Declare India Education ‘For Profit’ ?

We need bold, pragmatic reforms, no matter how unpopular they might seem.

Education in India is a strictly not-for-profit affair. Restrictions on “for-profit” education in India mainly come from Supreme Court verdicts, Model and State RTE rules, and board affiliation standards. This idea is based on socialistic principles and the idea that the fundamental purpose of the ‘sanctified’ educational institutes is to educate and not to make a profit. However, it is high time we look at it from a pragmatic angle as well instead of restricting ourselves to a mere philosophical outlook.

If the liberalization of other sectors is used as an example, we can expect a drastic improvement in quality, reduction in price, and constant innovation. Liberalization provided Indians with a lot of competitive choices in other markets and hence it can be safely said that the education sector would follow a similar extension. This is exactly what we need in education— better quality, lower price, and constant innovation and experimentation.

Since the standards of pre-existing education are not up to the mark, we see Indian parents enrolling their children in coaching centres. These institutions are not bound by any rules or regulations, hence they are extremely difficult to monitor, survey and regulate. The National Sample Survey Office’s 71st round reveals that more than one fourth of Indian students (7.1 crore) take private coaching. Around 12% of a family’s expenses go towards private coaching, across rich and poor families alike. If education is made for-profit then the need to attract more ‘customers’ would lead to better quality and thus reduce the need for external coaching. Clearly, the Indian population is making a choice to pick spending money in private institutes that provide quality, instead of focusing on the sanctity of education.

Even though the education sector is not for profit on paper, it has latent for-profit tendencies. In India, schools operate through a trust or society that is registered as a non profit. However, the trust enters into several transactions with founder-owned organizations for school supplies. For example, an organization owned by the founder may own the land on which the school is built and enter into a lease agreement with the trust. As and when desired, the rental charged to the school is increased. Similarly, almost anything required by the school is sold to it by a company belonging to the founders of the school. In many private schools, almost all contracts handed out are inflated by 15-20 per cent, which is the founder’s cut. Therefore, by opening up the education sector we would not be hiking costs as under the table practices already exist.

Another typical argument against allowing for-profit schools is to protect parents from self-interested capitalists. Indian parents and their children do not need as much protection from profit-making schools as we think. The fear of losing students, that is bearing losses, is the greatest incentive to provide quality education to students. These logical parents understand the high stakes involved and will abandon a bad for-profit school by taking their hard-earned money to a better alternative. Middle class parents have already demonstrated this wisdom by exiting the free government school system.

At first glance, this seems like a clear-cut positive reform that needs to be implemented as soon as possible. However, it would not be pragmatic of us if we do not look at the other side of the coin as well. The purpose of a for-profit organization is to maximise profits. This means that if education is run from a profit making angle, there will be expectations from the stakeholders. People will invest in educational machinery with the expectation of getting handsome returns. Therefore maximising profits could lead to exploitation of the students.

As noticed in the telecom sector currently, there is a huge risk of a monopoly culture in the education sector. What could start off as lucrative ‘deals’ given by more powerful companies could soon turn into a strong monopoly by destroying the lesser powerful companies which cannot take initial losses. This lack of competition could mean exploitation of students due to lack of choice, further down the line.

According to the National Education Policy, whatever is earned as profit needs to be reinvested heavily in school infrastructure. Therefore, there could be a huge possibility that for-profit education institutes could cost more and yet might spend less on the students' education. According to The Century Foundation, for-profit schools in the USA typically spend less than half of their revenue on student instruction, while nonprofit colleges generally spend more on instruction than they take in as tuition revenue. This affects the quality of education which leads to a lot of students dropping out. According to the National Center of Education Statistics (NCES), the six-year graduation rate for students pursuing a bachelor’s degree at for-profit schools in the USA is only 21%, as opposed to 60% at public schools and 66% at private nonprofit colleges.

If the standards of for-profit institutes are not set it might be difficult for employers to gauge the standards of graduates and could lead to more unemployment. A study by the National Bureau of Economic Research, in Cambridge, Massachusetts, stated that students who attend for-profit education institutions are more likely to be unemployed, earn less, and are more likely to not pay back their student loans due to higher debt levels than similar students at non-profit educational institutions.

As shown above, the proposal has both pros and cons. Hence the key is balance and regulation. Making Education for-profit can have a lot of benefits if there are regulations on the factors causing the cons.

Franklin D Roosevelt ushered in a new era of hope and progress when he proposed the now successful new deal and at the time his reforms were considered radical. He once said, “ A country demands bold, persistent experimentation”.