For-profit colleges and universities, compared to their public institutional counterparts, are governed and operated by private corporations. A National Student Clearinghouse report showed for-profit college enrollment changes during the pandemic: undergraduate enrollment was up 3 percent over last year, and down 9 percent in public community colleges enrollment. However, during and in the early aftereffects of Covid-19, one report stated, “When COVID-19 hit the U.S., many experts warned that America’s colleges and universities could be devastated. Some of them predicted enrollment declines of up to 20%. So far, those initial forecasts were worse than what has actually taken place. One month into the fall semester of the 2020–2021 academic year, overall enrollment was only 3% lower than at the same time a year earlier . . . for-profit colleges . . . average enrollment is up by 3%. In contrast, at public and private nonprofit four-year universities, enrollment fell by about 1.4% and 2%, respectively”(Ott, 2020). However, the same source states that, “Given the recent presidential election results, I also suspect the increase in for-profit enrollment may be short-lived. Graduates of for-profit colleges are defaulting on their tuition loans at higher rates, and President-elect Joe Biden has vowed to stop these schools from ‘profiteering off of students’” (ibid.).

Competitive advantages of for-profit institutions include “flexible scheduling with year-round enrollment, online options, small class sizes and convenient locations.” These characteristics attract a large and growing student population entering the education market. It seems the entrepreneurial wave of for-profits has and continues to serve a niche that traditional universities and institutions of higher learning have not served, and perhaps cannot serve, at least to date.

Trouble in Paradise but Still Surviving

“Under a federal law known as the 90/10 rule, for-profit schools are allowed to derive a maximum of 90 percent of their total revenue from federal student aid. The remaining 10 percent must come from elsewhere, including students’ repayments on their direct loans from the college”(Butrymowicz and Kolodner, 2021). Moreover, the same report noted that “the International Education Corporation, the company that operates . . . 29 other campuses, was owed $33 million in repayments in 2018, according to an independent audit submitted to the federal Education Department. The company estimated that $13 million of that—or 40 percent—would never be repaid” (ibid.). Continuing student loan defaults and a new U.S. administration are likely to bring more regulatory pressure on for-profits with regard to previous and present pressures experienced by many graduates of these colleges.

For-profit universities and colleges for higher education entered the eye of the storm on Capitol Hill over the last few years with regard to questionable recruiting practices and use of taxpayer funds that have not resulted in gainful employment and promised results for many students. Although for-profit universities have garnered the favor of Wall Street investors and have formed a powerful lobbying group to promote for-profit interests, questions continue to surface as the boundaries between traditional academia and the business of higher education blur. These institutions still manage to enroll more students than do traditional nonprofit universities and colleges, even during the pandemic. They rely on aggressive advertising and marketing, an established niche in the marketplace, and— interestingly—less red tape and bureaucracy, so there are fewer hurdles that potential students have to overcome to enroll and meet academic standards.

Congressional Investigation

The 2012 report of a two-year investigation into for-profit colleges by the U.S. Senate’s Health, Education, Labor, and Pensions Committee, comprised primarily of Democratic Party legislators, revealed staggering statistics that have resulted in intense scrutiny by the federal government, creating a call to action for regulation to monitor for-profit institutions. According to other recent investigations, currently “more than $30 billion in taxpayer funds flow to the [for-profit] schools each year” and “about 60 percent of for-profit colleges receive over 70 percent of their revenue from U.S. government programs.” These statistics, combined with some for-profit student testimonies about the “dishonest” and “fraudulent” practices of their educational institutions, have resulted in lawsuits. One such lawsuit reached settlement on July 26, 2013, after a “for-profit college in Richmond, Va., agreed to pay $5 million in a class-action settlement filed by eight former students, who argued that the training/education they received was a sham.”

The storm has continued to build since 2010 as the pressures for legislation increased, driven by senate investigations, increasing litigation, and courts setting precedents. For-profit education probes began in 2010 when press reports started to “raise questions about the quality of proprietary institutions.” “These questions stem from the rapid growth of this industry over the last few years, reported aggressive recruitment of students by such institutions, increased variety in the delivery methods used to provide education to students, and the value of the education provided by such institutions.”....

Questions for Discussion

1. What purpose and need do for-profit colleges and universities offer to the U.S. educational system?

2. What are the main issues in this case with the for-profit higher university and college education sector?

3. Watch the online video College, Inc. produced by PBS. Evaluate PBS’s role in making the video and its content. Is this a fair, objective account of for-profits? Why? If not, what additional information is needed in the video? Explain your reasoning.

4. Identify some of the major stakeholders and issues using your answers and findings in the above questions and this case. After reviewing the major stakeholders’ interests, arguments, and facts regarding these issues, what did you discover? What and whose arguments and information did you find most compelling to help resolve the controversy? Where do you now stand and why on for-profit university institutions and practices? Explain.