Many universities across the U.S. operate internal consulting firms, often called service centers or research labs, staffed primarily by professors and students.
These organizations offer services like market research, strategic analysis, and innovation projects to real companies—sometimes charging hundreds of thousands or even millions of dollars per contract.
At first glance, this might seem like a great opportunity for students to gain real-world experience. However, a deeper look raises serious ethical concerns:
- Students do most of the work but are not paid.
- Students actually pay tuition to participate in these projects.
- Universities, often nonprofit institutions, profit from these consulting contracts without paying taxes.
This raises an important question: Is this practice ethical? And if not, what would make it fair?
How These Consulting Firms Work
The basic model is as follows:
- A company hires a university’s consulting arm to complete a project, such as market research or product design.
- The university assigns one or two professors to oversee the work.
- A group of students is recruited to perform the research, analysis, and deliverables.
- The university collects a large consulting fee from the company.
- The students don’t get paid for their work. In fact, they pay tuition for the class.
At the end of the project, students gain experience and a resume boost. However, they don’t own their work—the university does, and it either licenses or sells it back to the company for profit.
The Ethical Dilemma
1. Students Work for Free (and Pay for It)
The most glaring issue is that students are not compensated. Unlike traditional internships where students either receive course credit or a paycheck, these university-run firms charge students tuition while benefiting from their unpaid labor.
Imagine a consulting firm in the private sector charging a client $100,000 for a project. If employees were not paid and instead had to pay to work, it would be considered exploitation. Yet, universities follow this exact model under the guise of education.
2. Universities Profit Without Paying Taxes
Universities, as nonprofit institutions, generally do not pay taxes. Meanwhile, traditional consulting firms in the private sector must pay corporate taxes, salaries, and overhead costs.
By using student labor and existing faculty salaries, universities have zero labor costs while still charging companies the same or higher rates as traditional firms. This raises concerns about unfair competition—should nonprofit universities be allowed to operate like for-profit businesses without the same financial obligations?
3. Students Take on Debt to Fund These Projects
Many students go into massive debt to attend these universities, often relying on federal student loans. Since many universities charge $50,000–$70,000 per year in tuition, students may be paying thousands just to participate in these consulting projects.
To make matters worse, federal loans and grants help fund these institutions, meaning taxpayers are indirectly supporting these for-profit consulting activities.
4. Parallels to the NCAA Student-Athlete Debate
This situation is similar to the debate over college athletes and name-image-likeness (NIL) rights. Until recently, student-athletes generated billions of dollars for universities but were not allowed to profit from their own talent.
A similar argument could be made for students working in university-run consulting firms. If their work generates revenue, shouldn’t they be entitled to some form of compensation?
How Could This Be Made Ethical?
If this system is unfair, what changes would make it ethical? Here are some possible solutions:
1. Offer Free Tuition for the Course
If students are required to work on these projects, at the very least, they should not have to pay tuition for the course. Free tuition would recognize the value of their labor and reduce the financial burden.
2. Pay Students for Their Work
Another option is to compensate students for their work, similar to internships. Even a modest wage would acknowledge their contributions and make the experience more equitable.
3. Give Students a Share of the Revenue
If the university is charging a company $100,000 for a project, a percentage of that revenue could be allocated to the students who did the work. This would mirror how consultants are paid in the private sector.
4. Treat These Consulting Firms as For-Profit Businesses
Universities could operate these consulting firms as separate, taxable entities, ensuring they compete fairly with private firms. If a university wants to act as a business, it should be taxed as one.
5. Ensure Students Retain Rights to Their Work
Currently, the university owns all intellectual property created in these projects. Giving students at least partial ownership would be a step toward fairness.
Final Thoughts: Should Universities Run Consulting Firms?
University-run consulting firms exist in a gray area between education and business. While students gain experience, the financial and ethical structure of these programs raises serious concerns.
Key issues include:
- Students provide free labor while paying tuition.
- Universities profit without paying taxes or labor costs.
- Federal loans and taxpayer money help fund these for-profit activities.
At the very least, students should receive some form of compensation—whether in free tuition, wages, or revenue sharing. Otherwise, these programs risk exploiting students while enriching universities.
So, what do you think? Should universities continue running these consulting firms, or should they be restructured to be more ethical? Share your thoughts in the discussion forum at TheBusinessProfessor.com!