Is This the End for For-Profit Universities?

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Is This the End for For-Profit Universities?

Most people likely think of for-profit higher education as a relatively new invention. But that’s far from the truth. Let’s look at the history of commercial colleges in the U.S. and their murky future.

Early History of For-Profit Higher Education

For-profit education is nothing new in the United States. It has roots in Colonial America, spurred in part by one of America’s Founding Fathers.

18th century (1)

Higher education focuses largely on theology, language, literature and philosophy.

Benjamin Franklin is among proponents of education that focuses more on building skills and trades to help the fledgling U.S. economy. As a result of that movement, for-profit colleges grow, enabling students to build skills in trades like bookkeeping and engineering.

19th century (2)

By the latter part of the century, for-profit education has surged. By 1871, more than 150 commercial colleges are operating, and the number grows as high as 500 by the early 1890s.

A common form of tuition at these schools is the “life scholarship,” in which students pay a lump sum in exchange for unlimited classes at any of the college’s branches. The costs were far less than tuition at most nonprofit universities.

1853 (2)

John D. Rockefeller takes a 10-week bookkeeping course at for-profit Folsom’s Commercial College in Cleveland, which today is Chancellor University. Rockefeller would go on to become the first American billionaire.

1854 (2)

Bryant & Stratton is founded, aspiring to open an institution in every U.S. city with more than 10,000 residents. Within a decade, the company would have more than 50 schools. Today, Bryant & Stratton has 18 campuses in New York, Ohio, Virginia and Wisconsin.

1872 (2)

The U.S. commissioner of education, decrying the range of educational quality among for-profit institutions, labels some as “purely business speculations.”

1897 (2)

More than 123,000 students are enrolled in commercial courses, in both the high school and collegiate level. More than 92% of college students are enrolled at for-profit institutions.

The Current Landscape of For-Profit Education

The past four decades have seen a huge revival of commercial higher education.

For-profit undergraduate enrollment by year (3)

1970: 18,256

1975: 38,579

1980: 106,397

1981: 147,311

1982: 172,600

1983: 187,801

1984: 184,270

1985: 190,553

1986: 208,965

1987: 187,704

1990: 206,103

1991: 218,976

1992: 219,682

1993: 212,975

1994: 217,015

1995: 223,400

1996: 279,347

1997: 303,284

1998: 334,070

1999: 379,927

2000: 402,891

2001: 472,021

2002: 518,131

2003: 610,588

2004: 740,684

2005: 847,866

2006: 888,636

2007: 995,861

2008: 1,237,989

2009: 1,585,366

2010: 1,720,978

2011: 1,655,365

2012: 1,513,613

For-profit higher education enrollment by state (4)

<5,000

Alaska

Hawaii

Idaho

Montana

Wyoming

North Dakota

Nebraska

Kansas

Arkansas

Mississippi

Maine

Vermont

Delaware

Rhode Island

5,000-24,999

Washington

Oregon

Nevada

Utah

New Mexico

Oklahoma

South Dakota

Louisiana

Alabama

Kentucky

Wisconsin

Michigan

North Carolina

South Carolina

Maryland

New Jersey

Connecticut

Massachusetts

New Hampshire

25,000-99,999

Colorado

Texas

Missouri

Indiana

Tennessee

Georgia

Ohio

West Virginia

Virginia

Pennsylvania

New York

100,000+

California

Arizona

Minnesota

Iowa

Illinois

Florida

Bad News

Recent events haven’t been exactly positive for commercial universities.

Investigations and lawsuits

Most of the big players in the for-profit higher education industry have come under investigation by state and federal agencies. EDMC, ITT, Career Education Corp. and Bridgepoint all have been targeted for investigation.

Corinthian was one of the largest for-profit systems in the U.S., but most of its campuses have been shuttered after a series of state and federal legal challenges.

Educational quality

More than 70% of programs at for-profit institutions produce graduates who earn less than high school

dropouts. (5)

Graduation rates for first-time, full-time bachelor’s degree students (5)

For-profit: 22%

Public nonprofit: 55%

Private nonprofit: 65%

Financial aid and student debt

For-profit institutions’ revenue comes largely from consumers, many of whom will rely on loans and federal Pell grants.

Commercial colleges account for nearly half (46%) of the borrowers who entered repayment on their student loans in 2010 and were in default by 2012. (5)

Student loan default rate (6)

For-profit: 19%

Public nonprofit: 13%

Private nonprofit: 7%

Federal policy

President Barack Obama’s 2016 budget proposal includes changing what’s called the “90-10 Rule,” which is a federal law that prevents for-profit colleges from getting more than 90% of their revenue from federal student aid. Obama’s proposal would amend the rule to cover veterans benefits like the GI Bill, which is currently excluded from the rule.

133

For-profit colleges that would have failed to meet the regulations in the 90-10 rule if veterans’ benefits were included in the 90% (5)

Sources:

1. http://americanradioworks.publicradio.org
2. http://www.bloomberg.com
3. https://nces.ed.gov
4. http://chronicle.com
5. http://www.theatlantic.com
6. http://www.nationalreview.com