from this high-income country. The U.S. is not the leading country in private higher education enrollment, nor is private education enrollment at its highest point in the country’s history. Notably, a large segment of private institutions in the U.S. are private non-profit universities, which perform roughly on par with public universities. As such, FPHEIs are typically studied as a separate category in studies of higher education in the U.S.

Regional differences in private higher education reflect differences in state-society relations, economic conditions, and the history of education provision.


As noted above, privatization varies a lot across regions and even between countries within those regions. This reflects differences in state-society relations, economic conditions, and the historical role of the government as an education provider.

To give a general idea, here is the role of private higher education in four key regions:




East Asia

A privatized and well-regulated higher education sector enrolls most students.

Latin America

About half of students are enrolled in private higher education institutions. The Catholic Church established many of the longstanding private universities. However, the for-profit sector is growing: small and informal institutions are prolific. Meanwhile, U.S.-based multinationals are expanding into this region.

South and Southeast Asia

Demand for higher education is growing unevenly, prompting a rising private sector. In general, private higher education plays a bigger role in Southeast Asia, especially Malaysia, Singapore, and the Philippines.

Central and Eastern Europe

There has been rapid growth of private higher education in some of the former Soviet states in this region, although this expansion is generally unplanned and unregulated. In most of this region, for-profit degree-granting institutions are banned (although they exist anyway).


For-Profit Higher Education Institutions (FPHEI)

pose challenges for economic planning, quality assurance, and equity.

Rally against privatization of education in Sri Lanka. Source:
Rally against privatization of education in Sri Lanka. Source:


The expansion of FPHEIs has created several public policy challenges that governments, whether in developing or high-income countries, must confront:

National Economic Planning: although higher education is increasingly seen as a private good, the cultivation of a skilled workforce is a government imperative. As such, one challenge is regulating to coordinate private higher education for the public good without overregulating. In particular, because FPHEIs often specialize and make their decisions based on their bottom lines, governments may need to act to ensure that the right balance of degree and professional programs are offered. Private colleges emerge to meet the demand for specific, largely vocational, degree and certificate programs. However, there is evidence that such colleges may choose not to offer some programs because they bear substantial up-front infrastructure costs. For example, the social sciences are overrepresented amongst FPHEIs in Mexico. This could have long-term implications for the composition of the workforce.

Quality Assurance and Transparency: in the U.S., much of the controversy about FPHEIs has concentrated on the role of large, often publicly traded and multinational, education companies. While similar concerns exist with respect to FPHEIs in developing countries, the vast majority of FPHEIs are small (dubbed “patitos” in Mexico). This makes it more difficult to undertake quality assurance and to ensure that information is transparently available for the public. In particular, assuring teacher quality (as most professors hired in FPHEIs are hired on a part-time basis), academic integrity, and accreditation have proven difficult.

Equity: the equity effects of private higher education are linked to the basic education system. In countries where public and private education systems can vary considerably in their quality – such as India, Brazil, Mexico and even, arguably, the U.S. – there is a class dimension to performance on entrance examinations. As a result, subsidized spots at a small number of public universities may be largely available to individuals from wealthier families, leaving FPHEIs as the only option for many poor individuals. Evidence suggests that FPHEIs often cater disproportionately to poor and socially marginalized groups. Some have raised concern with the emergence of these institutions because they can leave such students in staggering debt without providing the expected payoff (due to lack of accreditation, high dropout rates due to poor quality education or the admission of unqualified candidates, or low pass rates on professional exams).



Shiro Armstrong and Bruce Chapman (eds.), Financing Higher Education and Economic Development in East Asia (Australian National University E Press, 2011).

Bruce Johnstone, “The Financing and Management of Higher Education: a Status   Report on Worldwide Reforms”, (1998) World Bank.

Philip Altbach and Daniel Levy (eds.), Private Higher Education: a Global Revolution     (Rotterdam, NE: Sense Publishers, 2005).

Guilbert C. Hentschke, Vincente M. Lechuga, and William G. Tierney (eds.), For-Profit Colleges and Universities – their Markets, Regulation, Performance, and Place in      Higher Education (Sterling, VA: Stylus Publishing, 2012).

The Economist, “Special Report: Universities”, (28 March 2015) the Economist.