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.
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.
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.
The U.S. commissioner of education, decrying the range of educational quality among for-profit institutions, labels some as “purely business speculations.”
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)
For-profit higher education enrollment by state (4)
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., DeVry 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.
More than 70% of programs at for-profit institutions produce graduates who earn less than high school
Graduation rates for first-time, full-time bachelor’s degree students (5)
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)
Public nonprofit: 13%
Private nonprofit: 7%
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.
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)